How to Go From eCommerce to Physical Retail #623

Customer acquisition costs on paid social have been rising for years. The channels that drove efficient growth half a decade ago are harder to justify today. Physical retail is starting to look genuinely interesting to founders who would never have considered it before.

But there's a gap between finding physical retail interesting and actually making it work. Most e-commerce operators approach the move with a revenue mindset they've carried from online. They measure store performance the way they measure a channel. And they treat the first store like a proof of concept rather than v1 of a repeatable system.

The brands that get it right do three things differently.

In this playboook, based on a conversation with Guy Nappa, COO of Oz Hair & Beauty, we cover three things e-commerce operators need to know before making the move into physical retail:

• Know what the store is for before you sign the lease
• Model rent as a customer acquisition cost, not an occupancy expense
• Build the store-opening playbook before you need to run it fast
  
  Connect with Guy Nappa
  Explore Oz Hair & Beauty

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Transcript

Why E-Commerce Brands Revisit Stores

Oz Hair’s Leap To 30 Stores

SPEAKER_01 0:01

Did you know that retailers who are offering fast delivery outperform their competitors by 4% during Black Friday? And that's not just a stat, that's a signal for where growth is going to come from. Shippett's Commerce Delivery Report breaks down why speed equals success, as well as the other forces shaping delivery in 2026. From automation and AI to fulfillment and inventory, this report offers a really practical roadmap for the next phase of retail growth. If you want all the stats and the directions for what is coming in fulfillment, make sure you download this report at shipit.com forward slash CDR2026. That's shipit.com forward slash CDR2026. There's a tendency in e-commerce to think about physical retail as the mature version, maybe the future version, the grown-up version of your business. You prove the model online first, you build the brand, grow the customer base, and then when you've earned it, you open stores. It's a reasonable sequence, and we've seen that playbook before, but it's increasingly one that can be challenged. As we all know, customer acquisition costs on paid social have been rising for years, and some of the channels that have worked five years ago are really hard to justify today. Physical retail is starting to look really interesting to founders who would never have considered it before. Oz Hair and Beauty made this move, but not for any of those reasons. For the first decade, they were purely online. Good at customer service, fast at dispatch, highly reviewed, all the tick-tick ticks of e-commerce, and they had no stores. Then, during COVID, a group of investors came to them with a clear position. Their thoughts were that stores are going to come back and e-commerce is only going to get more expensive. They thought that Oshair and Beauty should be in physical retail. That wasn't common thinking during COVID. But it was the moment that everything changed. Not because it was their idea, but it came from two people who had spent their careers running retail at scale. And they said it with enough conviction that Oz Hair, they had to listen. Three years later, they've gone from zero stores to 30. And the thing Guy Nappa now says about that expansion is really simple. Their only regret is that they didn't start sooner. So let's hear it from Guy.

SPEAKER_00 2:32

Yeah, look, we um are very fortunate with our investment group that we've got so much experience around the board table that helps us not make as many mistakes. And I think that's the real key. We weren't actively looking for investors. It was a time during COVID where you know the market was very crazy, and Anthony saw what was happening with our competitors. And yeah, we had the discussion, you know, we don't want to be left behind. And it really came about quite naturally. Then we we met Edison and they had the group with Daniel and Brett. So this is Daniel Agostinelli from Accent Group and Brett Blundy. Yeah. And they kind of came to us and said, Yeah, we believe this can be a retail concept, and they explained why. And it was a completely change of pace, complete change of thinking. For us, we always had the idea of having like a mega salon at every state, which would allow us to do click and collect and shit from store, all the eco, all the omnichannel stuff. But their point of view was, you know, and they they did call it, they said post-COVID, you know, stores are going to be back, and e-comm's only going to get more expensive. And like they were on the money with both those two things. And like our only regret is we didn't do stores earlier because up to date it's been a real positive thing for the business. And from the group, like I said, it's just that ability or is that it's that guidance and mentorship to not make mistakes. Because in our first year, if we signed a bad lease deal, like we wouldn't be here today. And we needed, like, well, yes, we we did have a relatively big brand, but it was e com only. And to have Daniel and Brett specifically, you know, put their names on on our company and back us, it helped open a lot of doors, especially when we were early on. And you know, those retailers who gave us a chance, like a lot of that is down to having people like our board back us, which is something that is not lost on us at all. The last 12 months definitely we we have a template in place, and that's something we've really tried to roll out, especially during 15 and 12 months. It's very hard to to make changes. But the problem there is you don't really get a chance to stop and reflect on, you know, what went wrong, what can we do better. And like for us, we're so used to stopping, doing an after action review, looking at every single point. I think for us it got to a point last year where we were just doing so many, we didn't get to stop and take stock on, you know, what can we do better? And we've started the year now, we're in March, we're opening up our first store. It's given us a bit of a time to sit down, take a breath, relax, and you know, but make some key changes that that will allow us to open up more stores.

Pop-Ups, Tools, And Final Takeaways

SPEAKER_01 5:20

What Guy describes in the back part of that clip is the operating discipline. And it separates the brands that can scale physical retail from the ones who just stall after the first store or the first pop-up. Here are three things worth taking back into your business if you are considering opening up a physical presence. Number one, know what the store is for before you sign the lease. The most common version of this mistake is opening a store to build the brand without defining what that means in really measurable terms. Every decision that follows from location to fit out to staffing flows from what the store is trying to achieve. If that's not clear up front, you'll make different calls at every fork in the road. Two businesses illustrate the difference really clearly. When Life Interiors opened their first store, which was a 60 square meter space in Piemont, Basil Caram wasn't measuring it by what it sold in store. He was measuring it by what it did to the online business. Sales went from$10,000 to$40,000 online a month after it opened. The store's job was actually online revenue, and that's what it delivered. It seeded a strategy the business has run ever since. A physical presence in every state designed specifically to drive the online channel. OCOSA has held off on stores for a decade despite consistent customer demand. When they finally opened, they knew exactly what the store needed to do. Let people lie on a mattress before committing. For a committed purchase where the buyer's primary uncertainty is about feel, the physical experience removes their biggest barrier. In-store conversion was immediately and directly higher than online. Two completely different strategies, but both worked because the job was defined before the lease was signed. Number two, model rent as an acquisition cost, not an occupancy expense. The e-commerce operators' instinct for unit economics is really an advantage in physical retail. Most founders leave it at the door when they start evaluating stores. The businesses that unlock the real value of physical retail keep applying it. July luggage ran the numbers. Customer acquisition costs through their physical stores ran at roughly half what they were paying through paid social. Retail represented 20% of Australian revenue from a handful of locations against the entire online market. The framing that their founder, Ethan, uses, is precise. Treat rent as a CAC, not an occupancy expense. When you do that, the maths on stores really change. The harder part, of course, of all of this is measuring what the store does for the online business, not just what it sells in store. The frame that works here is dollars per square mile, not dollars per square meter. It's a big shift. Simon Molner at Flagship talks about this specifically. The store's KPI should explicitly include sales it drives online. Without a unified view across channels, you'll systematically undervalue your physical footprint. Geordie at Shopify put data behind the same point. Customers who shop across both channels spend 80% more with a brand. Hardline channel attribution, it tends to actively hide that. The attribution model doesn't need to be perfect before you open your first store, but it needs to exist and it needs to be considered. That leads us into point number three. Build the store opening playbook before you need to run it fast. The brands at Scale Well treat each new store as version N plus one of a tested system. The gap between those two is one thing, after action reviews, not after the campaign, after each store. What went wrong in the fit out? What would you do differently in the lease negotiation? Where did you lose two weeks that you would love to have back? The new store template only compounds if someone is accountable for capturing what it's teaching you. Oz Hare opened 15 stores in 12 months at one point. It's absolutely huge. But they found they were moving too fast to do this properly. The stores that followed after they paused and updated the template were much better. The consistent advice from practitioners who've helped e-commerce brands make this transition is specific. Talk to founders who did it recently, not the ones who did it years ago. Danny Latouf from the General Store makes this point really clearly. The retail environment changes fast enough that advice on costs, technology, and customer expectations from five years ago might not map to what you're about to encounter. Podlock ran a pop-up from a shipping container at a Formula One event with Oscar Piastri. That's what a low commitment physical retail test looks like now, even if the sponsorship definitely isn't low commitment. But the physical retail version of it, that is really low cost. And with tools like Sumpify Checkout, you can get them up and running faster than ever before. I think the physical retail playbook is one of the most interesting ones going around. It is moving at such a pace and it is being commoditized so much so that anyone with a big idea and a proven model and a great customer base with a brilliant product can get up and running in no time. It's never been easier to test, to iterate, and to improve on what your physical version of your online store looks like. You don't need to wait until you're a big brand to get started. Anyone with an e-commerce presence can get going. You just need to be able to choose the right model for you and know the reasons why you're doing it. Guy and the team at Ozhair and Beauty are a great example of a team who have taken an online concept and scaled it really fast. You don't necessarily need to open 30 stores or even have a vision to open 30 stores straight away, but know that that avenue is open to you and is a great way to bring your brand alive, to connect with new customers and to open up new sales channels that you would never have before. That's it for the playbook this week. I'll see you next Friday.