Why 2017 Is a Tipping Point for Retail

When Warby Parker was founded in 2010, the pitch was simple: Don’t buy expensive designer eyeglasses in stores; buy cheaper ones on the internet.
It was a good pitch. It was also a financial necessity: The founders had no outside capital and it was far cheaper to build a national brand online than to open a dozen storefronts in malls across the country with debt. But in 2013, as Warby Parker had grown to become a darling of online retail, the founders had a funny idea. Maybe they should undisrupt the brick-and-mortar industry by opening a store or two.

Within a year, there were eight Warby Parker brick-and-mortar locations nationwide. They weren’t just turning a profit. They were averaging $3,000 a square foot annually, higher than Tiffany, Ralph Lauren, and practically every company not named Apple. By the end of this year, the company will have about 65 storefronts. So, is Warby Parker still an “online retailer”? Obviously, no: More than half of its sales now occur in physical stores. But also, yes: As founder Dave Gilboa told PBS, “about 75 percent of our customers that shop in our stores have been to our website first.”Warby Parker’s success is extraordinary.

But this story is becoming quite ordinary, indeed. Online shopping is having an offline moment, as more e-commerce companies, such as RentTheRunway and Bonobos, invest in the very sort of physical stores they once made seem obsolete. Leading the trend is Amazon, the undisputed king of online shopping, which spent $14 billion to buy Whole Foods and its nearly 500 physical locations. According to internal documents, the company believes there is support for another 2,000 Amazon Fresh–branded grocery stores.

This throwback revolution is happening in the midst of what otherwise feels like a “retail apocalypse.” Bankruptcies are rising among clothing chains, like Wet Seal, and retail icons, like Toys “R” Us, which are stuck with a glut of shopping space and squeezed between stagnating sales and large debt obligations. The labor market in retail, once the powerhouse of the service economy, is having its worst year of the century.

In short, the retail industry is at an inflection point, where several brick-and-mortar companies with large footprints are struggling while e-commerce companies that once launched pop-ups as mere marketing tools have realized the value of storefronts. Indeed, Amazon sees an uptick in online shopping in regions where it’s opened a physical store, according to CNBC. “Five years from now, we won’t be debating whether ‘e-tailers’ are taking share from ‘brick & mortar retailers,’” Citi Research analysts recently wrote, “because they are all the same.” The trend even comes with an inevitable, and regrettable, catchphrase: “bricks and clicks.”

Read more at The Atlantic