LAS VEGAS – If there was a theme running through Shoptalk's inaugural conference, it was that stores matter, even in this digital age. It was a point driven home by Andy Dunn, founder and CEO of Bonobos, during one of the final sessions Wednesday.
Dunn founded Bonobos as a pure e-commerce retailer, one that began by making pants for men and soon expanded into shirts and suiting.
"We started and thought we were a pure play dot com and we discovered that dot com is very challenging," said Dunn. "We were telling ourselves that the Bonobos experience was better because it was online only. Once we put in a fitting room in our lobby, we realized we were wrong."
And the Bonobos Guideshop was born.
Guideshops are small-format storefronts with limited inventory. Shoppers can try items on, but purchases are shipped to them after the fact, something shoppers ultimately embraced and seem to prefer.
"Everything I've ever been told in the industry about instant gratification was a lie," said Dunn. Roughly 5 percent of Bonobos customers go into a store needing something right away – they spilled on a shirt or need a tie for a meeting. But the conversion rate is the same for this 5 percent as it is for the remaining 95 percent that understand the process, Dunn said.
The business model allows Bonobos to work with less inventory in smaller footprints, which in turn creates a better customer experience and is helping to build an "enduring asset," according to Dunn.
Funding is vital to a startup such as Bonobos, but raising money "into perpetuity" isn't in the business plan and neither is overinvesting in the platform at the expense of the physical experience, which Dunn said is critical growth. To that end, Bonobos is investing equally in stores and technology.
Bonobos will end the year with 32 stores, and Dunn expects to operate 40 by 2017. And while the brand does see some initial cannibalization of online business to areas where stores open for the first few months, that is short-lived. "I wouldn't be surprised if we're at 80 [stores] before long," he said.
The private company doesn't release sales figures, although Dunn shared that the company's store in Chicago's Lincoln Park neighborhood is ringing up between $2 and $3 million through the roughly 800-sq.-ft. storefront.
And unlike some digital era retailers, Bonobos is focused on both growth and profitability. "This is retail," not a software company, said Dunn. "Ultimately profits matter and cash flow matters."
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