As Retailers Close Stores, Eretailers Race To Open Them

Amazon was the first ecommerce success to open multiple retail outlets, driven both by the competitive desire to reinforce its own dominance - and by the disquieting realization that ultimate success would probably require a physical presence. Now, others are following its lead. JL

Khadeeja Safdar reports in the Wall Street Journal:

Online apparel brands are finding that they don’t need much to set up a store. Brands have opened temporary stores to test out foot traffic and experiment with new concepts.The evolution of point-of-sales technology means that transactions can now be made on phones and tablets. Some newer retailers don’t even keep much inventory. One challenge for online brands is to ensure that new locations increase sales, rather than cannibalize existing business.
While many retailers are scrambling to close storefronts, one internet upstart is opening them—but for just a few months at a time.
Greats, an online sneaker brand founded in 2013, plans to open at least 10 locations over the next two years by signing short-term leases ranging from three months to one year.
“Given the store closures and changes in the industry, this is the best route for us,” said Rachael Ulman, Greats Brand Inc.’s chief operating officer. “Right now we don’t even know what we don’t know.” The Brooklyn-based brand, which sells sneakers ranging from $50 to $200, manufactures most products in Italy and markets them directly to consumers online. It has tested three temporary stores since 2014, most recently a location in Williamsburg, Brooklyn, that was open for one year. In March, the company received $10 million in a funding round led by private-equity firm JH Partners.
The brand’s expansion comes as many traditional chains struggle to cope with years of overbuilding and a shift to online shopping. Earlier in April, Payless ShoeSource Inc., one of the country’s largest shoe retailers, filed for chapter 11 protection and said it plans to close about 400 locations.
Online brands are treading more carefully into physical retail. Several brands, such as Everlane, Casper and Warby Parker, have opened temporary stores to test out foot traffic and experiment with new concepts. Reformation, an eco-friendly women’s apparel brand, opened a store in Miami by signing a three-month lease starting in March.
Greats is targeting locations between 700 to 1,000 square feet—about the size of a coffee shop—primarily in urban areas.
One challenge for online brands is to ensure that new locations increase sales, rather than cannibalize existing business.
“We have to see the interplay between our online and offline
channels,” said Ms. Ulman. “A customer who shops online and offline is supposed to be very valuable, but we want to understand just how much more valuable.”
Historically, a short-term lease for a retailer was considered anything less than 15 years, according to the International Council of Shopping Centers. Landlords are increasingly viewing leases less than a year as necessary to minimize vacancies and spruce up shopping centers. In some cases, they are offering a rotating cast of stores year around.
Temporary stores are also less risky for landlords, who often make bigger investments to improve spaces for long-term tenants. Short-term tenants typically get what is known as a “vanilla box”—in other words, the shell of a building, said Liz Holland, CEO of real-estate developer Abbell Associates. “It’s not just the retailer that’s testing out the location. It’s also the landlord testing out the retailer.”
Online apparel brands are finding that they don’t need much to set up a store. The evolution of point-of-sales technology means that transactions can now be made on phones and tablets. Some newer retailers don’t even keep much inventory. Bonobos, which started out selling men’s clothing online, lets customers try on items at its more than two dozen “guideshops” and mails purchases to their doorsteps.
Greats sells eight core styles of shoes in different colors and materials, making its business more mobile than that of a traditional retailer. At its new locations, the company plans to bring its own interior elements such as shelving, greenery and lighting.
“You can do a lot within four walls,” said Ms. Ulman. “All we really need is some Wi-Fi.”