Online brands score surprising success with brick-and-mortar shops

By Lois Weiss | Dec 13, 2019

Lower retail rents are causing building owners to take a chance on tenants seeking shorter terms. That’s good news for online retailers that continue to find success in brick-and-mortar shops.

These Web-first companies are both leasing stores on their own and inside innovative new department stores, like Showfields, that rotate brands and goods.

At the same time, traditional retailers have found sophisticated ways to blend e-commerce and brick-and-mortar offerings. “[Online sales] are now ancillary to the retail business and part of the shopping experience,” says Joanne Podell of Cushman & Wakefield.

Customers who come into stores to make returns from online purchases actually end up spending more money, she says.

If retailers are able to capture their data from multiple sources, Podell observes, they can be more efficient.

Tech brand B8ta, for example, has opened on the second floor of the mall at Hudson Yards. Purchases must be mail-ordered, but the storefront gives consumers a chance to play with the gadgets before they buy.

B8ta is also backing Eden, open on the fourth floor of the Shops at Hudson Yards. Seen as an amenity by malls, it is “a place to go when you need a place to go,” explains Brandon Singer of Cushman & Wakefield. “You can take a shower, make a call, or have coffee” — or use a nice bathroom. The fee is $6 for half an hour, but the coffee is free.

Enlarge ImageIn the new mall at Hudson Yards, B8ta has gadgets for customers to try out prior to ordering.B8ta Hudson Yards

Online retailers ready to sign a deal for their first storefront may have some anxiety switching from clicks to bricks. Matthew Chmielecki of CBRE says he often has to calm their fears.

“Landlords need to understand you need to be creative to get the tenant to sign a lease — and flexible,” explains Chmielecki.

Building owners are also becoming more comfortable with pop-up shops, which are proliferating. “Landlords are using short-term deals to get a tenant excited about a space,” he says.

Pop-up leases give nascent retailers a chance to learn what works and what doesn’t.

More than just for holidays, pop-ups can extend for slightly longer terms — say, one to three years — with the ability to leave sooner or stay longer. “The term ‘longer-term’ has always been fluid. Now no one knows what to call anything,” says Chmielecki.

Enlarge ImageEden’s where tired tourists can pay to rest or use a nice bathroom.Jason Piro

Pop-ups can also reinvigorate interest in storefronts that had previously been vacant. “If people are used to walking by an empty box and then have a really interesting pop-up, it reactivates the space,” adds Chmielecki.

In Soho, there were many pop-ups, but now the vacancy rate has dropped and some of the pop-ups have signed on for longer-term deals. “The new rents reset and the activity levels picked up,” says Joel Stephen of CBRE.

The athleisure brand Fabletics is testing the market at 577 Broadway, while men’s collective Stuart & Lau is open through December at 119 Crosby St.

Online-first retailers also have reams of customer data on their side, which can help them design a brick-and-mortar business their fans will like. “They will be more efficient and smarter and more prepared than the old retailers,” says Podell.

Enlarge ImagePersol was an online-only eyewear retailer but now has an outpost at 253 Elizabeth St.Joe Schildhorn/BFA.com

She points to shoe company Rothy’s at 407 Bleecker St. as well as luxury eyewear maker Persol at 253 Elizabeth St. as two newcomers to NYC that originated as websites. Rothy’s is also a member of Happy Returns, which partners with retailers including Bed Bath & Beyond and Paper Source to install “Return Bars.” They accept returns of not only their goods but also those of partner brands. The hope is that Return Bars will generate new customers for the host.

Bleecker Street storefronts, some of which are owned by Brookfield, have backfilled with digitally native and e-commerce tenants on short- to longer-term leases. These brands include fashion retailer LoveShackFancy at 390 Bleecker St., home goods shop Hill House Home at 395 Bleecker St., men’s leather goods shop Slightly Alabama at 350 Bleecker St. and vegan smoothie cafe and shop Bonberi Bodega at 384 Bleecker St.

Enlarge ImagePreviously online-only retailers have taken over storefronts along Bleecker Street in the West Village. LoveShack Fancy has romantic women’s and girls’ outfits in a long-term pop-up at 390 Bleecker (left). Bonberi Bodega at 384 Bleecker has healthy food and skincare products as well as events (right).Zandy Mangold; Brainstorm Media

“Brands pop up that you wouldn’t find in any city in the world,” says Stephen of CBRE, who spent 14 years of his career in Asia and Africa.

Multi-brand concept retailers such as Showfields, Neighborhood Goods and Guesst also provide opportunities for digital companies to test in-person experiences. These retailers charge for shelf space, but provide staff and cash registers to tenants.

“We are creating incubator labs around the country,” says Jay Norris of Guesst. “Our management runs the collective.”

For example, Neighborhood Goods, which opened at Chelsea Market last week, provides space for established and new brands alike to reach shoppers.

Enlarge ImageInstagrammable experiences for Showfields customers include a slide.Mike Vitelli/BFA.com

Showfields at 11 Bond St. calls itself “the most interesting store in the world.” Along with rotating goods, Showfields has a cafe and community event space as well as immersive ticketed experiences. Currently, it’s offering free tickets through December for its Holiday X House, where you can touch, taste and feel all the merchandise, installations and artwork. A modern-day department store, Showfields is represented by Cushman & Wakefield’s Singer, who is working on its expansion to new locations.

New fitness startups like Fithouse, already in Union Square and Tribeca, are taking retail space. It offers a variety of on-demand workout classes for a $99/month membership price. “They saw the trend of different fitness concepts that charge $40 a class,” says Singer.

Consumer demand for interactive and Instagrammable experiences while shopping includes opportunities to give back.

For example, Krost is open in a tree-filled 70 Thompson St. through Feb. 7th in partnership with Eden Reforestation Projects to bring awareness and funds to climate change.

Choose Love, at 499 Broadway, is designed to support refugees. Since 2017, the company has given $3.4 million in needed goods to groups that help the refugee population.

Enlarge ImageA store that gives back, Choose Love has leased space at 499 Broadway until Dec. 24. On display are blankets, books and other items that customers can buy to send to refugees.Andrew Federman/Choose Love

At the shop, visitors browse emergency blankets, tents, and education supplies, then choose products that will be provided to refugees.

From shopping sprees to giving sprees — now that’s a retail evolution.

Article was originally published here.