Early last year, Matt Alexander, co-founder of Neighborhood Goods, sat down with 20 executives and founders from direct-to-consumer brands in New York City, including Hims, Stadium Goods and Away, and asked them what their biggest priority was in the next two years.
The biggest priority for everyone was physical retail stores. Most important: how to do it without cumbersome years-long leases or transient pop-ups.
Neighborhood Goods, a retail space in Plano, Texas, that brings together brand outposts, is helping born-online brands expand their retail footprint. According to Alexander, it plans to succeed by personalizing terms for every brand. If a brand wants to stay for a year, it can stay for a year. If it’s 30 days, that’s OK too. The brands can pay a flat monthly fee to lease the space or figure out a revenue share. Neighborhood Goods builds the setups, hires staff and handles maintenance of the store.
The company is setting out to take on the logistics and expenses of testing retail in a new market, from the brands that didn’t take the cost of physical retail into account when starting their businesses. The overhead, maintenance, staffing and inventory management put new pressures on tight margins, and brands typically end up needing to raise considerable venture funding to fuel offline expansion. Tools provided from platforms like Shopify and Appear Here help, but what Neighborhood Goods brings to the table is a consolidated destination for brands typically found in standalone stores or online only. It’s a retail-as-a-service model built for the DTC era.
“For us, we’re happy to take the risk and sign the longer-term leases because our economics are built around that model. We’re not selling mattresses or luggage on specific margins; we’re purely trafficking in a business of getting people to care about the space. In the fundraising process, for us, it was never about sales or traffic or elements of business that brands are beholden to. It was about building a new multibrand physical retail model.”
After opening in November, Neighborhood Goods just cycled out the first few brands that signed up for a holiday stint. Alexander didn’t share early sales figures but said the space got lots of walk-by customers who had never heard of the concept and added that 40 percent of purchases took place after 6 p.m. Neighborhood Goods’ bar drew people in who ended up shopping the brands in the space. With one payment system, a customer can shop from children’s brand Primary, speaker company Sonos and sneaker brand Stadium Goods and check out once.
Its success will point to a potential future of consolidation for digitally native brands that, until now, have largely gone it alone. Similar models like Bulletin and Re:Store are competing to figure out what the shopping mall of DTC looks like. Neighborhood Goods has raised $13.8 million to open new iterations of the concept, which Alexander said will be tailored to location.
“It’s easier than ever for someone to start a company, a brand, which is great. I don’t think the spirit of what’s going on right now is going anywhere. People are shifting away from generic businesses,” said Alexander. “But I think we’ll start to see models like ours in the space, bringing that curatorial perspective to multibrand retail, rethinking a traditional retail idea in the same way these companies rethought the role of the brand.” — Hilary Milnes
Amazon eats … its words?
Maybe Amazon won’t ruin the New York dating pool after all. The company is now reportedly reconsidering its plans to build a campus in Long Island City after there has been a wave of opposition from the community and from some local politicians, per the Washington Post. It hasn’t yet purchased or leased any space yet. We’d previously reported how picking New York was some indication of how serious the company could be about its burgeoning ads business. New York is the epicenter of media and advertising, and the company already opened an office in Manhattan over a year ago that brought 2,000 jobs, mostly in advertising to the city in the hopes of being closer to Madison Avenue. Multiple agency execs told me that Amazon still struggles to “understand” them, something they hoped more regular contact (and perhaps, more wining and dining) might change. HQ2 also meant more talent flowing to Amazon, potentially away from ad agencies and media companies, which have already seen sales planning and account management roles moving to the company, lured by the promise of a bigger paycheck.
But that might soon be reversed — the Post said the company might actually move the office to Nashville, where politicians are sweetening the deal with a $15.2 million incentive offering. One major ad buyer who works with Amazon isn’t convinced: “They need to be in New York. If they can’t be in New York, they’ll go to Newark. But they’re not going to go far from here.” — Shareen Pathak
3 questions with Shopify vp of branding, Amy Hufft
Why does Shopify need a vp of branding now?
Our history has been focused on growth and performance marketing, which has worked well, but as we grow, the business is more complex, so I was brought in to convey what we stand for as a brand and what our brand values are. I cover everything from marketing to managing government relations and community relations, to how we show up in core markets, and identifying the communities that are important to us, like entrepreneurs and minorities. I work with executives on our value proposition and every touch point that’s out there.
How do you market a company like Shopify?
Our core is entrepreneurs and small businesses — that’s who we want to reach at the moment. We want our brand to be more known and loved across the globe. If you want to start a business, we’re here. We want the world to love entrepreneurship. For instance, we launched Shopify Studios, which is about taking this idea and giving it a platform. We want people to appreciate entrepreneurship. We also have geo-specific goals. Shopify is a global company and is exporting to other markets. We are global whether we are situated globally or not, and we are opening in more markets.
Where do you see the most potential for growth as you focus on Shopify as a brand?
Shopify’s largest vertical is fashion. It doubled in the last year. From a business perspective, it’s an important category. We had never done anything at fashion week and a year ago it wouldn’t have even made sense. But now, we feel it’s important to speak to that community and find the right moment. So we co-produced a fashion show with 11 Honoré. This is a good glimpse of what’s to come and what we’ll be doing more of. — Hilary Milnes
The state of retail
NRF released its 2019 retail forecast last week predicting the growth of the industry for the next year. It’s expected to keep growing — meaning retailers like Tapestry will have a harder time pinning dismal earnings reports on market volatility. Here are the numbers to know.
- Retail sales are projected to increase between 3.8 and 4.4 percent to more than $3.8 trillion in 2019.
- Last year, the retail industry saw a 4.6 increase, reaching $3.6 trillion, which exceeded NRF’s prediction of 4.5 percent growth.
- Online sales in 2018 increased 10.4 percent, to $682.6 billion, and online sales are predicted to grow another 10-12 percent this year, to between $751 billion and $765 billion.
- Overall, this will contribute to a gain of an average of 170,000 jobs per month, down from 220,000 in 2018.
Walmart plays DTC
Walmart’s Allswell bedding brand is putting a twist on the pop-up concept by packaging it inside a traveling tiny-home exhibit. It’s a way to move the year-old online-only brand into the physical world to give customers a chance to sample products and generate marketing buzz with social media moments. Armed with a “bevy of shoppable bedding elements and social media-friendly vignettes,” the tiny-home exhibit is traveling coast to coast; it began in New York’s Union Square last week and will end its run in Seattle at the end of April. Customers can buy an Allswell tiny home for $100,000.
Alswell, which debuted a year ago, is just one of a growing number of online-only brands developed from within Walmart. The retailer is rapidly moving into new product categories suiting a range of urban, younger customers — a departure from its traditional suburban big-box store model. Just last week, Walmart launched two online-only brands, including Sofia Jeans by Sofia Vergara, and MoDRN furniture products. — Suman Bhattacharyya
What we’ve covered
The ad spread: Amazon has begun testing ads within the Amazon Business marketplace in an effort to get more B2B clients.
There’s one app for that: Target is on a path to consolidate its suite of mobile apps into one, combining mobile shopping, the loyalty program and payments in a single place after experimenting with a litany of separate apps.
Not for the faint of heart: E-cigarette company Juul is on the search for a CMO.