Source: Instagram/@sweatybetty
Digital-first focus drives faster growth than stores ever did for Sweaty Betty
Sweaty Betty’s digital-first multi-channel strategy is helping the U.K-based women’s activewear brand to “grow quite quickly in multiple markets at the same time,” according to Julia Straus, CEO.
“The challenge at retail is that you can only grow, unfortunately, one store at a time,” Ms. Straus said last week at Financial Times’ “Future of Retail” digital seminar.
Building digital demand, either ahead or parallel to store expansion, “is a really nimble and attractive way to acquire customers,” she said.
The retailer, founded in 1998, pivoted to digital-first with major upgrades over the two years prior to 2020. Those investments paid off as the pandemic shuttered stores and spending shifted toward digital marketing and social media to capitalize on “very dramatic” shifts toward active lifestyles in the stay-at-home economy.
Going “pure digital” as stores closed wound up being “incredibly eye opening” and helped Sweaty Betty optimize its digital-first approach. “We were not as nimble as we thought we were. We were still thinking about four walls and, no matter what you do, it’s very hard to break that,” said Ms. Straus.
“It actually was an experiment that we never could have run under normal circumstances and I think it’s made the way we think about merchandising and bringing product to the customer much, much faster,” she said.
Online sales currently make up about 70 percent of Sweaty Betty’s revenue, but Ms. Straus insisted stores are “more important than ever.” It currently has 65 stores, largely in the U.K., and ramped-up openings are expected following its March acquisition by Wolverine Worldwide, the parent of Merrell, Saucony and other footwear brands.
Stores, she said, remain a “critical point to engage with your customer,” both from a pure sales perspective in being able to touch product and make instant purchases, as well as for the community aspects. Sweaty Betty is seeking to bring the educational and social advantages of the store to the online experience.
She said of stores, “A lot of it is community, and it’s just being out with each other and experiencing a day that is not behind your computer screen.”
Discussion Questions
DISCUSSION QUESTIONS: To what extent has the pandemic accelerated and proven out the digital-first approach for retail? What lessons has the pandemic taught about balancing digital and physical?
Poll
Loading …BrainTrust
Melissa Minkow
Director, Retail Strategy, CI&T
Nikki Baird
VP of Strategy, Aptos
Very few retailers can survive without a strong digital strategy and that was magnified during the pandemic. When the pandemic forced many non-essential stores to temporarily close, those retailers relied solely on digital sales for revenue. In today’s retail climate and with today’s elevated customer expectations, savvy retailers are focusing on a phygital strategy that combines the benefits of an online and physical shopping experience.
Well, there are two sides to the online rush in the pandemic. One is a success story like Sweaty Betty, which is great. This applies to companies of all sizes – like Nike, who benefited enormously from a digital-first perspective. But the other side is a challenging story, where brands that were already mostly reliant on digital found that everyone else rushing to digital raised customer acquisition costs significantly and even turned marginally profitable businesses into unprofitable ones as a result – even as business was booming.
It’s not all or nothing. It’s both. I saw a very interesting stat the other day: there is no digital upstart with over $1 billion in sales who has not opened stores. I’m sure Amazon achieved that without opening stores, but even they’re in the store business hard these days. You need both strategies – and you need them working together seamlessly.
Consumers struggled to fully envision how online shopping could be embedded seamlessly within their routines because pre-pandemic, it was more convenient to stop in a brick-and-mortar store while you were out and about. Once we couldn’t be out and about anymore, online retail more easily integrated into our habits and lifestyles. Along this journey, shoppers have come to realize that online works just as well, if not more conveniently, for most categories than in-store does.
The way Sweaty Betty still sees stores as important, just in very intentional ways, is how smart retailers will think about balancing online and offline. A physical store is crucial to maintaining a community presence and to facilitating experiences, but having too much brick-and-mortar is just expensive and doesn’t add much.
One other important note – this transition of Sweaty Betty to an online-forward strategy may be easier for them than U.S. retailers because British shoppers are, and have been for a while, online-forward consumers.
For many things COVID-19 was an accelerator — we all know that. But for e-commerce, it was a nuclear rocket booster. Over 75 percent of Americans were required to work from home, going outside seemed unsafe and oh yeah, it was cold a lot. Surveys pre-COVID-19 had e-commerce at around 20 percent of retail (minus gas, auto, restaurants) but in several recent studies, when consumer were asked “how will you shop predominantly going forward, in stores or online?” e-commerce hit 64 percent and higher. And by the way, Warby was really the first to use e-commerce as a driver into a market and THEN follow with physical. So yeah, Sweaty Betty was a fast second on the road to the future of retail, but there’s nothing wrong with that.
Playing a digital-only or store-only strategy is a difficult proposition. Even with the pandemic, a balance of both is key for long term health. Digital native retailers are moving into stores. Traditional store-only retailers have created huge digital capabilities — there is an intersection on the store-digital graph where optimization can be found, and for each retailer the percentages are a little different. This is what makes retail so interesting and ever-changing.
I think the pandemic has proven exactly the opposite of “digital first.” Sure there was the moment when digital became the critical fall back channel, and digital is an amazing launch and potential growth vehicle. But then I read about the digitally native brands going public that are not yet profitable. They need stores to round out the business model. Even the article says stores are “more important than ever” and stores remain a “critical point to engage with customers.” And I’m guessing it wasn’t as simple as “digital first” for Sweaty Betty. I suspect that they had done a superb job of creating and executing a solid and focused brand promise that built a level of consumer awareness and confidence that enabled the digital strategy to perform so well.
I would argue that being digital-first today often includes stores as part of the end-to-end experience and that the pandemic has accelerated this. We’ve seen a massive uptick in click and collect or BOPIS orders. Sweaty Betty has obviously seen the growing need for more pickup points to support their digital sales as well. In October 2020 they rolled out their click and collect partnership with John Lewis whereby customers can pick up their Sweaty Betty orders at a John Lewis or Waitrose store (via a ship to store model).
What will be most interesting is whether Wolverine ends up leveraging their entire portfolio’s distribution network to serve each brand’s customers.
It seems to me that several weeks ago in our discussions a statistic was quoted that 87 percent of shoppers begin product searches online. Advertisers have moved digital as well. In 2021 digital ad spending will equal or surpass traditional ad spending. Certainly the pandemic has accelerated a trend that was happening anyway. I believe it moved the importance of digital ahead at least five years.
There is a recently opened “adult store” in our zip code. The company was forever online-only. Why did they open a brick-and-mortar store here? They say it was simple. It was because of the high concentration of online orders that came from this zip code.
Consider how the data from one’s sales helps choose brick-and-mortar locations. the risk of location panning may drop dramatically.
The most important takeaway from the Sweaty Betty success story is that digital-first is not digital-only! “Stores are more important than ever” should be an industry mantra coming out of the pandemic. Digital strategies clearly rose to the surface of table stakes during the pandemic to help many retailers survive, but when we look closely at who experienced the most success, it becomes clear that the right balance of stores and digital is what make a truly exceptional success story in retail. If the pandemic proved anything, it’s that stores + digital is significantly more powerful than digital-only or stores-only. Each supports the success of the other. Digitally native brands that open stores quickly see a rise in digital sales from surrounding zip codes to that store. Likewise, brick-and-mortar retailers that invest in their digital footprint see significant increases in sales. Despite the hype, this isn’t a zero-sum game — it’s additive! The best example – even Amazon has stores!