In late September, Australian menswear tailor InStitchu announced the opening of a new retail store in Melbourne, the second physical store for the business which started out as a wholly online shop. Launched in 2012 by Robin McGowan and James Wakefield, the online store allowed customers to measure themselves, and design their garment without the need for visiting a physical store at all. This provides an interesting case study into a more recent trend in the growth of online shopping, where successful online businesses expand into the traditional retail market with bricks-and-mortar offerings.

Marketing: When starting out, why did you begin with a wholly online offering?

James Wakefield: When Rob and I started out, the idea to start a wholly online offering, stemmed from the problem we were trying to solve. We saw the challenges everyday guys wearing corporate suits to work each day are faced with. When you go out to buy a suit via the traditional channel you have to compromise on fit, style and price and even when you get the suit or shirt that you’re after, you have to get it altered, the whole process is full of different pay points. At the same time, we saw them all going off to Asia and having tailor made suits made over there. Through the power of the internet we can actually bridge that gap and develop an online platform that can link customers from their own home or office directly to the tailors over in Shanghai. We never really wanted to build a small lifestyle business and especially at the price points that we sell our suits at, where our margins are significantly slimmer than a traditional off the rack suit business, so for us it comes down to volume and the internet is what allows us to access such a broad set of customers. Customers all over the world. Whereas if we were just a traditional suit shop it would just be customers in that close vicinity of wherever your showroom is.

M: Since then, how would you say your online store has performed compared with your initial expectations?

JW: It’s exceeded our expectations. Originally, call it being young and naive, we thought, “hey, we’ll do our first hundred grand in sales,” that was a huge success and then it kept on growing and growing, so I guess these new targets that we have for ourselves are always moving. Customers that come in rave about the website, they love the ability to go online at their leisure, get to know the brand, play around and design their own garment, do a bit of research on our style guide to find out what sort of garments would look good for them, what’s in fashion and then go ahead and design it. We can see how customers are interacting with our website through the products that they’ve designed, so far to date we’ve had over 200,000 unique products designed by our customers, and we’ve got live feeds so we can see what customers are designing at any point in time, and it’s interesting seeing the fashion trends that are changing, and we identify them, potentially before the rest of the market, because these customers are there designing what they want, before it’s been made and we can look at that data and see where trends are emerging.

M: What were some of the challenges you faced in the early creation of the business?

JW: A lot of challenges. I guess the key one was giving people confidence that you can actually purchase an item like a suit online, especially a tailor made suit. Back when we first launched, yes, the online retail section part of the market was booming, but it was still such a small percentage of sales. So you look at the online retail market, it’s still only 6% of total retail sales in Australia. It is still a very small part of it, and it was around us trying to give people confidence that you can get a tailor made suit cheaper than you’d normally buy an off the rack suit, and it will be better quality, it’ll fit better, and also comes with a guarantee where if the customers aren’t happy we’ll give them all their money back.

M: Did you always have the plan or desire to build a bricks-and-mortar store or did that come out of necessity?

JW: It came out of listening to the market. We originally planned to be just pure online, we didn’t really envisage having bricks-and-mortar ever, but then we listened to our customers and they did want it. A lot of customers, for their first order, especially for a tailor made suit or shirt, they do want to have somebody take their measurements for them, they do want to look at the fabrics, they do want to look at some of the finished products and just get a little bit more confidence in the business before parting with $500 or more. And so, the bricks-and-mortar strategy also was based on consumer demand, and works really well. Really, now the showrooms act as an extension of our website.

M: Conversely, and aside from building trust as we discussed before, do you find there are any key drawbacks with a wholly online business?

JW: Yes, some of the challenges that you have to face, which luckily we’ve been able to overcome is the communication with the customer. When customers go to your website, if they have to send an email, and that’s the only way they can communicate with you, which is not really adequate. Customers do want instant contact points where there is a 24hr support phoneline, or live chat, those types of things, that’s what you really do have to try and offer your customers to build that ongoing communication and relationship. With the online side, any type of returns or issues a customer might have, when their order arrives, immediately they freak out because there is no-one there to talk them through it or explain that we will take care of it. The first point of call for them will be, towrite a review online about their experience. To overcome that, it comes down to setting expectations from the get-go, providing lots of communication, when the order arrives, having a beautiful letter in there explaining ‘if the garment has any issues, don’t worry we’ll take care of it, there’s absolutely no risk to you’. Really, it all goes down to service, and being there at every touch-point, even though, that’s the hard part when it’s an online business because it is really hard to keep the communication there at those touch-points.

M: How have the physical stores been performing, have they been complementing the online offering. Have you found the profile of the website has grown at the same time?

JW: Absolutely,our showrooms were an exact extension of the website, when we launched in Melbourne, our online orders in that area significantly increased, our website traffic in that area significantly increased, so they’re really good in that regard. They’re exceptional in the fact that customers come in and each of our showrooms generate some really impressive sales figures. Compared to other retail businesses where something like ten or fifteen percent of people that pass through the door might actually end up purchasing. With our showrooms our conversion rate is almost 100%. Customers that come to us, they’ve already essentially  made the purchasing decision, they want to come in and just get measured, so for us that’s a pretty powerful tool where if we take appointments, every one of those is essentially a locked in sale. Also we do allow other people to stop by and just check out the product. The customers that do order through the showroom, generally it’s their first order, for their second, third, fourth, fifth orders, they are just jumping online and ordering through the website like a normal customer, but their measurements are already saved in their profile.

M: Do you see any key differences between InStitchu’s typical customer and the typical customer of a traditional retail competitor?

JW: Our customers, more often than not, know exactly what they want, and because they know that our platform allows it, they take the time and the effort getting into the product, learning the ins and outs of our product, the construction techniques, what colour threads they want, different buttons, where they want the buttons positioned,so I feel that our customers are very particular, they know exactly what they want, and that’s all we provide them with. Whereas normally, if someone’s purchasing a suit from a traditional retailer, they go in there, they’ve got their rough idea of what they’re after, but they’re willing to concede on fit, style, design, price all these different bits and pieces, because everyone’s so used to having to settle for what’s available in store. For our customers, they know whatever it is that they want, they can get, and that’s what we provide them with.

M: What are some of your strategies for targeting the more traditional retail market customer?

JW: Our biggest competitive threat is nothing to do with other tailoring businesses, other online tailors, it’s still the traditional menswear stores, where guys go and buy their suits. Really what we’re trying to do is educate guys on this niche market that is online tailormade suits at a much more affordable price than what they’d expect. So really, word of mouth has been our most powerful marketing strategy, where our customers, they love our product, they love the service, so they go back into their office, or they go back to their circle of friends and they tell their friends about it. Given that that’s been our most powerful marketing tool to date, what we’ve been spending a lot of time and effort doing recently is further enhancing our online referral program, so our customers, they’re there promoting our business when we’re not even awarding them so what we’re doing now is game-ifying our platform and incentivising customers to refer their friends and then putting cash back in their pockets for every referral that they do. So that’s a marketing strategy that we’re implementing at the moment aimed at getting people away from where they’re purchasing the suits from at present. Then, the other marketing strategy that works really well for our business are Google AdWords, SEO – our digital re-targeting software – and the different online digital strategies that we can employ to generate the traffic. From an SEO and  AdWords perspective we’ve started bidding on not just the keywords that relate to tailor made suits, and shirts and so-on but now general suits. So if someone’s searching for a navy suit, they don’t even know that they want a tailor made suit, we’ll start coming up with the results there and try to win them over.

M: What do you think the future of shopping will look like?

JW: I think the future of shopping will definitely involve a lot more guide shops and showrooming, similar to what the InStitchu business model is. So, imagine if you’d like to wear Country Road clothing, instead of Country Road having a huge shop that is carrying heaps of inventory and stock, they’ve got a storeroom that you go in, try on the pants, try on the shirt, get an idea for the sizing and styles that you want, and then it’s all just fulfilled through an online connection to their website or to their warehouse, and the garment’s delivered to your home or office in the next few days. Really that showroom or guide shop where it’s that smaller space, not carrying inventory levels or stock in the store, and really being able to provide that same level of service, but without the same risks that a traditional retail store would have.