I met an interesting startup founder yesterday. When he introduced himself, he said “I own a beauty salon”. His investor immediately chimed in and said “he’s being very humble. He is launching a tech enabled beauty salon chain and already has 55 locations”. Turns out that launching the salons was only the beginning. The company is now spinning off its software to other salons, and starting retail sales on their DTC nail products in the physical store. I was blown away by the quick scale and by the fact that it was VC-backed.
While eCommerce sales broke the $6 trillion mark in 2024, over 90% of retail sales in the U.S. still occur in physical stores. For ambitious direct-to-consumer (DTC) brands seeking sustained, generational growth, physical stores are proving essential. I recently wrote a piece about how DTC isn’t dead, but it’s evolving and I believe brick and mortar expansion is a key part of that evolution.
Here’s why VC-backed startups are embracing the physical pivot, transforming stores from simple sales points into immersive experience hubs.
The Strategic Rationale: Beyond the Transaction
While online retail offers 24/7 accessibility and doorstep delivery, physical stores provide what the digital realm often cannot: essential human interaction and tactile engagement.
- The Need for Sensory Experience: Many consumers still highly value the opportunity to see, touch, and try products before purchasing. For instance, a survey found that 62% of shoppers prefer buying clothing in-store specifically for the tactile experience.
- Brand Ambassadorship and Loyalty: Physical locations serve as powerful brand ambassadors, offering immersive experiences that reinforce brand identity. They can be designed as hubs for creativity and innovation, helping to build lasting connections with customers.
- Driving Digital Sales (The Showroom Effect): Far from competing with e-commerce, physical stores often amplify online growth. This concept of “showrooming”—where customers explore products physically and then purchase online—highlights the potential for harmonious integration. Data confirms this: opening a new store leads to a 6.9% increase in a brand’s online sales in that trade area, and for DTC brands, this doubles to a staggering 13.9% increase after a store opening.
Case Study: Gymshark
Gymshark, the British activewear brand, is a perfect illustration of a digital-native company intentionally building out its physical footprint. Starting as an online-only retailer in 2012, Gymshark now sees the U.S. market account for about 50% of its overall sales, entirely through e-commerce.
Now, Gymshark is making a notable expansion into the U.S., proving physical retail is key to longevity.
- Intentional Expansion: After opening its first successful permanent physical store in London in 2022, Gymshark is bringing its model stateside. It is establishing two initial permanent U.S. stores in New York state: a 4,000 square-foot concept store and a massive 13,000 square-foot Manhattan flagship.
- Experience Over Inventory: The Manhattan flagship is designed to be much more than a retail shelf; it will span four floors and feature live events and workout studios (perhaps taking a page from Lululemon, who pioneered this concept with Yoga classes in its shops). This approach aligns perfectly with the strategy of creating community-centric spaces to encourage repeat visits.
- Targeted Growth: Gymshark’s expansion is calculated; they are “not after a quick return, in terms of revenue growth,” but are curating locations to be relevant in the cities where their consumer community resides, aligning with their goal to be a “100-year-old brand”.
This intentional movement into brick-and-mortar, which Gymshark believes will help it stand out in a crowded market, shows DTC players are leveraging high-street visibility and shopping center foot traffic to connect with existing and future communities.
Gymshark is of course not alone: Warby Parker, transitioned from online to offer eye exams and unique in-store experiences, Neko Health is doing the future health check up, Townhouse is doing it in nail salons and Travis Kalanick is doing it with CloudKitchens, building an empire of tech enabled dark kitchens all over the world, that uses robots for food preparation. If it’s any indication of the trend, Ycombinator invested in 88 Brick and Mortar startups and counting…
The VC Takeaway: Strategies for Physical Success
For me the takeaway is that what was once a PE only play is now coming to VC and DTC brands that were once online-only are now all thinking about hybrid retail strategies. For product startups considering their physical market entry, the goal is not to compete with the sheer convenience of e-commerce, but to provide complementary value. To thrive, physical retailers must evolve and adapt:
- Go Omnichannel: An integrated omnichannel strategy is crucial, ensuring a seamless experience across all touchpoints. This means offering in-store pickup for online orders and enabling easy returns.
- Leverage Technology: Digital tools can enhance the in-store experience and AI can also play a big role in bringing more people to the store. From smarter CRM management to using augmented reality (AR) for virtual try on, the bar with traditional retailers is very low when it comes to tech.
- Focus on Community: Hosting workshops, events, or pop-up shops fosters a sense of belonging and encourages repeat visits, turning stores into community centers.
In conclusion, the challenges posed brick and mortar retail, including the pressure of substantial rent and staffing costs are real. However, by adopting modern strategies and blending the strengths of both digital and physical operations, startups can ensure their physical presence is not an overhead, but a key driver of long-term growth and brand resilience.
I'm a former general partner at google ventures, head of Google for Entrepreneurs in Europe and founding head of Campus London, Google's first physical hub for startups.
I'm also the founder of Techbikers, a non-profit bringing together the startup ecosystem on cycling challenges in support of Room to Read. Since inception in 2012 we've built 11 schools and 50 libraries in the developing world.
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