To be or not to be Offline? The Question Online Companies are asking Themselves

Compared to brick and mortar stores, your online store has a number of obvious advantages: it remains open around-the-clock, there is no store space to manage and staffing needs are often less tricky. For your customers, there is no hassle with waiting in a slow check-out queue and prices are often lower than on the high street. Worrying about your shop location is a thing of the past – at least as long as you don’t have a tongue-twister of a domain name and you are able to manage your online presence well.

Based on these observations and others, during the past decade or so, several industry experts have proclaimed the slow but steady demise of offline shops. According to Statista, online retail sales were expected to increase by a whopping 18.4 percent in 2015 across Europe while offline retail sales would decrease by 1.4 percent. With these numbers in mind, you might think that all eyes are set on grabbing a bigger slice of the online market pie. Not so fast! This is the opinion of an increasing number of tech start-ups which, in recent years, have decided to expand their presence to the offline sphere.

We met with the CEOs of VIU Eyewear and Chronext, two such companies, to hear about their experiences with and reasoning behind establishing an offline presence despite being online at heart. The Swiss eyewear start-up sells designer glasses and lenses online, while Chronext is a Swiss online luxury marketplace for watches.

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Combining Both Worlds
Since VIU opened in Zurich in April 2014, another six stores have been added to the list all across Switzerland and Germany, while Chronext opened the doors of its very first flagship store in London, U.K. in November 2015.

  • Killian Wagner, VIU: “For VIU, it’s been important to combine both worlds, because customers are not thinking about different channels in an isolated way anymore. We call it ‘omnichannel’. Our customers can start online and finish offline or vice versa and we try to ensure a pretty seamless experience. I believe that’s particularly important in the eyewear market, which is still perceived as a very medical product. Think about it. The last pair of glasses you bought was likely from someone wearing a white “doctor-like” outfit. You have to combine both worlds”.
  • Philipp Man, Chronext: “Luxury timepieces are an investment, so our customers put great care into their selection before purchasing. Initially, they want to discuss their preferences and try different timepieces first-hand. Also, we want to foster that one-on-one customer relationship. They can quickly and easily put a face and a location to our name and they can be reassured that they are dealing with an authentic watch seller. Offline retail is an important aspect in our future, both for revenue and brand image. For companies within the luxury segment, it is essential that your clients are given the opportunity to experience your brand within the real world. We think a flagship boutique is a great way to achieve this.”

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Location is Everything
The term ‘flagship store’ originates from the concept of a flagship which is typically the fastest, largest, or most heavily armed vessel leading a fleet of ships. In the context of retailing, a flagship store refers to one or more specific stores belonging to a retailer, which may be located at a prominent address. Or, it is the retailer’s largest store, has special interior decor or anything else that makes it stand out and possibly increase brand value. For both companies, it is an essential factor that the store location resonates well with the brand and the target market.

  • Killian Wagner, VIU: “We are looking for in-scene locations with a strong connection to the local fashion & design community”, VIU’s Kilian Wagner states. “In Berlin, for example, we’re on 77 Potsdamerstrasse, which is in a rough, yet upcoming neighbourhood, right beside other high fashion flagship stores.”
  • Philipp Man, Chronext: “We specifically chose London, because our current target market is concentrated in this region. Our flagship boutique is located in Mayfair, which is a rather affluent area of West London that is dotted with embassies, corporate headquarters, areas of commercial activity and other high-end stores”.

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Tracking Offline Performance
As anyone working with online businesses will probably tell you, tech start-ups usually have an insatiable appetite for tracking and measuring everything possible, given their digital origin. Outside the digital world, tracking can be a trickier endeavour.

  • Killian Wagner, VIU: “We track customer satisfaction with the ‘Net Promoter Score’ based on a super-quick happiness survey. To us, this scoring makes a lot of sense, since it is a very early indicator – if it drops, you know you can still react before it impacts on revenues. However, the main KPI for our stores is to build a cool brand. We want to create a mix of an encompassing brand experience and a point of sale – I think this is what we’ve been able to achieve so far.”
  • Philipp Man, Chronext: “Our main KPIs are revenue and store visits – and both have exceeded our expectations. Besides that, our main branding objective was to increase the spectrum of our unique online shopping experience to the world of brick and mortar – while maintaining the benefits of the online marketplace model.”

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Driving Store Traffic
To help bump up awareness and create a buzz around the stores, both companies have taken various marketing initiatives.

  • Killian Wagner, VIU: For us, online channels and the company’s website are essentially the main ways by which we encourage customers to visit the stores in Switzerland and Germany’s major cities. Typically, a customer gets to know us online first, by browsing around and discovering the brand and the different products. Then he or she sees: “Hey, they also have a store nearby. Why not stop by for a visit?!””
  • Philipp Man, Chronext: “Initially, we promoted the Chronext store via our online journal, on social media and prominently on our website. The launch itself was also heavily promoted, because we invited the press and our VIP clients to the opening party. I have to say, a key factor was our advertising in the London metro around the time of launch. Advertising in tube stations has enabled us to attract new and exciting customer segments that were difficult to reach by other means.”

Offline not the Holy Grail
Even though it may be easy to get carried away when your offline presence pays off, our interviewees remind us that we need to remain level-headed: offline presence is not the be-all and end-all.

  • Killian Wagner, VIU: “VIU’s virtual ‘Try-On’, is a feature where website visitors can select glasses and see how they would look on them. Yet, I believe that the experience of touching a product is pretty difficult to replicate online – and building a lasting brand with a pure online presence is simply super expensive. Take Zalando, a leading online shoe and fashion retailer. They spent more than €1bn in order to build their brand and educate the customers about the ease and benefits of shopping for shoes and clothes online.”
  • Philipp Man, Chronext: “While offline is a great way to interact with the clients on a personal basis and transmit your brand message, we also continue to try to create an entirely new and unique experience online. Today, e-commerce has become increasingly experiential, too. That’s also a guiding principle that we use in order to constantly improve and push our website forward, and to better enable content discovery and facilitate interaction with our service team.”

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Should You Go Offline?
Whether an offline presence really makes sense for you is very dependent on the nature of your business.

  • Killian Wagner, VIU: “I think having an offline presence is a benefit for more complex products or services, where the purchase decision requires a higher level of explanation and trust. Personal interaction and physical presence can create that value. For simpler products, such as books or ‘software as a service’ offers, I don’t see a permanent offline presence as the right strategy. I would say to anyone thinking seriously about going offline: “Test it!” Experiment with temporary pop-ups to find out how customers react. Determine whether it helps the brand and whether the economics make sense or not. I wouldn’t rush into it but go ahead and gain that all-important first-hand experience. The costs are very limited and if there is value in it for you, you can go into a more permanent store-building mode.”
  • Philipp Man, Chronext: “It always depends on the company’s business model. When thinking about taking that step into brick and mortar, it is always important, first and foremost, to analyse the needs of the customer. I think that the key focus should always be on whether it meets the costumer’s needs. In our case, we noticed that some of our clients asked whether they could pick up their watches in-shop. With our physical presence, we can fulfil that wish.

This blog post is an adapted version of an article that featured in Leverate Media’s company magazine ‘Leverate ONE‘.