REAL ESTATE

This Is Not a “Leaving New York” Essay

The modern direct to consumer (DTC) roadmap used to go like this: launch online-only, infiltrate social feeds, open a palo santo scented store in SoHo. Then Covid-19 came knocking—and new stores were put on ice. 

Months later...Some DTC brands are reinstating plans to open stores in new markets, with caution.

• A new store snapshot: Stoney Clover Lane (Newport Beach), Mizzen+Main (Houston), Beardbrand (Austin). 
• Coming soon-ish: Allbirds plans to spend its latest funding round on a new flock of stores in 2021, and Fabletics projects it’ll have 100 stores within a few years.

For all the hype surrounding e-comm, leaders at DTC brands told me that moving IRL still has unparalleled benefits for...

Existing customers. With a large online audience in the region, “the West Coast has been top of mind for a new retail location for quite some time,” Stoney Clover Lane co-founders Kendall and Libby Glazer told Retail Brew. 

• SCL opened two other stores this summer, including a permanent store in NYC’s West Village. 
• Shoppers lined up for those openings, masks and all. The co-founders said the success came from a combo of loyal customers and solid collections/partnerships groundwork.

New customers. “Physical stores serve as a strong acquisition channel for the brand,” Mizzen+Main COO Ryan Kent told me. “This is especially true when we open new locations.” 

• Mizzen+Main uses market and zip code data to target where stores open…and when shoppers in a new area can try on its clothing, conversion rates shoot upward. 

One big L for both?

...location.

When DTC brands first opened brick and mortar storefronts in the late 2010s, they clustered around retail hubs like NYC and LA. But now? 

“From a location perspective, we are seeing quite a shift to more neighborhood and outdoor destinations,” Amish Tolia, CEO and co-founder of store optimization platform Leap, told Retail Brew. 

• Tolia notes that Leap’s clients are targeting outdoor shopping centers in Arizona, Florida, and Texas.
• “While these are not top five markets for brands today,” Tolia told me, “they are crucial next tier markets for [brands] to win in their respective categories.”

One advantage? Landlords are willing to make big concessions, Tolia said: “We’ve been able to secure many locations that do not require any base rent and this allows brands to expand to new markets with significantly less risk.” Brands are also tiptoeing into new markets with experimental short term pop-ups.  

Zoom out: Any brand that’s positioned to open a new store is bucking the overarching trend. By Coresight Research’s latest tally, 8,062 stores have closed this year; 3,384 have opened. 

EARNINGS

Direct to Future

Back in February, Under Armour CEO Patrik Frisk admitted that the company was having some trouble Protecting This House. 

Last Friday, the story was different: The athletic apparel brand’s Q3 earnings beat expectations all around, and it announced some concrete strategic changes. UA is going the Nike route, trimming down wholesale partnerships and concentrating instead on its DTC business.

• Under Armour will jump ship from between 2,000 and 3,000 wholesale partnerships in the next few years.

The brand’s earnings gave us a taste of what could come with the reshuffling. Under Armour’s e-comm biz grew 50+% during the quarter, and its DTC revenue ticked up 17% year over year. Wholesale revenue dropped 7%, while its overall revenue was flat on the year at $1.43 billion. 

It’s also selling off fitness platform MyFitnessPal, which brings in most of UA’s connected fitness revenue. Under Armour initially viewed the platform as a good way to connect directly with consumers, but now it says MyFitnessPal doesn’t align with its target consumers.   

Zoom out: Even before the pandemic struck, the brand knew it had to prioritize e-comm and DTC to reverse its multi-year slump. Now, it’s aiming to clear away distractions and execute on that. 

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M&A

Dealing in Drama

In some cases, drama is key to success: sports, reality TV, Kate Bush’s Wuthering Heights. 

Elsewhere—like, say, corporate mergers—drama should be avoided at all costs. And yet, LVMH and Tiffany will ride a wave of it into their new life together. 

The deal details, finally

The two brands solidified the sale last Thursday after an increasingly ugly back-and-forth that threatened to tank the biggest luxury deal in history. 

• Back in September, LVMH said it was walking away from the acquisition due to U.S.-France trade issues. Others said it backed out because the pandemic turned a good acquisition price bad. 
• The companies then did their best Spiderman pointing at Spiderman impressions, each suing the other over the souring deal. 

Crystal ball check: Halie predicted LVMH would use the specter of a drawn-out legal battle to scoop Tiffany up at a lower price. That is indeed what happened: LVMH will pay $131.50 per share vs. the initially promised price of $135.

Big picture: As Bloomberg pointed out, LVMH’s hardball tactics likely saved it relatively little cash in the scheme of the $16 billion deal, especially when you factor in legal costs. 

WHAT ELSE IS BREWING

• Mall owners CBL and Pennsylvania REIT have filed for bankruptcy protection. 
• Ipsy scooped up rival beauty subscription service BoxyCharm for ~$500 million, mostly in stock. 
• Dunkin’ has been bought by restaurant group Inspire Brands, which will take it private. 
• Home Depot is riding its 12-foot skeleton high to Manhattan, where it will take over a massive Bed Bath & Beyond storefront in 2021. 
• Swarovski will cut 6,000 jobs over two to three years as it deemphasizes its mass-market biz to focus on its ~fancier~ offerings.
• Some retailers have boarded up shops ahead of Election Day. 

FROM THE CREW

Last call! Last call! 

That is the sound of me, yelling to all of you retail pros, that our 2020 trends survey is about to close.

As a reminder, we’re asking all of you to weigh in on which retail trends were the most overhyped this year, and which were the most overlooked. I’d make some in-the-know joke about a trend we all know was overhyped, but then I’d be biasing your answers. 

If you’d like your hot take to be captured in our data set, click here and answer the anonymous survey. 

SWAPPING SKUS

Personally, I’m pretty ambivalent about thrifting. Love the sustainability and surprise, lack the patience. But who cares about the opinion of one man when thrifting is booming overall? 

• For many members of Gen Z, thrifting is more than just a way to get a nice outfit on the cheap. (Refinery29)
• Trending up: Digital resale platforms like Poshmark and Thredup. Trending down: Your local thrift store. (New York Times)
• The global resale market is expected to more than double over the next four years. It’ll hit $64 billion in 2024. (Retail Brew)

ICYMI

• Why Etsy is the Go-To Marketplace for Independent Makers
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• How Telfar’s Shopping Bag Won Q3