“If you’re going to a high-traffic area and paying a decent amount of rent, it puts the pressure on you to know what you are doing,” Dennis said.
Take Sigma Beauty. Founded in 2009, the New Brighton, Minn.-based Internet makeup retailer quickly grew, thanks to its international reach and deft use of social media like YouTube. The company expects to generate $25 million in sales this year compared to $18 million in 2012.
Opening a store was never part of the plan, Xavier said. “The cost of maintaining and building the store is humongous. I was very hesitant.”
Added Filho: “Financially, it doesn’t make any sense. You’re going to lose $1,000 per day.”
But when the couple learned of available space at the Mall of America, they quickly jumped on it.
For one thing, Xavier said, although Sigma Beauty sells to customers in more than 100 countries, very few people in Minnesota are aware of the company.
In addition, a retail space provides an ideal place for Sigma Beauty to host events like “beauty parties” in which the company recruits celebrity makeup experts from YouTube to offer personal makeup tutorials. But running a store requires a whole new mind-set, Xavier said.
“Online, it’s very easy,” she said. “People can purchase products anywhere, anytime. You are not restricted to the hours of the malls; you’re not restricted by the weather. Everything in the society around us affects the (store) sale.”
Xavier also discovered that even relatively small adjustments to the store — placing merchandise in front of the cash registers or pumping a scent near the store entrance to draw in customers — can really affect sales.
Since the store opened last December, the location now generates enough sales to almost cover the costs of operating it. Encouraged by this, Xavier and Filho said they might consider opening Sigma Beauty stores in New York and Los Angeles.
“It’s a challenge for us,” Filho said. “Can we do it? It looks like yes. It has become a toy for us to play with.”