Wayfair is opening its first big-box store outside of Chicago | Wilnesh News

What retail apocalypse?

Online home furnishings retailer wayfel The company will open its first eponymous store near Chicago, following a string of other digitally native companies turning to brick-and-mortar stores for growth.

For a company that became a $12 billion behemoth by convincing consumers to buy sofas and beds online, it’s ironic that Wayfair is leaning into retail’s most basic building blocks. That’s because, no matter how far technology advances, shoppers still can’t try out a new mattress from their laptop or phone.

“If you think about the categories that we’re in, they’re typically very visual categories, or very tactile categories, or, you know, consider buying because it’s quite expensive and you’re going to put a lot of thought into picking the right one. product,” Wayfair CEO and co-founder Niraj Shah told CNBC.

“Depending on what someone purchases, they may prefer the in-store experience and working with colleagues,” he said. “Or they might want to discuss financing or need help with design, and we can offer all of those experiences. We offer those experiences online as well, but sometimes, it can be more enjoyable or more effective in-store.”

The massive 150,000-square-foot store in Wilmette, Illinois, will open on May 23. Warby Parker, FigCasper, Glossier and Everlane.

Wayfair’s retail ambitions come as the online-only company looks to chart its next phase of growth in an environment that has evolved since the company was founded and makes running a profitable e-commerce business more difficult than ever.

Privacy changed on Yuan and apple iOS makes it harder for marketers to target customers in ad campaigns. The company also faces more competition from upstarts with ties to China such as Shein and Temu.

Returns and the scams that come with them are a never-ending money-losing game.As online markets proliferate Amazon, Walmart and Targetalmost anyone can become a retailer, and brands may find themselves competing against their own manufacturers.

Many companies that started out selling directly to consumers now offer their products in department stores and mass retailers, but even that comes with pitfalls. Brands that gain a competitive advantage by collecting reams of customer data don’t have as much visibility and don’t make as much money when working with wholesalers.

They are also subject to the whims of their partners and can be removed from shelves with little notice, or risk losing a major source of revenue if the wholesaler suddenly goes out of business or sales drop. When brands have their own stores in addition to their websites, they have more control in mitigating these risks.

Additionally, U.S. Census data shows that the explosive growth in e-commerce during the Covid-19 pandemic has slowed and dropped below pre-pandemic lows. Census data shows that given the seemingly inseparable role of online shopping in most Americans’ lives, some may be surprised to learn that the vast majority of retail sales (about 85% by 2023) still occur offline .

Larry Cheng, founding partner of tech growth equity fund Volition Capital, said: “For some of the companies I’ve had different experiences with, from an economic perspective, if you have a really good brand, (stores) are probably your best bet. Good access. “It’s not going anywhere, it can increase online sales, it can increase attracting new customers, and the economics can be great. ”

In the early 2010s, new store openings greatly outstripped store closings until the situation reversed in 2017. US and UK store tracking database.

The surge in store closures has prompted headlines about a so-called retail apocalypse and warnings that stores will disappear as shopping moves online.

For a while, this seemed to be true. New store closures outpaced new store openings until 2022, when the trend changed. As of May 10, there were 307 net new job openings in 2023 and 521 net new job openings in 2024.

Discount retailers, e.g. Dollar General, Five or less, burlington and TJX Corporation John Mercer, Coresight’s global head of research and managing director of data-driven research, said that growth has been largely driven by this growth. But direct-to-consumer retailers are also playing their part.

take Warby Parker, the eyewear company credited with launching the direct-to-consumer movement. In May 2023, the retailer said it believed it could open more than 900 stores in the United States. 12%.

FigThe company, which sells scrubs and other products for health care professionals, sold its products exclusively online until it opened its first store in Los Angeles in November. The company also plans to host another event in Philadelphia this summer. Chief Executive Trina Spear told analysts on the company’s first-quarter earnings call on May 9 that 40% of people shopping at the Los Angeles store were new customers.

“This is our most penetrated Los Angeles market. So, it’s great to see that,” Spears said. “Healthcare professionals are just like everyone else, right? They want to interact with brands both online and offline, and we’re seeing that with the Century City store.”

Other direct-to-consumer private labels have also expanded into retail stores, including bedding company Brooklinen, furniture store Burrow and apparel brands Everlane and Untuckit.

“The pure players[in e-commerce]will say, ‘We’ve hit a certain number, we’re doing a really good job[in e-commerce]but we’re not going to be able to beat that number no matter what…if we Not opening up another pipeline,” said Rebecca Fitts, who formerly served on Warby Parker’s in-house real estate team and is now senior vice president of business strategy at the real estate consulting firm. Alvarez and Marsal Real Estate Solutions.

“I don’t think every brand is going to have the number of stores that Warby has, but they’re definitely learning these lessons, and that’s a good sign,” she said.

If any direct-to-consumer brand could open stores and suddenly boost sales and profitability, they would all do so. But retail fundamentals are likely to create a steep learning curve for companies that start out as online disruptors.

Expanding into physical retail is challenging and costly.

Amish Tolia, co-founder and CEO of Leap, a startup that helps brands open retail stores, said companies that want to open stores need to figure out logistics such as physical locations, furniture and supplies, and shipping inventory. shop. He said they also need to determine how to increase foot traffic and operate the store.

All of these components require “time, effort, budget and resources, right? So for as long as we can remember, in addition to multi-brand department stores, if you want to build your own fully branded retail environment, the proportion of entry-to-market has been very High,” Tolia said.

Some direct-to-consumer brands have suffered as they expanded too quickly and suffered from declining demand.

whole birdIts market capitalization has grown from $4.1 billion after its IPO to about $114 million, and it has rapidly opened dozens of stores over the past few years, bringing its total number of stores to about 60 as of the end of March. But the footwear and apparel seller now plans to close 10 to 15 “underperforming” stores in the U.S. in 2024 so it can focus on “maximizing productivity at its remaining stores,” company executives said in May Said during the first quarter earnings conference call on the 8th.