Startups born online have discovered an old way of doing business: opening physical stores

Startups born as ecommerce are discovering a new, unexpected method to increase their turnover. The opening of physical stores. Thanks to the soaring prices for online ads and a greater propensity to buy in stores after the boom in e-commerce during the pandemic, companies born during the golden years of the digital economy have begun to experiment with alternative ways of selling own products. First of all, the oldest. Open shops, fixed or temporary ‘Popup’.

Velasca: from ecommerce to physical channels, 25 million in turnover

“It is a trend that has been strengthening in recent months. We had intuition that we would go in that direction as early as 2014, when we tried to experiment with physical sales by renting an Ape car”. Enrico Casati is co-founder of Velasca. Born in 1987, with a degree in Management from Bocconi University in Milan, Casati founded Velasca in 2013 in Milan with Jacopo Sebastio. The idea is quite simple: to create ecommerce of handcrafted men’s shoes produced by small local workshops. Marches in particular. Today the company has 90 employees, 20 points of sale, single-brand stores in Paris, London and New York and an expected turnover of 25 million for 2023.

“We were born as an e-commerce business, but we realized a little ahead of our time that sales on traditional channels such as shops offered an opportunity that online did not offer”, adds the manager. The pandemic has accelerated the trend. “Ecommerce has accelerated a lot. Today he braked. Of course, we cannot say that we have returned to the pre-pandemic level, there has been a slowdown ”, he reasons. Focusing on physical stores is not just a matter of opportunity. But almost out of necessity.

“Online advertising costs have increased by at least 50%. And today, if the quantity of content is not improved, it is difficult to obtain a good conversion rate”, i.e. the number of potential customers acquired based on the number of clicks obtained. The transition from ecommerce to the physical channel for a startup is not obvious. For example, Velasca obtained investments from the P101 venture capital fund, specialized in financing digital companies: “At first it was not easy to convince them. Then, over time, they proved us right”, admits Casati.

A trend that affects many ecommerce startups in Italy

This conversion to physical ecommerce channels is a trend that has been active in Italy for some years now. The Turin-based Lanieri is considered to be the forerunner, founded in 2012 by Simone Maggi and Riccardo Schiavotto, incubated at I3P of the Piedmontese Polytechnic and sold in 2020 to the Reda Group. A few years after its foundation, Lanieri immediately focused on physical sales channels as well. Just as dozens of Italian startups have done in recent years.

After the pandemic, Miscusi closed its ecommerce channel for the sale of pasta based on regenerative agriculture. Today it focuses only on physical stores, has raised 20 million euros in funding and continues to open stores. Same path for Endela, brand of ethical motorbike made in Tanzania. But there are not only fashion companies on this track. Even biomedical startups such as the Turin-based Epicura have opened physical spaces in the last year. Several sector operators confirmed to La Stampa that the trend concerns all ecommerce companies to a certain extent, which in many cases would struggle to find sales assistants and shop managers especially in central and northern Italy.

Ecommerce is holding up after the Covid boom. But something has changed

However, this rediscovery of physical channels does not only concern Italy. According to the Wall Street Journal, American startups are doing the same. The opening of shops, net of the increase for rent and management costs, helps companies find their stability where online is troubled by dizzying and sometimes unpredictable price fluctuations. The golden age of ecommerce and companies born exclusively to sell their products online began in 2015 and lasted until the end of the Covid-19 pandemic. Then something changed.

The increase in online advertising costs, various market researches explain, is mainly due to one factor: everyone has an ecommerce and everyone wants to bring traffic to their site to try to attract new customers. Certainly it cannot be said that the physical channel has marked a new overtaking of ecommerce. After the pandemic, Netcomm research explains, the number of online shoppers has grown to 33 million. But the most relevant data is that online has become the best ally of retail sales on physical channels: 40% of people in fact get information online, then buy in the store. What is sought therefore is a mediation.

Omnichannel is the new mantra of online businesses

“I use a bad term. omnichannel. Here, today the theme of omnichannel sales is very topical”. Chiara Marconi is the founder of Chitè, an ecommerce of women’s underwear. Born in 2018, Chitè opened the first physical channel the following year. Today there are three: Milan, Bologna and Barcelona. It has 14 employees. “Being online only could have been interesting until the time of Covid. Then all the brands born only online moved to the physical channel”. Opportunity issues, but also optimizing marketing expenditure. “If you want to do digital marketing well, you have to spend at least 50,000 euros a month. It costs more than opening a shop and hiring someone to run it. Also because if we have 40,000 customers a month online, with a conversion rate (customers who then buy something, ed) of 2% if we are good, an average shop gets 400 people a month with a rate of 40-60 %”.

The new privacy rules for apps wanted by Apple have complicated the picture for those who do online commerce: “If before I could tell Facebook or Google to run a campaign aimed at a certain target of people, who perhaps had liked certain pages , today I can’t do it anymore”, adds Marconi. “Not to mention that today everyone is online. And everyone wants to get traffic to their sites.” The effect is that as demand increases, costs increase. “I’ll give you an example: today if you search Google for a funeral home in Milan, the suggested front pages, those with investments in advertising, could pay up to 25 euros per click obtained. Regardless of the conversion rate”, reasons the entrepreneur. Costs often difficult to bear.