Beach bag brand Aloha Collection is eyeing coastal communities for store expansion

Aloha Collection began as an online-only, direct-to-consumer business in 2013. It opened its first store, a flagship in Waikiki, Hawaii, in 2021 and now has three other locations: Encinitas, California; Newport Beach, California; and Lahaina, Hawaii. Aloha Collection hopes to operate between 15 and 20 stores by the end of 2026, co-founder Heather Aiu told Modern Retail. She described the brand’s expansion approach as “not super aggressive, not slow rolling, but right in the middle.” Approximately 17% of the brand’s sales come from stores, a number it aims to bring to more than 20% in the next two to three years.

Aloha Collection’s founders met via Craigslist and became roommates in 2009. They were not in retail — Aiu was a mortgage banker, while Rachael Leina’ala was a flight attendant — but both were interested in trying something new, Aiu told Modern Retail. The two began their business in 2013 with $4,000, which they funneled into making samples, a logo and a website. The following year, Aiu and Leina’ala turned to Kickstarter to raise funding, and in 2017, they opened a warehouse.

Fast forward to now, and Aloha Collection has expanded into non-bag categories such as trucker hats, koozies, travel mugs, pickleball paddles and socks. It has also hired a visual merchandising team and created a global ambassador program of surfers, airline pilots and volleyball players.

Because Aloha Collection customers take their bags to the beach or on boats, the brand is primarily opening stores in seaside areas. But physical stores were not part of Aloha Collection’s initial business plan, Aiu said. “When we first started the company… I would have said we would never open stores,” she said. “The operating costs, the turnover, the inventory management, it just seemed so crazy to me. But I think we’ve been really fortunate in the locations that we’ve been able to secure.”

Outside of sales from its website and stores, Aloha Collection sells via Amazon and corporate gifting programs. It also has wholesale partnerships with online businesses like Ocean Paper and Salt Gypsy. E-commerce makes up the lion’s share of Aloha Collection’s business, at some 60% of sales, but Aiu said she’d like to achieve more of a balance among e-commerce, wholesale and retail stores in the future. “Our retail strategy is not to open 200 doors in the U.S. in the next five years,” she said. “We’re definitely trying to be really intentional.”

While e-commerce exploded during the pandemic, more digitally-native companies have opened more stores over the last few years to connect with in-person shoppers. Vuori, an athleisure brand, is in the process of opening 100 new brick-and-mortar stores in the U.S. by 2026. Maiden Home, a furniture brand, opened its first flagship store last September in New York.

Though some brands are targeting urban hotspots like Los Angeles and New York City for expansion, others are opting to open stores in smaller, emerging cities where their e-commerce sales are high. Swimwear brand Andie and apparel company Naadam, for instance, used sales data to open stores in 2021 in West Palm Beach and Dallas, respectively. Brands are also showing up in Sun Belt cities like Orlando, Atlanta and Miami, places where corporate tax rates and rent prices tend to be lower than in bigger cities.

Psychologically, there’s a big difference between shopping in the virtual world and shopping in the physical word, Alec Zaballero, managing executive at design firm TPG Architecture, told Modern Retail. “There is a visceral validation that happens when you see a brand you have already generated an online relationship with and you walk into their physical space,” he said. “When you put a store into a neighborhood… you create the opportunity for people to walk in and go, ‘These guys are for real. They’re not a dropship brand that’s going to disappear on me next week.'”

Making that transition to physical retail isn’t easy, though, added Zaballero, whose firm designs stores for digitally-native brands. “Digital brands are used to the speed and returns on investment and cost structures of living in the digital world,” he said. “And the timeframes and processes and investments you have to make for physical retail are really, really daunting… There’s definitely a learning curve.”

To that point, while brands like Aloha Collection are forging ahead on store expansions, others are pulling back. Most landlords are no longer offering discounted pandemic-era deals, and the retail sector as a whole is seeing lower demand for discretionary goods. Athleisure brand Outdoor Voices shuttered all retail stores in March. Allbirds went all-in on brick and mortar in 2021 and 2022, only to announce it would close 10 to 15 “underperforming” locations in 2024.

At the same time, Aloha Collection sees the value in physical stores. “I think there’s such a big difference between buying online and buying in person and walking into one of our stores and really getting to experience the feeling of Aloha,” Aiu said.