Why eCommerce Needs A Foot In The Real World

As PYMNTS noted last week, there’s no shortage of quantitative data on the Internet. It’s barely an exaggeration to state that whatever statistic one needs – no matter how obscure – someone has gathered it and posted it on the Web somewhere. The problem isn’t finding the data, it’s knowing what the data actually says.

And in no place in payments and commerce is that more clear than when one looks at the numerical narrative around eCommerce/mobile commerce and physical retail.

The simple story is that commerce online is exploding and expanding. No matter what metric one uses, the number of consumers buying goods online and on mobile is just increasing. Meanwhile, foot traffic to physical retail is on the decline, year-to-year and month-to-month; consumers are even more and more consistently sitting out “shopping holidays” like Black Friday. It’s a tempting David/Goliath narrative, when at a quick glance at the numbers, David is beating up on Goliath in a big way.

It does, however, overlook one key fact: just how much larger Goliath actually is next to David. In 2013, the U.S. Census Bureau reported that, overall, 94 percent of retail sales were conducted in brick-and-mortar stores, while just 6 percent occurred online. And while the balance is shifting and some categories may flip or tip that more, eCommerce is going to have to grow at a very fast rate for a while before it starts throwing rocks at Goliath that really hurt.

Retailers in the business of selling clothing and other fashion items – especially selling it online – face the Goliath-sized proportions of physical retail most acutely.

“The reality is 90 percent of clothes are still purchased offline,” Blank Label CEO Fan Bi noted in an interview. “People want to feel and touch and try on.”

Blank Label is the firm first launched in 2009 as an online-only boutique for custom-made menswear.

“We like to think we’re serving an underserved market of men that want a better fit,” Bi noted.

And they get that better fit by asking customers an exhaustive – and somewhat unusual – series of questions about their prefered color palette, how much risk they enjoy, if they are seeking comfort or if they are want to look good in their clothes.

“There have been a lot of interesting attempts, but as a stand-alone, the idea hasn’t really had much consumer traction,” he explained. “What we have found is that men actually like top-down design” of apparel. “It’s about utility. We’re solving a problem for guys.”

But it is not a problem that Bi believes they are able to really solve from an online-only perch. Blank Label opened its first physical store in Boston about two years ago.

“[When the firm was online only] it seemed like too much of a stretch for them,” Bi said. “They’d ask where the store was. What we came to realize is having a physical footprint is the most ROI effective form of marketing. Take what you spend in online banner, search and email ads, and offline print, boards, etc., and place it into opening experimental stores where you can create demand, capture demand, and also create emotional connections, and you’ll have a better return on your investment.”

The move into physical retail was not easy, noted Bi, and was made even more difficult by Bi’s immigration status. Bi is an Australian citizen, and shortly after founding his firm in 2009, he was politely asked by the American government to return to his nation of origin. After a year, a brief sojourn in Shanghai and a special visa for Australian citizens, Bi returned to the U.S. and began pushing his firm’s transition into physical retail.

“ECommerce brands are going physical,” Bi has noted in past interviews. “If you look at the most funded, fastest-growing startup brands: Warby Parker, Bonobos, Birchbox, Etsy, Rent the Runway, Harry’s, and even Amazon, that is the way this is going.”

And to aid in that goal, Blank Label has recently announced $1.1 million in funding from a vast collection of Boston-based angel investors. Up until now, the firm has been bootstrapping off of its founder’s initial $30,000 investment. And, Bi noted, even their road to angel funding was a little unorthodox.

“The catalyst was AngelList, which sent us out in two email blasts and all of sudden we had over 100 messages from investors to learn more,” Bi said. “That created good momentum for us to get picked up in the Boston scene.”

With this latest funding round, Blank Label has both made the turn into profitability and is expanding its physical presence outside of Boston; the company is looking to open a location in Washington’s DuPont Circle neighborhood later this year and locations in Charlotte, North Carolina, and Dallas, Texas, in 2016.  And while Bi has not disclosed revenue specifics, he did note that Blank Label has shipped about 100,000 garments so far, with 40 percent of that volume occurring in the last year. About half of the company’s 15,000 customers are repeat clients.

“The goal is to be able to get profitability in those four markets and continue building stores,” Bi said – further noting that he does not buy into the gospel of rapid growth that is common among tech and eCommerce startups.

“I’ve come to realize there’s a fast-trajectory startup route and there’s ‘building for the long term,'” Bi noted. ”It’s been a slow grind over five years and I’ve heard lots of entrepreneurs saying, more or less, ‘If you’re not trying to build a unicorn within three years, you’re basically a loser.’ But when you look at the really successful consumer brands, they take 10 years to build, not three. When you try to compress that into three years, bad things can happen.”

So Bi is continuing to build out his business slowly and sustainably – with a market to solve for the fashion-conscious but unfussy male shopper who just wants his clothes to fit right.

“We’re building a business, not building a startup,” Bi noted.

And now, Blank Label will find out if that business has legs.