Professional Documents
Culture Documents
According to Euclid CEO, Brett Franson, “The King or Queen of retail will master both online
and offline - online is the efficiency, offline is the building experience.”1 The term “omnichannel” was
coined to describe this phenomenon after the shift from a “multichannel” strategy to sound more more
seamlessly integrated, frictionless, and “channel agnostic.”2 Thus, an omnichannel approach unifies
physical locations, digital platforms, e-commerce and wholesale accounts to improve customer
experience and ensure brand alignment. This approach allows a customer to be engaged with a retailer
in multiple capacities, giving a consumer the freedom to choose where to purchase. However, when
retailers chase ubiquity, they must not forget to neglect certain channels. Almost 90% of purchases in
the U.S. remain in stores, but “digitally influenced physical store sales are far bigger than online
sales.”3 Furthermore, e-commerce, while influential in purchases, is not as profitable alone and more
difficult to create digital experiences that lead to customer acquisition. Channels have symbiotic
relationships that need to be fostered accordingly. Perhaps dubbing this integration a “unified channel”
rather than “omnichannel” would more clearly delineate the importance of the connection.
Few have mastered this unified channel approach while maximizing speed and convenience in
supply chains. However, the greatest success stories leading industry change are going from “clicks to
bricks”4: online retailers opening physical stores. For example, Warby Parker is the epitome of
unification. The entire product supply chain is genius, undermining Luxottica’s monopoly of the lens
market with a non-value added cost of glasses. 5 Warby Parker owns and operates its lens distributors,
as well as the frame manufacturers, eliminating the middle man in the chain. Furthermore, WP’s entry
into physical retail in 2012 was even smarter. WP launched “showroom” spaces and started showing at
boutiques where customers can order online from both but do not necessarily immediately walk away
with a product. Furthermore, they initiated a digital program in which customers could see what the
glasses would look like on their faces and a program in which customers can order up to five frames
for free to try on for a week and send back. WP focused on the human element of the entrance
experience: they know that customers want to interact with a product, try on glasses, and ask others
opinions before they are ready to make a purchase. WP uses digital technology to streamline the
customer experience rather than letting it overwhelm - customers make their purchases after
familiarization of the product. And, all purchases from the showrooms are databased to show raw data
From Clicks to Bricks: Physical Retail in a Digital World !3
for analyzing the ROI. Yet, the best characteristic of Warby Parker? The physical retail locations carry
very little or no inventory. While sales associates are happy to put an order in for a customer in the
physical retail locations, WP is not left with a cost draining inventory management issue. Furthermore,
the small inventory that some stores do carry is kept in a basement and sent to the customer in stores
through pneumatic tubes (best remembered from the 1980s bank drive-thrus6). These pneumatic tubes,
operated by an associate in the basement, efficiently deliver the products to the consumer in stores, and
allow a low inventory, clutter-free store space for customers to enjoy. Altogether, Warby Parker has
created its own flawless system to ensure products reach their customers as efficiently and
experientially as possible.
Men’s fashion house Bonobos also uses a similar e-commerce based distribution strategy. With
the addition of a wholesale account with Nordstrom, Bonobos has “Guide Shops” that act as e-
commerce showrooms for customers (i.e. no inventory either). Each Guide Shop has in-store
associates and apparel for visitors to try before they buy. According to David Fudge, “A lot of our
customers don’t mind an online-only model, but sometimes they want opinions from friends and
family before completing a purchase. Our partnership with Nordstrom, in addition to our Guide Shops,
help expand our visibility in a very strategic way.”7 Bonobos showroom sales associates are also able
to order for customers in stores. After purchase, products show up looking sharp in crisply folded craft
paper within a day or two. How does this happen so quickly? Bonobos makes use of Quiet’s
Fulfillment Management System8 (software) that sends signals to Kiva robots in a fulfillment system
which bring the products and correspondingly sized package immediately over to be packaged by
employees. While Bonobos does not own these fulfillment centers, they have made it possible for the
hours. Rather than creating an omnichannel experience, Warby Parker and Bonobos both created a
unified channel, utilizing multichannel resources to enhance customer experience and brand
connection, ultimately driving sales and leading to a more efficient supply chain.
Amazon is yet another example of successfully integrated supply chain management. In the
span of two decades, Amazon went from an online bookseller to one of the most dominant forces in
online retail. The behemoth vertical retailer has several patents, including that of drone technology,
From Clicks to Bricks: Physical Retail in a Digital World !4
twenty leased Boeing 767 aircrafts, and a successful “Fulfillment by Amazon” category that provides
storage, packing and shipping to small merchants selling products on the website. Amazon alone takes
up 7% of the U.S. apparel market and according to Time, could take up 19% by 2020.9 However,
Amazon’s next move is into physical retail after dominating the digital, so they began testing the
concept with an initial bookstore launch in 2015. Amazon currently has six physical bookstores
(planning to open over 400 more) that act as an “experience” because books are turned face out, so not
to look like crammed inventory. Customers in these stores are also able to purchase directly from the
Amazon website and have the books shipped to them, similar to the both the Warby Parker and
Bonobos distribution tactics. The data-centric website is able to compile the most popular books based
on genre purchased on Amazon, and create categories and “recommendations” that would best fit
consumers’ tastes.10 Amazon displays their electronics, like the Echo and Fire TV, in the center of the
store so that consumers are able to get comfortable with new, unfamiliar devices. Additionally,
Amazon has twenty campus book-less store locations, where students order textbooks and dorm
furnishings online and then come to these locations to pick them up, reducing shipping expenses for
consumers. The company is also testing a grocery store pickup service as well as a grocery store in
which a customer can walk into the store and walk out without checking out, while an account is
charged automatically on his or her phone. All transactions in store would go through an online
amazon account, a unified channel.11 But, why stop there? Amazon has the proof of concept that
experience stores work for them; the next step would be to launch a curated fashion retailer based on
all of the best selling products categorically. Amazon’s success comes from the immense amount of
data at its fingertips and the power to implement new strategies because of investment and vertical
Modcloth recently opened a curated store in Austin, Texas in January of 2017 that features
select samples of the independent designers that they carry. In April of 2015, Modcloth began
experimenting with a pop-up tour called “Modcloth IRL” that started in Los Angeles and made its way
across the country. The pop-up allowed the company to hear customer feedback and see where
geographically the first store should be opened. Modcloth does not refer to the store as a physical retail
store, but rather a “fit shop” because of the limited curated stock. Customers are able to buy in store
From Clicks to Bricks: Physical Retail in a Digital World !5
and go home the same day with their purchases, but, many more items are available on their e-
commerce site. The selection of items even changes in the stores depending on the inventory on the
site, and which pieces the founders believe look best together in stores. This process cuts out
merchandisers and buyers because the data from online retailer tells the founders exactly what should
be displayed in a certain geographic location like Austin. Additionally, Modcloth has a “Be the Buyer”
virtual fashion buyer program in which online customers vote for the products they would most like to
see on the company’s website. With this emphasis on customization, Modcloth handles more than
7,500 designs from approximately 1,200 designers. They take in large shipments from vendors into
individual customer orders and pull from those shipments for the inventory in the Austin fit shop.
While working with independent designers can be tricky in the supply chain process, the company
uses an enterprise resource planning system (ERP) to handle fulfillment, logistics, and shipping with
vendors. For Modcloth’s private label, the company does not have manufacturers ship directly to
online customers - they manage and handle those products just as the rest of their products as not to
complicate the logistics process. Modcloth’s greatest feat in opening the retail space is the customized
curation through compiled e-commerce purchases, ultimately eliminating the need for in-house buyers
On the horizon for the next supply chain innovation, FarFetch is to launch its “Store of the
Future” concept this fall that would start to free up time and enhance in-store customer experience.
FarFetch is using an augmented retail solution that “links both the online and offline worlds, using data
to enhance the retail experience.” 12 Retailers now need a way to collect data about their customers,
especially while they are browsing in store to provide a curated shopping experience. Everything in the
inventory will be attached to RFID trackers and it detects the pieces that consumers interact with
during their shopping experience, adding it to a customer’s wish list. A customer pays with an app that
provides better information on customer taste to a sales associate. The “Store of the Future” would
close the loop between a great online presence and a complete omnichannel offering. FarFetch is also
making this concept modular, meaning that brand and boutique partners can choose which
technologies they would like to license from FarFetch and build upon the platform. Right now
employees are the inventory controllers, but FarFetch prefers sales associates to be the in-store
From Clicks to Bricks: Physical Retail in a Digital World !6
influencers for a retailer with the hassle of inventory left to technology. According to FarFetch founder
and CEO, José Neves, “digital is completely influencing consumer behavior and the creation of desire;
online is growing much faster than offline, but offline is still - and will be - where the vast majority of
transactions take place.”13 Thus, the “Store of the Future” will solve for the unification of channels.
Perry Ellis, a global men’s lifestyle brand under Perry Ellis International, could potentially
benefit from improving its supply chain in the same unified strategy and shorter cycling as the
previously discussed companies. As previously stated, e-commerce retailers that use data compilation
methods to launch physical retail stores have been immensely successful in omnichannel fusion. Perry
Ellis currently operates mainly as an online retailer that distributes to wholesale accounts like Macy’s,
Amazon, Dillards, and Men’s Warehouse. PE has physical stores, but mostly in premium outlets, and
unfortunately had to close over fifteen stores in 2016.14 According to PEI’s annual 10K, Perry Ellis has
two full-price stores, but not in crucial metropolitan areas. In studying Perry Ellis’s supply chain
strategy, I encountered five main problems towards the end of the supply chain that the clicks to bricks
distribution, and brand alignment. Furthermore, I identified an antiquated lack of transparency in the
As previously discussed, Modcloth has eliminated the “middle men,” or buyers, in the
distribution process, and Perry Ellis could do the same. Perry Ellis the man was known for his wit and
his innovation in the fashion industry by redefining American sportswear. He was forward thinking
and believed that fashion should never be taken too seriously. While Perry Ellis’s fashion shows and
presentations directly mirror Perry Ellis’s vision, by using patterns, pops of color, new shapes, and cool
trends, the collection available on e-commerce and in department stores is drab in comparison. The fun
belts, interesting man-bags, and fashion forward pieces that perry ellis showed in the FW17
presentation in the Spring is unavailable to the everyday consumer in ready to wear. Why? Because in-
house merchandisers and buyers from wholesale accounts choose the pieces most likely to sell in mass
quantities. The “middle men” do not want to bet on what will sell to the mass consumer, so “safe” in
terms of Perry Ellis purchases mainly follows navy and black suits, dress pants, and traditional men’s
work clothing. Department stores and in house merchandisers every once in a while will bet on a piece
From Clicks to Bricks: Physical Retail in a Digital World !7
and buy a small inventory, like the cool green track suit available in department stores today. However,
seemingly in Perry Ellis’s case, the middle men create an omnichannel disconnect between the brand’s
marketing strategy and the actual supply of product. Generation Z customers now want more than just
clothes, but a connection to the trends and the brand messaging. They not only want quality, but
products that speak to them through history - as the witty Perry Ellis originally envisioned the brand.15
If Perry Ellis was able to eliminate this tier, or at least let “customers be the buyers” like ModCloth,
Each of the companies also are e-commerce websites that launched a physical store. Perry Ellis
would greatly benefit from having a physical, curated, full price store. After opening up the website to
allow consumers to choose the pieces directly from the runway collection that they prefer, like
Modcloth, the geographical data compilation from e-commerce would allow Perry Ellis to open a store
where they have a high concentration of customers. The curation in the store would also be based on
popular customer purchases, and would allow supply chain managers to easily predict the amount of
inventory needed for the store. Customers would have access to a greater variety of products that
connect more deeply to the brand because of the elimination of middle men, without worrying about
inventory management. A retail space would allow Perry Ellis to host events, something that the brand
is currently unable to do without costly venue searching. The omnichannel, or unification, of a brand
must focus on customer satisfaction and interesting store experiences. Without a store, Perry Ellis is
unable to capitalize on the fact that the majority of purchases do in fact take place in a store.16 While
Perry Ellis is in department stores, it is difficult to create a unified message with the limited options
given in a select floor plan, even with retail marketing managers. Thus, the only way for Perry Ellis to
keep up with the rapid change happening in the industry is to create their own custom experience in a
physical location.
Every company wants a high inventory turnover ratio. However, in order to cut losses as
Warby Parker did, keeping minimal or no inventory at all in a store leads to a desired ratio. As the
fashion industry constantly changes inventory based on season, excess inventory is discounted, leading
to a loss in gross margin and overall profitability in a retail setting. Perry Ellis’s main collection (not
even including the 360 Athleisure collection, Portfolio suit collection, or licensed products) launches
From Clicks to Bricks: Physical Retail in a Digital World !8
roughly four new seasons per year. With the turnover of product high, it would make sense for Perry
Ellis to use Warby Parker or Bonobos’s strategy of a showroom or “Fit Shop.” While no actual product
would be sold in the location, the ROI could easily be determined by the number of online orders that
take place in the physical store. Therefore, Perry Ellis would still be able to show shareholders
One issue that could come into play for Perry Ellis is the distribution of product. Today, Perry
Ellis International has a 10-person team in China and a separate team at their headquarters in Miami
that helped to develop a product lifecycle management (PLM) system.17 However, Perry Ellis
International is the umbrella company of Perry Ellis that holds over 30 brands including Original
Penguin, Rafaella, Callaway, and more. Meaning, streamlining the design, merchandising and
production cycle is a much harder process while competing with the various other companies and
orders to suppliers must be submitted over six months in advance. While PEI has in-house reporting
systems and logistics teams that track all shipments and look to improve transit times, flexibility in
supply chain is just not available for Perry Ellis the brand. Furthermore, speaking with personal
experience, overnight shipping does not actually mean overnight, but more or less delivery within
three days. While this is a difficult supply chain problem to fix for a brand with an umbrella company,
the addition of vertical integration specifically for overnight shipments or orders placed in the new “Fit
Shop” should be considered. While this could be a bit of a stretch for shareholder approval, a less
drastic consideration would be to use the same or similar technology to Bonobos in the warehouses,
Kiva robots. The technology allows Bonobos to drastically ameliorate the order logistics process,
without human error or delay, using the robots for fulfillment. The robots would even cut down on the
warehouse employees needed to oversee the process. If the brand Perry Ellis is only able to operate
under Perry Ellis International’s supply chain, it could be beneficial for all parties under the PEI
A physical “Fit Shop” location, an elimination of “middle men,” and the improvement of
technology in the supply chain, all leads to a better unified message across channels for Perry Ellis.
Once these steps are taken, Perry Ellis’s marketing team has the capacity to reach beyond just what is
purchased by in-house and department store buyers. The team would be able to connect with the brand
From Clicks to Bricks: Physical Retail in a Digital World !9
history and bring back the original wit of Perry Ellis rather than having to apply it to products that are
not symbolic of the original man. Perry Ellis’s new brand direction is moving towards innovation and
technology, so what better time than to introduce Kiva robots to the supply chain to improve customer
satisfaction? Perry Ellis is also exploring new fabric technologies, like moisture-wicking and washable
suits, so a showroom would give customers a first look and feel of the new Perry Ellis experience.
Ultimately, the above supply chain improvements are imperative for Perry Ellis to keep up with the
changing industry.
Lastly, something else to ponder is the lack of transparency in the start of Perry Ellis’s supply
chain. In the move for digital Corporate Social Responsibility and a company’s suppliers at a
consumer’s fingertips, Perry Ellis International does not disclose a comprehensive list in their annual
reports. The majority of companies now disclose all suppliers and vendor information because of more
eco-friendly, social justice oriented consumers. For example, despite criticism from consumers in the
aftermath for certain factories, Gap began releasing full annual reports in 2016. Joining the ethical
trend are other companies like VF Corp, Marks and Spencer and C&A. While controversial
considering the unknown structure of the beginning of Perry Ellis’s supply chain, if Perry Ellis has
nothing to hide, releasing the list could be beneficial to a company moving towards a new Generation
Z demographic.18
In looking at the above proposals for Perry Ellis, one must complete a cost and benefit analysis
to determine financial practicality. In creating my analysis, I put together two proposals with tangible
financial data. The first proposal includes opening up a showroom space and eliminating the Perry
Ellis in-house buying team. The second proposal includes implementing a “starter” Kiva Robot
warehouse system.
In my first proposal (see APPENDIX I), I take Perry Ellis through its next step of creating an
omnichannel success: physical retail. I consider capital costs (buildout, furniture and fixtures, and the
initial deposit), inventory investment, severance, wholesale cannibalization, lease costs19 , labor,
utilities, and insurance in my total three-year costs of $8,169,375. I include labor savings and sales in
my total three-year benefits of $20,250,000. Ultimately, the net three-year benefit of implementing this
proposal would be $12,080,625. My costs mostly include those to open a physical retail space and I
From Clicks to Bricks: Physical Retail in a Digital World !10
used data based off of Warby Parker’s SoHo location to calculate the numbers. Most obviously, my
largest cost is the lease for a prime retail location in Manhattan, around $4 million for three years. My
second largest cost is wholesale cannibalization from other department stores, which I attribute to 10%
of the sales in the physical showroom ($1.9 million for three years). Overall, the retail location and e-
commerce website combined will allow Perry Ellis to compile data on consumers that allow the
company to fire the five person in-house buying team and focus on letting consumers “Be the Buyer”
as Modcloth does. Thus, a main benefit is labor savings from a five person team, accounting for $1.5
million in three years. However, the largest benefit that the retail space can give Perry Ellis is the
exponential increase in sales. For example, Warby Parker does on average $3,000 in sales per square
foot of their retail showrooms.20 By this standard, Perry Ellis could be doing $18.8 million in sales
after three years of showroom operation. On top of these financial benefits, Perry Ellis would also gain
the intangible assets of having a space in which customers can experience products. Perry Ellis would
benefit from a customer being able to touch and feel fabrics, try on garments, and be catered to by
hospitable sales associates. The New York team for Perry Ellis would also be able to host events in
In my second proposal (see APPENDIX II), I sped up Perry Ellis’s supply chain efficiency
with Kiva technology. I considered capital costs (of buying robots), and severance (for letting go half
of the warehouse labor) in my cost analysis of $1.5 million in three years.21 It is important to note that
these are both one-time costs while the benefits of implementation continue as the robots have a life of
anywhere between 10-15 years. The benefits of using Kiva robots include labor savings from workers
let go, a reduction in shrinkage (due to theft), and a reduction in fulfillment errors/shortages totaling
$1.87 million in three years. The net benefit of implementing this technology is relatively low tangibly
in comparison to proposal one at $350,000. However, intangibles also include improved service level
for Direct-to-Consumer at 24-48 hour shipping windows, an investment in technology consistent with
new brand image direction creating a “wow factor” for marketing, and delivering the right product on
time. Furthermore, both the intangibles and tangibles will last as long as the life of the robots,
These two proposals are the most realistic in gaining shareholder approval, as the costs
outweigh the benefits for shareholders. Other previous suggestions, such as an entirely vertical
integrated system and releasing Supplier/Vendor lists could potentially risk shareholder approval as the
costs could potentially outweigh the benefits for the company. However, in the two proposals that I
have created, I am able to refute any negative feedback that shareholders could have. In proposal one, I
expect the main concern of shareholders to be cannibalization of wholesale through department stores.
However, as you can see in my financial model, cannibalization will account for roughly 10% of sales
in the store. While this is a large figure, Perry Ellis could argue to shareholders and negotiate with
department stores that the company is creating a new “line” or assortment which differs from the
merchandise being sold in wholesale. This new initiative would technically be avoiding a large portion
of the channel conflict, especially because the store will be aimed at a younger demographic instead of
the older department store consumer. Technically, Perry Ellis would be investing in department stores
by fueling a desire for the brand. Furthermore, to shareholders Perry Ellis could highlight the fact that
there will be no physical inventory in store, meaning there will be no loss on inventory. Another point
to make in proposal one is that there will be a great benefit in firing the merchandising team and using
the data collected from the store and e-commerce to decide inventory management. By firing the team,
the company will make up $500,000 annually. While this decision may be looked at with doubt
ethically for firing a whole team, the financial benefits will most likely override the ethics for
the Kiva system. However, in my financial analysis I have proved that with firing half of the Perry
Ellis warehouse team, the system will pay for itself and more over fifteen years. Furthermore, it will
Ultimately, Perry Ellis would be opening a store that is a self-funding brand investment and
would be implementing a new technology for supply chain efficiency. Based on industry trends, this is
the best way to create a unified message and channel for a primarily e-commerce based company in a
rapidly changing retail environment. Such unity can only be achieved for Perry Ellis by going from
clicks to bricks.
From Clicks to Bricks: Physical Retail in a Digital World !12
Appendix
Numbers calculated using research from Retail Dive, NYC Office Space Leader. 22 23
Assumptions:
Assumptions:
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From Clicks to Bricks: Physical Retail in a Digital World !16
Endnotes
1 Howland, D. (2017, March 29)
2 Dennis, S. (2017, March 23)
3 Dennis, S. (2017, March 23)
4 Neely, A. (2017, January 09)
5 Villa, C. M. (2012, July 25)
6 Schulte, E. (2017, April 18)
7 Fiorletta, A. (2012, August 9)
8 O'Reilly, J. (2010, February 15)
9 Close, K. (2016, May 13)
10 Wingfield, A. A. (2016, March 10)
11 Press, T. A. (2017, April 28)
12 Conlon, S. (2017, April 13)
13 Kansara, V. A. (2017, April 12)
14 Beilfuss, L. (2016, August 18)
15 Howland, D. (2017, March 29)
16 Dennis, S. (2017, March 23)
17 Slack, E. (2016, February 21)
18 Howland, D. (2017, March 29)
19 New York Office Space for Lease | Metro Manhattan. (n.d.)
20 Howland, D. (2017, January 24)
21 Wulfraat, M. (2012, February)
22 Howland, D. (2017, January 24)
23 New York Office Space for Lease | Metro Manhattan. (n.d.)
24 Wulfraat, M. (2012, February)