Micro retail: small stores become big business

Brick and mortar stores are closing en masse. 2018’s closures are set to exceed last year’s record number.

So how is it that more and more online retailers are opening up physical stores? Warby Parker, Casper, Birchbox and Bonobos have all opened brick and mortar locations in recent years.

Simply put, online retailers are opening physical stores that complement their online platforms. Their stores are experience centers, where customers can put their hands on products they ultimately order online.

 
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Physical retailers playing catch-up

Brick and mortar retailers are starting to catch on to the advantages of smaller, experience-centered, stores. They are increasingly opening up small stores that act more like showrooms and customer-service centers. This trend is known as “micro retail”.

Part of this trend is simple economics: large stores filled with inventory no longer deliver good returns on investment. Rents are simply too high and sales too low—thanks to e-commerce—for many large retail stores to make financial sense anymore.

But micro-retail doesn’t simply mean opening up a downsized version of a large retail store.  Instead, micro-retail establishments are attempts to mirror aspects of what has worked for the likes of Warby Parker and Bonobos: locating closer to the customer, emphasizing customer service, minimizing inventory, utilizing tech and, above all, creating a true omnichannel experience where online and offline retail come together.

Eyeglass retailer Warby Parker is a perfect example. Their stores are built for great customer service and omnichannel experience.

At Warby Parker stores, highly trained staff attend to in-store customers with ipads so they can easily connect to customers’ online profiles. That way a staff person can find all the glasses a customer has saved online, allowing the customer to try them on. This seemingly simple bridging of online and offline shopping allows Warby Parker to track the full customer journey to purchase, which is extremely valuable information for the sales and marketing departments and something most retailers still can’t achieve.

New directions for brick and mortar

Brick and mortar retailers have to zero-in on their advantages, which are essentially threefold. The first is browsing. Physical stores allow customers to handle products and offer in-person customer service to answer questions.

The second is deciding which product to buy. When choosing between similar products, customers tend to want to experience each product. The third is returns, which are still considered easier at a physical location than by mail.

These advantages all point to smaller stores in more urban areas that are focused on customer experience. Target, for example, is opening a number of small urban stores in an attempt to get closer to the customer.

Micro retail stores will also act as product pickup hubs. The idea is to keep up with Amazon and get purchases to consumers at lightning speed.

Furniture and home accessory retailer Ikea, for example, is looking to open smaller stores in more urban locales that will double as pickup centers. The retailer recently announced new investments in logistics and distribution systems to enable 24-hour delivery for online purchases of almost all of its 10,000 products.

These new Ikeas will essentially be customer-service centers and showrooms for the company’s most popular products. They won’t hold stock, so they won’t have the normal huge onsite warehouses, which means much cheaper rents.

 
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Going omnichannel

Since smaller stores are easier and cheaper to setup, micro retail outlets can afford to experiment with new technology and ways to personalize the shopping experience.

Makeup retailer Sephora’s Sephora Studio stores are a good example of personalized shopping outlets. Staff process payments on phones and beauty advisers can create online profiles of customers. Each customer gets emailed a list of all the products they tested at the store.

It is vital for micro retail establishments to closely integrate their in-store experience with their online platforms. This type of omnichannel retail is exactly what modern consumers expect.

In sum, micro retailing is not just about downsizing. It is an attempt to bridge the gap between online and offline shopping experiences by creating physical stores that complement online stores. A micro store’s purpose is to provide what online retailers can’t: real experience with products.


About the author

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Will Freeman is a content expert at Evo.

He is a former economic journalist and part-time entrepreneur. 

His interests include economic development, China, India, cryptocurrency and blockchain, and financial technology in general.