New DTC toolkit   //   June 18, 2019

How Rothy’s is building out its physical store strategy

By Hilary Milnes

A little over a year after Rothy’s opened its first physical retail store on Fillmore Street in San Francisco, the footwear brand is expanding its store network, with five new locations to come this fall.

As first reported by CNBC, the next five stores will be located in Manhattan, Boston, Washington D.C. and Los Angeles, which will get two locations. There are more stores to come next year as well. Last year, Rothy’s did $140 million in sales, and as far as other direct-to-consumer brands go, it’s relatively low-funded: The brand has raised $42 million to date, most recently raising a $35 million round from Goldman Sachs.

Underpinning Rothy’s store strategy is an emphasis on profitability: According to Rothy’s president Kerry Cooper, the first store is profitable and became so four months in. As more digitally native brands move offline and into their own physical retail stores, these locations have served dual purposes as both marketing plays and sales channels, particularly in the form of pop-ups that ship inventory displayed in stores to customers’ homes.

Cooper broke down Rothy’s approach to physical stores, which are valuable in both driving customer acquisition and being places where people want to shop.

Follow the data: Cooper said that the next locations of Rothy’s stores were chosen based on where customers already were — D.C. is Rothy’s No. 1 market, while New York is No. 2. “We wanted to learn from our customers while simultaneously building brand awareness,” said Cooper. In the first year of running its physical store, the brand also kept tabs on customer behavior, learn what customers don’t like and why, and use that information to reflect on its online store strategy and vice-versa.

Tailor inventory to the store strategy: Some of that customer data is used to stock stores. According to Cooper, Rothy’s can’t carry all of its inventory in every store. So it pulls a selection of best-sellers, local high performers and exclusive in-store styles to give customers the best selection when they visit. What the brand has found is that it can highlight special designs and colors in stores, where they perform better than online, because people like them more once they’re actually able to try them on.

Build a dedicated team: At the beginning of this year, Roth’s hired Giovanni Lepori as its vp of global retail development, who previously launched the Aesop brand in the Americas. Cooper said Rothy’s retail strategy can be broken down into two pieces: Retail development and retail operations. As the company adds more stores, the operations piece will become more complicated. “So far, we’ve been getting by with store merchandising led in-house with marketing and merchandising teams,” said Cooper. “So we’ll continue to build out those areas in a light way. When you have six stores it will require a special team.”

Slow and steady: DTC brands are approaching store expansions differently than traditional brands. Don’t expect 100 Rothy’s store to pop up overnight. “For us, stores are a profitable chance for us to acquire new customers. I don’t think we’ll ever have hundreds of stores in the U.S. — there are some limits to the market, and we’ll take it very slowly. I think that’s where you see the proclaimed death of retail, where stores have too many locations and not enough traffic.”

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