Among e-tailers launched in the early 2000s, Birchbox and ModCloth share many similarities. Both cater to young female consumers: Birchbox sells beauty samples, ModCloth sells apparel. And they enjoyed similar levels of venture capital funding at the time of their launch.

However, ModCloth grew slowly, delivering under $100 million in annual sales up to a decade after its 2002 founding. In contrast, Birchbox surged to $125 million in only four years.

The secret to Birchbox’s success? Opening stores.

While it may sound counterintuitive, L2’s Intelligence Report: Death of Pureplay Retail finds that stores provide e-tailers with a marketing boost and increased profitability. By investing in a physical presence, e-tailers like Birchbox can grow faster – and often with less capital outlay – than online-only peers.

Venture capital funding

After Birchbox opened a popup shop in New York City’s Chelsea Market in 2013, Google searches for the retailer spiked. The same happened when Birchbox opened its first permanent store in 2014. Even today, search volume has not fallen back to pre-store levels.

Birchbox searches

Meanwhile, ModCloth’s business stagnated. Revenue growth remained flat from 2013 to 2014, with sales hovering around $150 million.

In 2015, that all changed. The pureplay e-tailer hired former Urban Outfitters Chief Strategy Officer Matthew Kaness as CEO, who shifted the retailer’s focus from online to brick-and-mortar. In April, ModCloth launched its first pop-up shop in two years, followed two months later by a “Fit Shop” in San Francisco.

Just as for Birchbox, the strategy dramatically boosted site traffic. Kaness announced in September that the retailer would begin the next year contemplating “when and where to launch” its first permanent fit shop. He added that the stores would be “in a lot of locations nationally” – making ModCloth sound less like a pureplay e-tailer than a conventional retail chain.

 

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