Now Trending: Changing the Channels

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One of the most important trends to track these days is that of online retailers making the jump to brick-and-mortar. The different strategies and tactics they have taken, and the new and different ways that retailers are adapting to the realities of an omnichannel world, can not only reveal some fascinating truths about retail today — but also provide some insights into where the retail industry might be heading in the future.

Today we have four different distribution channels in wide usage: online, catalog, brick-and-mortar, and wholesale. While a brick-and-mortar brand bolstering their online presence is a familiar story, it’s where we see online (and, to some extent, catalog) retailers evolving from virtual vendors to physical storefronts that things get really interesting.

Simply opening up a store is one strategy. In my last column I wrote about exactly that: how online retailers like Warby Parker, Athleta and Amazon Books are selecting physical store locations and establishing themselves as viable brick-and-mortar brands. I also referenced the “creative relationships being formed between traditional retailers and their online brethren–and new and different mechanisms for traditional retailers to establish their omnichannel bona fides.” That is where we start to get into the wholesale category (which also includes “store-within-a-store” concepts), and some of the “hybrid” solutions that online retailers are using to get their foot in the brick-and-mortar door.

While Australian skincare and cosmetics brand Aesop had brick-and-mortar locations Down Under, it decided to expand its first with an online-only U.S. presence, then opening dedicated freestanding stores, and finally by going into the cosmetic department at Nordstrom’s. Men’s pants brand Bonobos also chose the wholesale route – but with a twist. Bonobos is also available at Nordstrom’s, but the retailer has also opened a number of non-traditional brick-and-mortar locations it calls “guide shops” in cities across the U.S. The guide shops allow customers to try on pants with the help of trained guides, who help determine the right fit and then place the order online to have the selected purchases shipped to the customer’s home.

The Bonobos example is illustrative of the fact that when online retailers are looking to expand or enhance their brick-and-mortar distribution channels, there is no rulebook–they have to figure out the best way to showcase their product. Canadian apparel retailer Kit and Ace determined that the best way to do that was to take an entirely new approach: open up pop-up locations in luxury hotels in several cities around the world. From San Francisco to Melbourne, and from London to New York, Kit and Ace’s “The Carry-on,” pop-up concept (featuring “easy-pack carry-on essentials”) appears for a limited time at select high-end international hotel venues.

The push to bring online brands into brick-and-mortar isn’t just a one-way street, either: Macy’s actually bought online skincare and cosmetics company Blue Mercury to begin selling their products in-store. Developments like that show that department stores realize that they have to diversify their offerings, and that the “direction” of flow within these new distribution channels can go both ways – and sometimes meet in the middle. Macy’s likes having the exclusive on a line of products that won’t be sold at other stores in the mall, and it’s easy to see why online specialty retailers can benefit from piggybacking off of a mass merchant, reaching new markets and potentially dramatically broadening their appeal. A similar dynamic is at play with Sephora and J.C. Penney: Sephora can now go into J.C. Penney locations in smaller markets that the cosmetic retailer would never have been able to justify opening as a stand-alone store.

So what does all of this tell us? First, the willingness and enthusiasm of retailers pushing to try new ideas and expand into new frontiers is an acknowledgment that retailers understand something important: to be successful in today’s retail industry, they have to have an effective multi-prong distribution strategy.

Fundamentally, it’s about being creative with how you distribute your product. For so many years there were just two options, brick-and-mortar or catalog. And then the internet came along and online opened up. Now we’ve added wholesale, hybrids, hotels and more to the list. This is without a doubt the most dynamic and diverse age of distribution in history–and it continues to evolve as traditional boundaries break down and new innovations and opportunities emerge.

I’ll be the first one to admit that I didn’t see it coming. For years the perceived threat of online sales was something brick-and-mortar retailers would have to grapple with–or at least, so went the conventional wisdom. While it’s true that online and mobile sales continue to creep up, the story isn’t nearly as simplistic as we may have thought. The retail landscape today isn’t a binary black and white place: there are shades of gray. It’s not so much online versus brick-and-mortar as it is online with brick-and-mortar: collaboration, not competition, is the theme. Successful retailers have recognized that, embraced it, and flourished as a result.

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