Click Click = Bricks
When Internet retail came on the scene, the fashionable viewpoint at the time was that it signaled the end of brick-and-mortar retailing. Stories by major media publications predicted the “death of the mall” and breathlessly forecast an end for all stores.
The reality has played out a bit differently. Online sales have steadily grown, topping $210 billion in 2006, according to Forrester Research Inc., but overall they account for a tiny percentage of the retail industry's $4 trillion in sales.
And, the online stores that were fed by billions in venture capital and billions more in skyrocketing IPOs evaporated years ago. Most online retailers that have found success are those that made the leap from brick-and-mortar stores. Even the few retailers that started only with an online presence found they could only grow so much without physical stores. Amazon.com, for example, benefits from the storefronts of its partners including Target and Toys ‘R’ Us.
Today, there are plenty of examples of more brick-and-mortar stores that were born from online start-ups. Retail Traffic spotlights four small online retailers who've successfully grown from clicks to bricks.
KooKoo Bear Kids
With three little boys at home, busy mom Tara Mediate could never find the time to go shopping, particularly for children's clothing, décor and gifts. She figured that she wasn't the only mom who was looking for a convenient way to shop for these items, and KooKoo Bear Kids was born.
In 2003, Tara and her husband, Joe Mediate, a technology guru, launched both a Web site and catalog that specialized in designer brand children's goods.
The couple decided that they didn't want the hassle of a retail location, Tara says. “All I could think about was operations problems, inconvenient hours, and staffing issues.” But in January 2005, after the only high-end children's store in Roswell, Ga. shuttered, and a retail space in the shopping center across the street from KooKoo Bear Kids warehouse became available, the couple decided to open a store “It just seemed that everything fell into place,” Tara says.
The KooKoo Bear Kids Web site and catalog generated the bulk of the company's $3 million in sales last year, Tara and Joe recognized the retail component attracts a new market. “We realized that a storefront targets a shopper who likes to touch and feel the product before handing over their money,” Tara says.
The day that Igal Alon's landlord threatened to evict him was the day Alon decided his online endeavor, Mavrik Jewelry, needed its own retail storefront. Today, Mavrik (which means shiny and brilliant in Hebrew) has two storefronts in St. Louis — one that sells unique fashion jewelry from a retail store in a middle-class suburb and the other in the upscale neighborhood of Kirkwood that sells fine jewelry. Together, the stores generate 50 percent of the company's $1 million revenue.
Alon founded the MavrikJewelry.com Web site in April 2003, selling custom and handmade pieces created by Israeli artisans that he procured during his frequent trips to Israel. When his customers wanted to pick up orders directly and look at his wares with their own eyes, he opened the doors to his home, creating enough foot traffic in his apartment building to cause his landlord significant distress.
“I had so many people coming to my apartment to pick up their orders and hoping to browse my inventory, that my landlord thought I was running a different kind of business,” jokes Alon.
Alon started his business online originally because he didn't have the resources to pay commercial rent. He was also hesitant to expend the time and money associated with finding, leasing and operating a storefront. But his business took off enough that he was able to enter the market and be more forceful in negotiating his terms. Establishing a brick-and-mortar store, Alon says, could also build Mavrik's brand recognition.
Mavrik's first retail store — an 1,100 square foot shop in a three-story mixed-use building — opened in late 2003 with one-of-a-kind jewelry pieces ranging in price from $15 to $800. In 2005, Alon decided to expand Mavrik's retail collection to include fine jewelry with precious gems. For that, he says, the store needed to be located in an upscale shopping center whose well-heeled clientele would be more of the target market for jewelry priced from $1,200 to $150,000. Alon found the right spot in Station Plaza, a mixed-use project offering lofts and a plaza — an environment that provides a “young, European flair” for the new store, he says.
With the success of the first two stores, Alon is evaluating whether to open more stores in other states. “Mavrik gained plenty of customers in St. Louis through word of mouth,” he says, “but, the global reach of the Web site allowed Mavrik to attract customers in many markets.”
In the meantime, Alon is focused on establishing distinct identities for the stores and the Web site.
After several years of working as an IT drone in southern California, Bua Semapakdi wanted to do something fun and exciting. She had always dreamed of owning a trendy little boutique with unique gifts, but thought it would be too expensive to launch a start-up that way. Instead, she built a business online first and only recently opened a brick-and-mortar location.
“In San Francisco, rent is very expensive, and opening a store just seemed really risky,” Semapakdi explains.
Semapakdi launched SatinBox.com in 2003 as an online retailer featuring a mishmash of unique and trendy items for personal and home use. SatinBox's revenues reached $100,000 within 12 months, and Semapakdi thought that opening a storefront would bring credibility to the online store and allow it to expand more rapidly.
In 2005, Semapakdi and her husband Tim Chang moved to Boston, and she revisited the idea of opening a store. Although retail space in Boston was about 30 percent less expensive than space in San Francisco, she was challenged to find a location that suited the unique character of SatinBox.
Semapakdi and Chang did their own market research by examining the different neighborhoods in and around Boston. They ruled out strip malls because they weren't in keeping with the image they wanted to convey, worrying that an “average” retail center would rob SatinBox of its trendy, unique vibe.
In Cambridge, Mass., Semapakdi found the perfect spot for SatinBox to display its assortment of paper goods with a vintage style, trendy clutches and fun kitchen accessories — a 400-square-foot storefront on the ground floor of a yellow three-story house.
Not only was the space right, but the landlord was willing to give SatinBox try a one-year lease. Other owners had demanded three- to five-year leases. “We found a space that allowed us to take the leap,” Semapakdi says.
The SatinBox store opened in July 2006, relying on word of mouth and foot traffic. Since its opening, the store has increased total revenues by about 25 percent and it's expected to add 50 percent in 2007. The store now accounts for 25 percent of SatinBox's total revenue.
Carpet, tile and hardwood flooring don't seem like the most natural fit for e-commerce. At least that's what Steve Simonson thought when he launched his iFLOOR.com Web site in 1999. But, he was able to grow the company into a multimillion dollar business, selling carpeting, tile and or hardwood floors, all without a showroom.
“When I started iFLOOR, I didn't really know how successful it would be,” says Simonson, CEO of iFLOOR. “Living in Seattle, I was right in the middle of the e-commerce boom and knew I wanted to start a Web site. Since I had a background in flooring, I combined the two.”
And the unlikely combination took off. The Web site allowed consumers to browse at their leisure 24/7 among a myriad of sample flooring options before purchasing. IFLOOR's sales grew by 20 percent to 40 percent a year. In 2005, iFLOOR.com was ranked 115th among Internet retailers, according to Internet Retailer Magazine. It was also cited 135th on the list of fastest growing private companies in the United States, according to Inc. magazine.
Soon after Simonson launched iFLOOR.com, manufacturers started pressuring him to build actual showrooms to complement the site. Showrooms would allow admiring consumers who had seen the textiles on their computer screens to experience products firsthand, running their hands across an array of various samples of carpeting and wood flooring.
“When we looked at our customer base, we saw that we could serve it better by being a multichannel retailer,” Simonson says. Although Simonson felt confident that retail stores would significantly increase sales, he didn't want to go out on a limb so he chose his hometown of Seattle for iFLOOR's premier showroom. The 5,000-square-foot combination showroom and warehouse opened in 2004, and the second store, in Tukwila, Wash., opened in 2005.
Since then, stores have opened in seven more states — in cities that have a large concentration of iFLOOR online customers. Having the brick-and-mortar locations is invaluable to Simonson when interacting with iFLOOR customers. Overall, there are 16 iFLOOR stores located across the United States, primarily in large metropolitan markets, all contributing to total revenues of $70 million a year. Another 10 stores are expected to open next year in both new and existing markets.