Why A Chicago Startup Is Tying Its Future To Physical Retail

Brick-and-mortar retail oftentimes gets a bad rap in 2018.

It’s not wholly undeserved, of course. Last year saw store closures spike 200 percent to 7,000 — the worst retail bloodletting since the dark days of the 2008 recession. Layered onto those closures was the running wave of bankruptcies that saw 21 retailers filing for protection, including some household names like Toys R Us. And then there are the “Walking Dead” players like Sears that are continually reporting falling sales and increasing debt loads.

The widely shared consensus is that this could all get quite a bit worse for physical retail before it gets better. According to a report released by Moody’s Investors Service in late 2017, distressed bond issuers in the U.S. retail and apparel markets are nearing recession levels, tripling in the past six years. Debt maturities are also headed toward record levels over the next five years, and more bankruptcies are anticipated.

While it’s easy to fixate on the doom and destruction in the world of brick-and-mortar retail, there is one silver lining that annoyingly persists throughout the rainstorm.

About 90 percent of retail transactions — depending on which figures one prefers — still take place in a physical store. Those purchases are to an increasing degree digitally assisted or enhanced in some way, but they are very often still happening in a physical environment, though the types of environments consumers prefer is evolving quickly.

And adapting to those evolutions – and following them through, ” The Tie Bar CEO Allyson Lewis noted in an interview Lewis  is how the eCommerce Tie Bar brand made a full migration to permanent physical stores — now up and running in Boston, Chicago and  New York.

“We’ve quickly learned that online and in-store shoppers end up being our most valuable customers,” said Lewis. “So, we are carefully studying where our customers live, because an expanded physical footprint is the next rational expansion for the brand.”

From Bow-Ties to Bricks

A little over a decade ago, The Tie Bar began with a pretty simple premise: Men needed nice ties, fashionable pocket squares and perhaps the occasional bowtie to succeed in life — and they should be able to access these basic, one-size-fits-all fashion staples on the internet for a reasonable price.

The brand has grown gradually and cautiously during that time. While other digital apparel startups focused on aggressive expansion and growth, The Tie Bar kept its eyes on the profitability prize.

That has lead to some curious results. The brand was occasionally referred to as the “Warby Parker of ties” in its early days, despite actually being a few years older than Warby. Lewis said the brand mostly stands by its profit-first mentality around growth and expansion — though, of late, they’ve pursued the market more aggressively.

The brand took tentative first steps into the realm of clothing (as opposed to fashion accessories) with their line of men’s dress shirts. The shirts sold out so fast, the firm was taken off guard, and, as their new CEO (Lewis had been with The Tie Bar for three and a half years as the head of design and merchandising), she had to think more expansively about the brand’s future.

“I think anything’s on the table for us. What we learned from the shirting is that our customer wants to buy clothing from us, and they trust us, not just for accessories but for apparel. So, the customer has been asking for more categories — he wants pants from us; he wants suiting. We’re always exploring what those next steps are going to be,” Lewis noted.

At least some of those next steps will be into the physical world.

The Thoughtful Physical Footprint

The Tie Bar’s continued expansion into physical retail has netted a lot of attention. Although Lewis explained that the brand is not intending to open a massive fleet of physical stores, they do plan to expand.

Because those locations are profitable — in more ways than one.

The first way is the traditional way: They make money, which came as a pleasant surprise for the brand. Their pop-up locations in cities like New York and Boston, which were conceived of as an investment in marketing and expanding brand awareness, did not capture a lot of revenue initially.

Over time, the numbers became clear: The stores weren’t just raising awareness, they were generating a profit all on their own, which made a very strong case for making them permanent all on their own.

But, Lewis noted in an interview with Fast Company, there was more to it than that. The Tie Bar’s physical stores also offered something likeable to test labs for the brand’s full array of products and a rich set of data on how they can improve the digital experience for their online customer base.

That doesn’t mean the brand will open everywhere, Lewis emphasized, but it will mean opening a new store in Chicago, plus four new stores to match the Chicago, New York and Boston permanent locations that are already up and running — with more on the way for 2019, depending on the data.

“I don’t think you’ll see us opening a ton of retail stores. But we really want to give our customers an offline experience of the brand. We do see ourselves having more; it’s just about finding the right location,” the CEO concluded.