The news of record store closings from traditional retailers in 2019 may have given the impression that things are bleak for brick-and-mortar retail. But online-born brands, or s0-called direct-to-consumer (DTC) labels, are proving there’s not only healthy demand for physical retail, but also a new viable template to go about it.
One example can be found on Bleecker Street in New York’s West Village. A cluster of about a dozen standalone stores, including Naadam and Goodlife clothing labels, share many common characteristics, such as water bowls outside each location for people walking by with their pets and a stash of treats inside for the dogs who venture in with their owners.
Sales staff for those stores also do double duty and help out the other nearby busy shops. Why? They aren’t employed by those brands but by Leap, a startup platform that helps these DTC brands and others run their physical store operations, including negotiating deals with landlords, taking on leasing risks, designing stores where the modular fixtures can be moved about easily to host events, and installing traffic trackers.
That means brands can have their individual stores up and running in under 90 days, less than half what it traditionally takes, Amish Tolia, cofounder and co-CEO of Leap, told me on a tour of the stores. He added those stores turn profitable 90 days after they open.
“It’s time for brick-and-mortar retail to be disrupted,” he said. “When we bring in a mini cluster of stores in a neighborhood, we are a market maker. We find the right dynamic of shoppers. Everything is tech enabled to understand conversion and how many people walk by or walk in.”
Ask Naadam CEO Matt Scanlan. When the luxury cashmere brand that sources from Mongolia opened its own store well over a year ago on Bleecker, Scanlan recognized there was a problem.
“Doing retail well isn’t in our existing skillset,” Scanlan said in an interview, adding the company had overspent on capital spending. “We did it ourselves two or three months, and we were like ‘We need help.’ It’s definitely a science to understand fixtures and store flow. Finding really good retail staff is hard. The actual operation of running retail is different from the brand side of it. The attention to detail is critical.”
After a recommendation from another brand, he handed in the retail-operation reins to Leap. The store has since turned profitable and sales have at least doubled, Leap said.
Naadam has opened two more stores in New York through Leap, with Scanlan eyeing as many as 20 locations in the next three to four years.
“Having physical footprint is critical for a brand,” Scanlan said. “You have to be in real life and own that story and experience and provide a better customer experience….We don’t want a multi-brand operation. This solution feels very curated and it feels like we outsourced our retail team to allow us to focus on what we are good at.”
As more online brands recognize the importance of brick-and-mortar retail, Leap is just one of the new options that have surfaced to help them—and increasingly even traditional labels—nail it.
Mall operator Macerich, for instance, has unveiled a new concept called BrandBox that’s intended to help popular online brands open new physical stores without the typical leasing strings and red tape attached.
Silicon Valley tech retail startup b8ta features many online upstart tech brands in an out-of-box setting in its stores.
New startup ShopFulfill in December announced the Anchor Shops concept that it said will give online brands an easy and low-cost “plug and play” alternative to have their own physical footprint and distribution network. It plans to open the first Anchor Shops retail location in Philadelphia’s Fashion District this year.
Neighborhood Goods, which has billed itself as offering a new model for the struggling department stores, in December opened a 4,500-square-foot store inside Chelsea Market in New York’s posh Meatpacking district, a year after it opened its first location in Plano, Texas.
The New York store houses more than 40 brands, from mostly online-born labels like Dollar Shave Club that only gets some shelves to test new products to traditional brands including Fossil.
“Younger brands can’t afford to be here” otherwise, cofounder Matt Alexander told me. “Major retailers ask how they can remain relevant? A lot of people are rushing to the table and answering the wrong questions…. It’s about how you curate the brands and that human merchant behavior. Food and events help a lot too.”
To that point, Neighborhood Goods’ New York location plans to open a small snack bar early this year. It will also take a page from its Plano store, which has hosted events from Equinox exercise classes to an event with Serena Williams, who is an investor of the startup. Declining to specify, Alexander said the Texas store has topped its financial expectations. “We are focused on having a profitable unit model,” he said, adding it has several more locations in the pipeline.
Brick-and-mortar retail isn’t dead. It just continues to upset the old model to experiment with what may best work today.
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