2010s Wrap-Up: As Traditional Retail Stores Close, Direct-to-Consumer Startups Take Their Place with Physical Stores

The best words to summarize the North American retail landscape of the 2010s: retail apocalypse. The 2010s ushered in an era of change in the way Americans shop. Compounding these challenges were changes in consumer expectations. Increasing online retailer presence and improvements in shipping times (most notably, Amazon’s two-day shipping option) have contributed to the consumer expectation of being able to buy anything online and to receive it within days. 

While some old-guard brands like Best Buy and Target have risen to the occasion, others have struggled to keep up. In the past decade, retail behemoths like Sears, Toys R Us, and Payless have filed for Chapter 11 bankruptcy. The closure of major brands leave thousands of retail outlets empty, waiting for a new guard to take their place: direct-to-consumer (DTC) startups. 

Direct-to-consumer brands are defined as ecommerce companies that “build, market, sell, and ship their product for themselves, without any middlemen”. DTC startups sell everything from mattresses to vitamins to make-up and ship it directly to your door within days. The DTC model allows brands to cut costs from middlemen, translating to lower prices for consumers in comparison to traditional retail brands. DTC companies also have complete control over the quality of their products and, perhaps most importantly, over the relationship between the brand and their end consumers. With these advantages in mind, it is easy to understand why brands like Warby Parker, Everlane, Dollar Shave Club, Casper, Away, and Glossier have achieved major success within the last decade. 

In the age of the retail apocalypse, one might wonder why DTC brands that have been successful online would ever open brick-and-mortar stores. However, after establishing a presence online, numerous DTC brands have done just that.  

There are several reasons why opening physical stores is crucial for the success of DTC companies. First, consumers still highly value physical stores. While ecommerce has increasingly accounted for a higher percentage of retail sales over the last decade, ecommerce is only expected to account for 12.4% of retail sales in 2020. Also, 78% of consumers are “shopping at brick-and-mortar stores just as much as or more than they did a year ago”. Keeping these statistics in mind, it is clear that physical stores must be an integral component of any successful DTC brand’s long-term strategy. 

The main factor responsible for DTC success in physical stores is an emphasis on shopping as an experience and on building communities to further deepen brand-consumer relationships. DTC beauty startup Glossier is one of the foremost examples of physical stores that emphasize the experience of shopping, with a focus on building community through such experiences. In his review of Glossier’s New York flagship, Forbes contributor Chris Walton observes that “At Glossier Flagship, shopping and buying are not one and the same. The physical experience is about shopping. How the consumer actually takes the product home is an afterthought. Fulfilment does not matter because it is the joy of shopping, the joy of discovering, of living, of immersing, and of creating memories...that inspires people.” Walton’s appraisal of the Glossier store clearly has merit: one reviewer described the Glossier London pop-up as a “Willy Wonka experience for make-up hypebeasts” that attracted 10,000 visitors over one week. 

The Glossier shopping experience doesn’t just make customers feel inspired by the product and therefore more likely to purchase it, but also builds a community of strong and engaged consumers. In How I Built This, Glossier CEO Emily Weiss illustrated the power of a strong shopping experience: consumers enjoyed the shopping experience so much that many shoppers spent over an hour in the store. Even better, consumers used this time to forge a community: shoppers exchanged product information like which colours looked good on each other and which Glossier products they had tried, but also exchanged personal information like where they worked and whether they were looking for a roommate. The Glossier community, forged first online and enhanced in stores, is the ultimate example of a brand community that revolves not just around the product, but also around the lives of its consumers. 

In stark contrast to the shopping experience at Glossier stores is the shopping experience at stores like Sears, which failed to provide a joyful, community-building shopping experience and consequently went bankrupt. While traditional retailers like Costco and Barnes & Noble evolved by adding restaurants and cafés within their stores in successful efforts to build community, Sears failed to upgrade the physical shopping experience it provided. Instead, Sears chairman Eddie Lampert tried to turn Sears’ ecommerce arm into an Amazon competitor, an attempt that rarely ends well for any company. In the past decade, traditional retail stores without a community focus have crashed and burned while DTC brands have opened thriving physical stores. 

For all its benefits, opening a physical store can be challenging for DTC brands. It can be a costly endeavour - in addition to staffing and leasing commercial space, building and designing incredible shopping experiences isn’t cheap. For DTC brands who depend on low costs to maintain lower prices for consumers, the financial implications of opening physical stores can be daunting. 

The closure of traditional retailers in the 2010s sent shockwaves through the retail industry, serving as a wake-up call for brands to start prioritizing customer experience and community. Over the next decade, consumer expectations are sure to evolve; whether the remaining traditional retailers survive the evolution will be the biggest test of the next decade for the retail industry.