Hybrid Retail

retail storeEarlier today I read Jeff Jordan’s article in The Atlantic titled The Death of the American Shopping Mall. Jordan is a partner at a16z, and sits on the boards of some great consumer businesses (AirBnB, Fab, OpenTable). The article mostly discusses the death of traditional retail, and the real estate consequences that go with that. Indirectly, the story addresses a new model that I’ll call Hybrid Retail.

Hybrid Retail is a physical outpost of a predominantly online brand. This has come into fashion recently as companies like Bonobos and Warby Parker establish brick and mortar locations. The storefronts are a bit unusual in that they do not keep stock and orders are fulfilled through the same warehouse systems as online orders. Another business I will add for consideration is Tesla. The Tesla showrooms do not actually perform any sales function, all the reservations and orders are done online.

In the case of Tesla, the Hybrid Retail model was forced rather than designed. Automobile dealers have state and federal laws regulating new car dealerships. Tesla gets around this by allowing customers to pre-order their car online. All sales legally take place in California and the car is delivered to your home.

For a car, buying on a computer at the store makes sense. You are going to wait for delivery anyway, there’s no chance you’ll be able to drive off the lot with your car. Arguably, this model could work for Warby Parker as well, because you are buying prescription eyeglasses. For a clothing retailer like Bonobos, I think this model is much less practical.

Traditional retail is all about getting what you want instantly. Warby Parker beats Lenscrafters on price, but not on time-to-happiness. Same for Bonobos vs. Gap on style. When you offer a product that nobody else has (i.e. Tesla) the Hybrid Retail model can work. But when you have a commodity good like eyeglasses or clothing, the convenience factor is huge.

Amazon and Walmart are investing heavily in same day delivery programs that will provide large catalogs, low prices, and great time-to-happiness. Can Warby Parker and Bonobos offer amazing in-store experiences that get customers to look past the convenience issue? Only time will tell if the Hybrid Retail model can really work, though I would bet against it.

Categorized: business