The Future of Physical Retail
Brand executives explain why they’re still investing in new store locations that are complete with coffee bars and art installations for the post-pandemic landscape.
Written by Christina Binkley
Roberto Compagno, the chief executive of Slowear, the Venice-based luxury apparel maker known for its timeless designs, spent a good deal of the pandemic planning store openings. While retail destinations reeled from closures and a dearth of consumer foot traffic in 2020, Slowear opened a new 1,150-square-foot store in Chicago in October, outfitted with a sitting area serving espresso and prosecco to encourage shoppers to stay awhile. Shortly after, a new shop opened in Brooklyn, bringing the company’s US store count to three locations. A fourth in New York’s West Village will follow this year, with additional stores planned for San Francisco, Los Angeles, Dusseldorf, Hamburg and Berlin. In all, Slowear is planning to open about 25 new stores globally in the next two years.
The store expansion is part of the company’s broader direct-to-consumer strategy, and designed to build a relationship with customers. Experience is essential. “We want to test a different customer,” says Compagno. “The physical store is to give support and give service. It’s the easy way to show who you are to the consumer.”
Slowear’s Brooklyn store.
The middle of a global pandemic, which is currently at its peak in cases worldwide, is an unlikely time to be investing in new stores. An economic recovery is expected to take several years, and in 2020, more than 11,000 stores closed in the US, an all-time record that could be broken again in the coming year, according to some analyses, which have suggested that as many as 100,000 stores could close by 2025. But Slowear and some other luxury companies see opportunity in consumer shifts that have taken root this year, including a greater willingness to experiment with virtual shopping, more intense brand loyalty and an openness to new brand relationships that answer needs and desires that have emerged in the pandemic. Coupling those consumer shifts with an urgency to boost profit margins and replace wholesale business — under pressure as department stores struggle — has led to a rush of new store activity.
Loro Piana recently opened a new store in New York’s Meatpacking District. Alexander McQueen in July opened a Miami flagship in the Design District as part of an aggressive global store expansion strategy that includes converting 11 flagships into stores capable of catering to clients both online and offline while entertaining them as well. In Southern California, luxury mall South Coast Plaza counts a flurry of 2020 openings, including a Monique Lhuillier flagship, a Thom Browne store, a new Celine location and a coming Blue Box Cafe at Tiffany’s, which brings the jeweller’s food concept to the West Coast of the US.
It’s a phenomenon that’s particularly strong in luxury markets where consumers have continued to spend while retreating to brands they trust, and where brands are seeking to cement those relationships.
Opening new stores now “seems a bit crazy, but a lot of people still value visiting stores,” says Neil Saunders, a retail analyst with GlobalData. “Luxury retailers are quite conscious that they need to take control back to their own brands.”
The interior and exterior of Slowear's Chicago store. .
Fortifying one-to-one relationships
Loro Piana chief executive Fabio d’Angelantonio says that 2020 served as an “accelerator of relationship permission”, with customers becoming more interested in brands they relate to. “The store and your sales associate remain the heart of the relationship,” he says, but “it’s much broader today. I would never have expected to have a sales Zoom”. Virtual-meeting sales with an associate in a store and a customer at home are now common.
Loro Piana’s online sales remain a single-digit percentage of overall revenues, D’Angelantonio says, but they’re growing at a triple-digit rate. He looks at the new Meatpacking store as an experiment in new retailing, which encompasses the entertaining experiences and services that stores now offer. The New York store opened with an art installation, for instance. He’s hoping the new retail approach will become a learning experience for Loro Piana’s existing stores and strategy. “It’s been a very strange year. I really think Meatpacking… will have a reverse engineering effect on the brand,” D’Angelantonio says.
Reaching new clients through stores remains a primary avenue for growth for Slowear, a family-owned holding company whose brands — also sold wholesale to department stores such as Saks Fifth Avenue and Selfridges — include Incotex, a maker of trousers with details such as rubber in the waistband to keep shirts from slipping, Zanone knitwear, Glanshirt shirts and Montedoro outerwear. The company started in the mid-20th century manufacturing luxury menswear for brands including Zegna and Burberry, then launched its own lines that sold wholesale. Slowear has long had a contrarian approach to fashion that’s inherent in its name — a reference to the slow food that sought to bring attention to local cuisines and traditions. The company has been built around Italian production and ethical production — it posts its ethical code on its website as well as a dictionary explaining the materials, methods and terms it uses to describe its goods.
The company had revenues of €55 million in 2019 and anticipates a 20 per cent decrease in 2020. “We will be quite happy considering what’s happened everywhere,” Compagno says.
Loro Piana’s new Meatpacking District store in New York, which opened this week. The store hosted a special collaborative exhibition featuring Oregon-based artist and Seneca Nation citizen Marie Watt. © Julia Gillard
Following customers to new locales
Stores are also relocating as consumers have moved around in the pandemic, flocking, for instance, to suburbs with their larger living spaces and to warm weather locations such as Florida. “There’s a big question mark over urban locations,” says Saunders, who cites a glut of space in developments such as New York’s Hudson Yards — which he called “quite frightening”. “A lot of suburban locations have seen really OK growth because there has been outward migration,” Saunders says. He notes that shopping areas that blend luxury and affordable brands are tending to do particularly well. “Some of them are quite strange — a mix between high-end, mid and everyday brands. Actually consumers seem to like this.”
That’s the recipe for Rosemary Square, a redeveloped mixed-use property from Related Companies that was once called City Place. Retail spaces have been leasing robustly, says Gopal Rajegowda, a partner responsible for Related’s southeastern US region. “The brands are following their clientele,” says Rajegowda. “There’s been more demand than we expected pre-pandemic,” he says.
Experiential retail was also baked into the concept of Miami’s Design District, which has seen remarkably strong sales in 2020. Despite being shuttered for two to three months, revenues there will be down a mere 2 per cent for the 12 months ended in November, after seeing year-over-year growth of 40 per cent in the September through November period (and 20 per cent growth in July and August), says Craig Robins, the district’s founder and developer.
Despite the cancellation of the Art Basel art fair this year, store openings there have been robust, with the Alexander McQueen, Off-White and Stone Island stores opening during the pandemic. Maison Margiela is expanding its Design District store and Chanel began a construction project there in 2020, Robins says. “They’re doing big expansions post-pandemic, which is really crazy,” he says, noting that while tourism plummeted and hotel revenues fell painfully, a rush of escapees from cities such as New York has the South Florida population booming, pressuring housing prices and bringing in eager new shoppers who have been enjoying Florida’s relatively relaxed Covid-19 regulations.
Robins speaks almost as though there was no pandemic-related retail apocalypse happening around him. “We’ve got the most robust leasing activity in the past five years.”
January 2021 from Vogue Business Link