Is brick and mortar dead?
Earlier this year, we were shocked to read the Atlantic's "What in the World Is Causing the Retail Meltdown of 2017?" which reported on the steep decline of physical retail stores. Eric Roos, the co-founder of Nancy Boy is successfully maintaining a physical retail store in the midst of this "meltdown", so we thought we do some investigative reporting and learn what he's doing right and explore Eric's unique approach to combining a flagship brick-and-mortar store with an online eCommerce store. We also take a look at Nancy Boys’ “No-Advertising” approach and how it compliments his theories on the direction of what it takes to have a successful physical store.
Nancy Boy – A Brand Unlike Any Other!
Founded in 2001, a lifetime ago in the world of eCommerce, Eric Roos and Jack Richards created Nancy Boy, an all natural personal care brand, as an e-Commerce store. And opened up their boutique flagship store in San Francisco a year later.
Eric has a background in advertising and worked on branding for a variety of beauty, lifestyle, and consumer brands. One of the things he noticed was that 90% of the personal care industry was owned by just a few large consumer brands. Eric also noticed that these larger companies tended to focus less on quality and focus more on their bottom line, cutting corners with their ingredients.
From the beginning, Eric wanted to create a company that focused on high quality ingredients first. One way to stay profitable was to cut advertising out the budget and instead focus on a strategy built on customer relationships. One by one, he won over his customers with personalized customer service and product performance instead of hype. The result was a cult following of customers that are now brand evangelists.
Traditional Brick And Mortar Stores Don’t Focus On Experiences
Throughout our conversation, Eric Roos made it clear that, while he appreciates the benefits of traditional brick-and-mortar stores, he doesn’t see the traditional model of retail lasting much longer.
The reason for this? Most retail stores don’t offer customers anything that’s interesting, special, or attention-grabbing. Eric used The GAP as the perfect example of this. You can walk into a GAP anywhere in the world, and you’ll see the same thing. The same 100 T-shirts, pants, sweaters, folded and presented in the exact same way.
Because these stores don’t offer anything experiential to customers, they’re losing the younger generation. Compared to older generations, Millennials are much more focused on engaging interactions and the experience of a traditional, chain-based retail environment are not holding their attention or offering anything meaningful beyond the purchase. What benefit is there to go the physical store when the same purchase can be made from the comfort of their own home?
Millennials are going to be the largest generation of consumers ever and their buying habits are already having a tremendous impact on the future of brick and mortar stores. This new generation of consumers aren’t interested in shopping as a hobby and they don’t spend hours wandering around malls like generations before them. They’re interested in convenience, so ordering a shirt or a beauty product directly from a smartphone is much more appealing than wandering around a boring chain store.
This Doesn’t Mean Brick And Mortar Stores Will Disappear Entirely
Eric does thinks that brick and mortar stores have a place in the modern retail world if they can provide a unique experience to their customers that they can’t find online.
Nancy Boy only has one flagship retail store and it has become a destination both for locals and tourists who visit San Francisco. They have loyal customers from all over the world that make a “pilgrimage” to see one of their favorite brands in person.
One of the ways they do this is by diversifying their brick and mortar stock list. Nancy Boy doesn't carry the exact same products in their retail store as they do online. One of Nancy Boy's top sellers is their Scented Linen Spray. To compliment this product they also carry luxury linens and pillows sourced from around the world. These products can only be found in their retail store, and they’re totally unique. At their retail store, Nancy Boy carries over 1000 product SKUs while online they have around 100.
As it becomes more convenient to buy online, Eric sees the future of brick and mortar stores being more of an experience to connect personally with the brands that customers love.
Today’s Startups Should Focus On e-Commerce First And Brick & Mortar Second
Eric explained that they opened up their retail store in 2001 originally because at the time people were still uncomfortable entering their credit card information online and they needed a way to prove they were legitimate. Eric believes in their case this worked out for the best for them, but said that new startups would do best to focus on eCommerce. The reason? Margins. Selling products online means avoiding costs like building rent, staffing, insurance, utilities and the list could go on.
Customers are now totally comfortable buying products exclusively online so there’s no reason that new companies can’t start out online, and move into brick & mortar spaces once they feel that they’re able to. Starting out with an ecommerce store is a great way to develop a brand, experiment with new products and figure out the market place without a lot of overhead.
Wholesaling Your Products Is A Double-Edged Sword
There are many unique aspects of the Nancy Boy business model. One of these aspects is that they do not wholesale their products. You can only buy Nancy Boy products either on their website or in-person in San Francisco.
According to Eric, wholesaling your products is truly a double-edged sword. While you may enjoy increased sales and profits, you lose some control of your brand image and you’re at the mercy of your distributors. In an interview with another POW customer Modern Sprout, we learned that some larger retailers demand unique product lines and special packaging from their wholesalers. This can lead to a tangent from the company’s primary branding.
If you partner with poor quality distributors who don’t market your products well, or misrepresent your brand, you’re at serious risk of brand dilution and all the hard work you’ve done to create a unique brand that customers can connect to may go up in smoke.
Because of the risk of losing brand control and suffering from inferior product quality, Nancy Boy decided from the start to avoid wholesaling and focus exclusively on first-party sales, both online and in-person.
Final Tips For Today’s Businesses
As mentioned in the intro, Nancy Boy doesn’t spend any money on advertising at all. Instead, they focus on creating better products and gaining more customers through word-of-mouth marketing. This will lead to slower growth but a stronger base of loyal customers. Eric has these tips for companies who wish to employ the same business model.
Grow your email list
First and foremost, Eric mentioned the newsletters that Nancy Boy sends out as their most effective marketing tool. Nancy Boy sends out a monthly newsletter and instead of just focusing on promoting products or sales, the newsletter offers funny, touching, and interesting anecdotes and stories. Eric emphasized that keeping it monthly is important. “Customers get hundreds of newsletters a month. You have to earn your way in.”
This approach has worked well for Nancy Boy. According to Eric, they have an open rate of around 40% for their emails – which is well above the average of 18%. His advice is to find a formula that works for your brand and stick to it.
Always put your customers first
If you are not advertising actively, each customer you have is absolutely precious. This is one of the reasons that, as outlined in the above section, Nancy Boy doesn’t wholesale their products. By maintaining total control of their customer service, Nancy Boy can offer superior service, and solve problems that larger retailers may ignore. For this reason, Nancy Boy is renowned for their incredible customer service.
Eric’s advice to new retailers is simple. Each one of your customers is valuable and they need to be respected and loved. If you truly care about your customers, you can offer better service and you’ll win them over for life.
Understand that you will grow slowly
Nancy Boy did not explode in popularity overnight and their focus on not using advertising is certainly part of the reason. Instead, Nancy Boy grew slowly and steadily over the years. They gained and retained customers due to their high-quality products, and kept on growing over they years. According to Eric, a few weeks after launching Nancy Boy, he thought to himself “Oh my God, I’m going to have to build this company one customer at a time”.
And that’s exactly what he did. If you plan to avoid advertising or wholesaling you should expect this. Your business will grow slowly, especially if you already have stiff competition. But if you dedicate yourself to great customer service and create great products, you can succeed.
Brick & Mortar Isn’t Dead, It’s Just Changing
Is Brick & Mortar dead? According to a Eric who maintains both a successful ecommerce store & a physical store, it's not dead it's just evolving into something more meaningful. When you do open a store remember, today’s consumers are starting to expect an experience when they shop in person.
So if you decide to open up a physical location ask yourself what you can do to make your customer’s visit special?
We'd love to hear your thoughts on the future of Brick & Mortar. Add your comments below.