Warby Parker and Allbirds, two digital-native retailers, are taking different courses with their brick-and-mortar footprints as one opens stores and the other closes locations. In the process, they're trying to define the best way for these chains to use real estate.

New York-based eyewear seller Warby Parker reported on Thursday that it had debuted 11 net new stores during the second quarter, for a total of 256 stores as of June 30. This year, the company said it's on track to roll out a total of 40 new locations. Warby Parker's ultimate target is building a fleet of over 900 stores.

"We still have a long runway before reaching our longer-term 900-plus store potential, which would still represent a small fraction," or 1% of its 45,000 U.S. shops," Neil Blumenthal, the retailer's co-founder and co-CEO, said on the earnings call.

By contrast, footwear retailer Allbirds, headquartered in San Francisco, on Wednesday said that from March last year to now, in an effort "to reset" its business, it had closed 14 U.S. stores as the company pushes to optimize its domestic distribution and retail-store profitability, in part by slowing down brick-and-mortar openings.

The moves show how a variety of retailers that originally were only selling direct-to-consumers online have now opened up physical stores, most notably Seattle e-commerce giant Amazon. Others include not only Warby Parker and Allbirds but also companies such as Untuckit and Savage X Fenty. Brick-and-mortar retail outposts act as promotional billboards and even help drive online sales, according to Warby Parker and even traditional retailers like Macy's.

But some digital-native retailers have stumbled with their physical stores and pulled back those expansions, including Amazon and Allbirds.

"This is all down to the strengths and weaknesses of each proposition," Neil Saunders, a retail analyst and managing director of analytics firm GlobalData, told CoStar News in an email Thursday. "Warby Parker has a clear position in the optical market and is attracting new customers off the strength of its proposition. By comparison, Allbirds has a very weak product that is not differentiated or all that interesting to consumers. It has been losing customers and sales, despite having opened new stores. Its financials are now unraveling so it is shutting shops to save money."

He added that "the lesson is that brands should not open stores unless there is a very clear and strong demand for their products."

Allbirds didn't respond to an email from CoStar News seeking a comment.

Warby Parker's store footprint, 251 U.S. and five Canadian locations, gives it a presence in 47 of the 50 most populous markets, with 30% of those locations street level; 45% in open-air shopping centers; 25% in indoor malls.

In a second-quarter investor presentation, Warby Parker said there is "significant white space" for it to expand its footprint. Its sales represent only about 1% of the $66 billion U.S. eyewear market, according to the retailer.

Adding the ability for a shopper to get an eye exam at a store is also driving sales, according to Warby Parker officials.

"We find that exam stores drive higher sales than non-exam stores, and industry-wide, approximately 75% of prescription glasses are purchased at the same location as an eye exam takes place," Blumenthal said.

He also touted Warby Parker's virtual tools to help a customer pick frames, including the new "glasses eraser." It's for customers that have a strong prescription requiring them to keep their glasses on to be able to see when looking at screens. Using computer vision and generative artificial intelligence, it digitally "erases" the glasses users wear on their faces, enabling them to virtually try on new glasses while keeping their current pair on.

In the second quarter, Warby Parker's total revenue increased 13.3%, to $188.2 million, as compared to the prior-year period. It posted a net loss of $6.8 million, compared with $15.9 million a year earlier.

One of the drivers of the quarter's growth was Warby Parker's "highly productive store base complemented by an improving e-commerce channel," according to Blumenthal.

"Retailer revenue increased approximately 18% year over year, coupled with e-commerce growth of over 4% over year, the channel's highest quarter growth since Q1 2021," he said. "Since Q2 of last year, we've added 39 net new stores, including 11 in Q2. Five new stores were at new markets, including Savannah, Georgia; Wilmington, North Carolina; and Thousand Oaks, California. Six new stores were expansions within existing markets, including D.C., Pittsburgh and New York City."

Allbirds, with roots in New Zealand and touting the sustainability of its footwear, launched in 2016 and made its name with a single shoe, its iconic Wool Runner. Allbirds — makes its footwear with materials like its sugarcane-based midsoles and textiles made with eucalyptus fibers and Merino wool — has expanded its line. But it hit bumps when it faced competition from existing brands like Nike and popular new ones such as Hoka. And a foray into activewear failed.

In the second quarter alone, Allbirds closed 10 U.S. stores. As of March 31, Allbirds had 57 stores, with 42 in the United States and 15 internationally. That dropped down to 43 — 32 in the United States and 11 internationally — as of June 30.

"We have closed 14 underperforming U.S. locations to bring us toward a smaller physical footprint that better serves our footwear product strategy and advances our goal to build a profitable retail fleet," Allbird's CEO Joe Vernachio said on Wednesday's earnings call.

In the quarter, Allbirds' net revenue dropped 26.8% to $51.6 million versus a year earlier. The retailer attributed the year-over-year decrease to lower unit sales, partially offset by higher average selling prices, within its direct business as well as international distributor transitions and planned store closures.

The retailer is looking to reignite revenue by bringing efficiencies to not only its stores but also its distribution network, as well as bringing new colors and materials into the product line to refresh it, according to Vernachio. This fall, Allbirds will introduce corduroy versions of its shoes, as well as more-rugged versions of its water-resistant collection.

It also plans to make improvements to its stores, according to Vernachio.

"We are enhancing the in-store consumer journey, starting with an improved assortment presentation, way-finding and floor displays," he said. "In 2025, we plan to take further steps to enhance the consumer experience by making both our stores and websites easier and more enjoyable to shop. You'll hear much more about this in the quarters to come."