• This photo provided by Blue Nile shows the outside of Blue Nile Webroom at Washington Square in Portland, Ore.  Online companies like Blue Nile, Rent the Runway and more are betting on shoppers wanting stores.   Retailers are finding that in the end, there are some things online shoppers want to touch and see in person.  (Blue Nile via AP)

    This photo provided by Blue Nile shows the outside of Blue Nile Webroom at Washington Square in Portland, Ore. Online companies like Blue Nile, Rent the Runway and more are betting on shoppers wanting stores. Retailers are finding that in the end, ... there are some things online shoppers want to touch and see in person. (Blue Nile via AP) (The Associated Press)

  • This photo provided by Blue Nile shows jewelry on display.  Online companies like Blue Nile, Rent the Runway and more are betting on shoppers wanting stores.   Retailers are finding that in the end, there are some things online shoppers want to touch and see in person.  (Blue Nile via AP)

    This photo provided by Blue Nile shows jewelry on display. Online companies like Blue Nile, Rent the Runway and more are betting on shoppers wanting stores. Retailers are finding that in the end, there are some things online shoppers want to touch ... and see in person. (Blue Nile via AP) (The Associated Press)

Blue Nile, Rent the Runway bet on shoppers wanting stores

Markets Associated Press

In the end, there are some things online shoppers want to touch and see in person.

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Blue Nile, a 17-year-old online jewelry company, is opening more showrooms after a trial run proved successful. Rent the Runway, a website that offers clothes for rental, is launching a showroom this week at Neiman Marcus, with plans for more, as well as standalone locations.

Why would online retailers take on the expense of overhead and store staff? And why would a department store risk seeing sales siphoned by rentals? In some cases, it's to attract a different kind of customer. And one executive says the showrooms, which are also being embraced by online companies like Warby Parker and Bonobos, typically cost less to operate than acquiring new customers by other means.

Seattle-based Blue Nile, known for its varieties of loose diamonds and choice of settings, first experimented with small kiosks inside two Nordstrom stores. It closed those but opened its first standalone "webroom" at the Roosevelt Field mall in Long Island last year, and has since expanded to malls in well-to-do suburbs of New York and Washington, D.C. It opened in September in Portland, Oregon, and next week, it will open in Bellevue, Washington. It plans to eventually have dozens.

The showrooms are appealing to Blue Nile's core customers, but offer more than the online site, said CEO Harvey S. Kanter. "Our webrooms are fresh, modern and bright. It is an experience."

At about 300 square feet of selling space, the showrooms are much smaller than traditional jewelry stores. While the diamonds themselves are still only online, shoppers can see and touch the ring settings and other jewelry, and choose a ring that can be shipped to their homes as fast as overnight. Kanter said the rent and staff costs of the showroom are less than running advertising through Google to draw in customers.

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"Most people want to touch, feel and look before they make a purchase. They do like the tactile experience," said Brendan Witcher, an analyst at Forrester Research. More and more shoppers are researching online first and then buying at a store. This year, about $376 billion of the $3.4 trillion in overall retail sales will be done online. Of the overall figure, $1.3 billion is influenced by the web, and that's expected to rise to $1.6 billion by 2020, Forrester said.

Bonobos, an online men's clothing store, will have 30 physical locations called Guideshops by the end of the year. Stylists offer advice about fit, and a customer's choices are shipped in a week or less. Andy Dunn, the founder and CEO of Bonobos, said earlier this year that instant gratification only works for food and essentials. "You don't eat your shirt," he said.

Warby Parker, an eyewear company, now operates 40 retail locations where it showcases its frames and offers optical exams. Co-founder and co-CEO Neil Blumenthal says that having stores wasn't in the company's original business strategy. But, he said, "The way customers interact with brands is evolving quickly so we need to evolve quickly."

Even Rent the Runway, which began in 2009 and has had 6 million customers, is using showrooms to make renting clothes more mainstream. It has six standalone locations so far, and starting Friday, it will occupy 2,500 square feet inside a Neiman Marcus in San Francisco. The showroom will be stocked with clothes from designers that the luxury department store already carries, complemented by items like shoes, handbags and cosmetics that Neiman Marcus hopes people will buy. The staff will include both Neiman Marcus and Rent The Runway employees.

"We have learned our customer loves the physical environment," said Jennifer Hyman, a co-founder and CEO of Rent the Runway. The company tested a showroom at upscale retailer Henri Bendel in 2013.

Executives from both Rent the Runway and Neiman Marcus said the partnership is a way to expand their differing customer bases. Rent the Runway's core customers are in their 20s and 30s, while Neiman Marcus's main customers are about 20 years older.

Neiman Marcus isn't concerned about possibly losing sales by offering clothes for rent in its stores. Customers in the Rent the Runway area can browse through Neiman Marcus' other offerings on iPads if they don't like the selection of accessories in front of them, Neiman Marcus CEO Karen Katz said. They can order online there or have a sales associate bring items off the floor.

Overall, Katz said she looks at it as a way to show potential customers the brands available at Neiman Marcus as they rent — which she hopes they buy later.

"Our primary goal is to better understand the young millennial fashion customer," she said. "Can we attract customers we never met before ... and introduce them to other categories?"

Katz said a few more Rent the Runway showrooms are planned for next year, and the company will re-evaluate then.

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