These eCommerce Startups See a Future for Brick and Mortars



In a city where people get everything delivered, one would think that an online-only platform would mean two happy parties to every transaction – high margins for brands, and customers with one less chore encroaching on their brunch time.

But a recent panel at TechCrunch Disrupt on “Modern Commerce” focusing specifically on fashion and cosmetics alluded to e-commerce not being the be-all and end-all that some might have envisioned.

On Physical Channels in a Digital World

Jennifer Hyman, CEO and Cofounder of Rent The Runway (“RTR”), noted that RTR’s addition of physical locations accomplished three things:

  • Marketing – “It’s much stronger to have a physical retail store than to buy paid ads on Google, for example, especially when trying to serve up… a new customer behavior, like renting clothes.”
  • Logistics &Customer Experience – “I’m able to use [each] store like a mini distribution center and provide a better level of customer service and experience to all the women who live in that market.”
  • Last-Minute Business – “Around 30% of fast fashion, H&M, Zara, etc., revenue comes from people having a last minute need and going into the store and looking at it; and, now we can really compete in fast fashion as well.”

David Tisch, agrees on the customer experience focus – and that is his ambition for Spring, where he is Cofounder and Chairman.  Spring believes that consumers do not download fashion brand apps often, but that those companies still need a way to be accessible on mobile devices. Spring intends to provide that point of connection,while allowing brands control of the experience.  When asked about physical outlets for Spring, Tisch said that he plans to leave physical locations to the brand companies themselves, saying, “… we are not looking to compete in the channels where [our brand partners] exist.”

As the Cofounder and CEO of Stowaway Cosmetics, Julie Fredrickson noted that it’s all about having a conversation with the consumer.

“All I care about is reaching consumers in the mediums that make sense to them, and the physical medium makes sense.”  She went on to say that “the future of retail is the end of wholesale.”

Moderator Colleen Taylor prodded on Fredrickson on wanting to remove middlemen. When Taylor presented a hypothetical global distribution contract from Sephora, Fredrickson replied, “I have turned down a $10 million [purchase order]. Not from Sephora, but from another retailer,” on the grounds that the makeup industry is entrenched on a wholesale model that creates a poor customer experience and there are other ways to scale.

Hyman admitted, “There are still reasons why you would go into a physical location, whether that’s discovery of something new, whether it’s experiential, or whether it’s just fun.” As to what this looks like for Rent the Runway customers, she said, “A huge part of our business is subscription, where people have essentially a Netflix for fashion, you can receive three things at a time off your cue. Well, imagine a world where you could come into our retail store, and take the necklace that [you] are wearing and [your] bag and say I’m tired of this, here it is, and I want to ‘steal’ two things from the store.”  She noted the transaction would be seamless as the whole process could be done via beacon technology and digital wallets.

On Competition in the e-Commerce Space

Tisch bemoaned the fact that, “In the tech world, everyone who sells something is grouped as competitive.”

Hyman went further, saying “Not only are many of these e-commerce businesses not competitive, but the existence of Spotify, Netflix, Birchbox, Classpass-  anything in which you change the model in which you consume things, that helps my business grow because it creates a mentality around access and rental and basically new ways of getting what you want.”

On Funding e-Commerce Today

As the investor perception is changing for what constitutes competition in e-commerce, so has the capital-raising process.  Hymansaid, “Right now, when we raised our last round, they were investing on the success of what we’ve done, not the dream anymore. Rental is a much higher margin business than if I were to just sell that product, because it is utilizing the inventory more effectively. I also think that having more female foundersand having many of those female founders be extremely successful has also had a real benefit in our fundraising over time.”

Fredrickson commented on the growing heat in cosmetics, “Cosmetics will be to this year as food was to last year, from a venture perspective. The market is so large and so few people are playing in it that there is so much opportunity. 70% of the industry has consolidated into ten conglomerates. When technology comes into any space that hasn’t changed in fifty years, that’s opportunity, that’s real money. From our perspective our fundraising was kind of a breeze.”

Hyman summed it up best by saying that “The word ‘fashion’ in the tech world is often viewed historically as being a dirty word.  The reason why I started a disruptive fashion business is that it is the second largest industry on planet earth.  It’s a 1.7 trilliondollar global industry…. It’s one of the few things that people have to do every single day. You have to put on clothes…. at least I hope so.”


Image credit: CC by Maria Elena

About the author: Scott Howard

Scott is the Founder of Current Consulting, a consultancy focused on providing actionable guidance to high growth companies. He is also active in the entrepreneurship and venture communities through his roles with Venturing Hoyas and Georgetown McDonough Ambassadors.

You are seconds away from signing up for the hottest list in New York Tech!

Join the millions and keep up with the stories shaping entrepreneurship. Sign up today.