E-Tailers Bolstering Top Shopping Districts And May Soon Make The Leap To The Magnificent Mile
Traditional brick-and-mortar retail outlets have suffered waves of bankruptcies and closures, plaguing even top shopping districts like Chicago’s Magnificent Mile with empty storefronts. But a new way of doing business could provide such areas a lifeline.
Digitally native brands, sellers that began online, have over the last few years established their own brick-and-mortar stores, giving internet shoppers opportunities to come in and try on or handle products they first saw on computer screens. These e-tailers already occupy a hefty percentage of the space within several neighborhoods, and some may be on the verge of making the jump into more luxurious districts.
A short stretch of Armitage Avenue in the affluent Lincoln Park neighborhood has become the heart of Chicago’s e-tail sector. At least 13 online sellers established themselves since 2013 on the two blocks between Halsted Street and Sheffield Avenue, just east of the Chicago Transit Authority’s elevated train station, according to a 2019 survey by Stone Real Estate.
“Armitage is the pinnacle of the types of streets we want to be on,” Foxtrot CEO and co-founder Mike LaVitola said.
His company started selling wine, cookies, snacks, groceries and spirits online in 2013 and opened a shop in 2016 at 900 West Armitage Ave.
“It was already a nationally recognized boutique retail district, and it had the gravitational pull of the L, which brought in a lot of shoppers,” Stone Real Estate Senior Associate William Winter said.
Lincoln Park’s dense concentration of wealthy consumers was also a plus.
“They are the ones who are shopping on Armitage Avenue every day,” he said.
Bonobos, an online men’s clothing seller, was the street’s pioneer, opening a 900 SF shop at 845 West Armitage Ave. in 2013, when the district was still mired in post-recession doldrums. The vacancy rate hit 17%, Winter said, but e-tailers such as Warby Parker, Interior Define and Tie Bar soon followed, and the vacancy rate fell to 11.5% in 2018.
“Bonobos opened the floodgates, and that’s when more and more e-tailers started to come in; it’s a proven business model at this point,” Winter said.
E-tailers Lively and Parachute Home, among others, debuted on Armitage in 2019, and vacancy sank to 8.8%, according to the Stone survey. Today, digitally native brands make up nearly 20% of the roughly 141K SF of retail space, compared to between 2.5% and 7.5% in other top Chicago shopping districts like Damen Avenue in the Bucktown neighborhood and Southport Avenue in Lakeview.
Foxtrot opened its first outlet in the West Loop in 2015, LaVitola said. Right away, it learned brick-and-mortar stores could give online sellers a big boost.
“It allowed us to bring our fulfillment operations in-house, we got to see our customers face-to-face and local deliveries exploded,” he said.
The Armitage location was its second store, and opening there was an easy call, LaVitola said, as Lincoln Park was already one of the young firm’s top neighborhoods for deliveries.
“I also lived near Armitage, and as a resident of the neighborhood, I knew it was one of the best shopping districts in Chicago,” LaVitola said.
“Lincoln Park covers a wide array of consumers, including the young demographic, as well as families in their 30s and 40s that have money and are looking for a quiet life,” State & Liberty co-founder Lee Moffie said.
Moffie helped start the online menswear firm in 2015 in Ann Arbor, Michigan, and opened at 840 West Armitage Ave. in 2018. It now has 12 stores across the U.S. and Canada, and Moffie said it’s typical for e-tailers to cluster in neighborhoods where companies like Bonobos found success.
“We all migrate together in all the cities we go into,” Moffie said.
Foxtrot later expanded to other strong Chicago retail districts, including Wicker Park, River North, Southport and Old Town. The experience has been similar in each area.
“There is a distinct correlation between opening a store and doing local deliveries,” LaVitola said.
He does not think the e-tailers deserve all of the credit for the revival of Armitage Avenue shopping. Other boutiques on the street, such as The Second Child, Art Effect and Lori’s Shoes give the street a warm, comfortable feel and help the growing number of e-tailers blend in, he said.
“It’s also a neighborhood that’s really beautiful, with all kinds of restaurants and coffee shops, and it provides a very calm and interesting shopping experience,” LaVitola said.
It’s a different vibe from the hustle of Michigan Avenue, according to Moffie, but e-tailers typically want that low-key atmosphere, as it gives customers a chance to slow down and familiarize themselves with a relatively new brand.
“We definitely provide a place where people want to hang out and have a drink,” he said.
Investors seem to appreciate this activity. Acadia Realty Trust, a Rye, New York-based investor, is by far the street’s largest landlord, Winter said. In 2019, it purchased 849 West Armitage Ave. and 912 West Armitage Ave. for a combined $7.9M and now owns 10 buildings on the two-block stretch, according to Cook County property records. Company officials have said digitally native brands are a big draw.
“I am constantly amazed at the outsized attention these short two to three blocks get on a national level, and I think it’s because of the concentration of digitally native, young companies,” Acadia Chief Operating Officer Chris Conlon told the Chicago Tribune in 2019. “Tenant demand for that small submarket is really extraordinary. If we can own more there, we would want to.”
“Landlords like dealing with digitally native brands because they are one of the few groups in soft goods retail that have continued to expand,” Winter said. “They are the growth brands at this time.”
As a grocery, Foxtrot was classified as an essential business and allowed to remain open during the statewide pandemic shutdown. Most of the other e-tailers, including State & Liberty, had to close their Armitage locations, but Moffie said they are preparing to reopen.
“I’m still very optimistic that people love going into stores, trying things on and talking to a sales person," he said. "Hopefully, in the next two weeks, we’ll be up and running.”
One of the big questions hanging over the future of digitally native brands is whether they will ever migrate in a big way to the premier shopping districts downtown and bolster those areas’ sagging occupancy numbers.
Bonobos did recently venture onto the Magnificent Mile by opening a small shop inside the 900 North Michigan Shops mall, Winter said. Peloton opened a kiosk, and Microsoft opened a now-closed pop-up holiday store in The Shops of North Bridge at 520 North Michigan Ave.
Foxtrot could soon make the leap to the Magnificent Mile, LaVitola said. But the high rents on Michigan Avenue are a deterrent, and before the company would agree to occupy space, he wants to see its landlords adjust their expectations. That could mean lower rents than these owners are accustomed to garnering from traditional tenants or perhaps agreeing to base rent on total monthly sales and allow shorter, more flexible leases.
“We don’t have anything signed yet, but we’re definitely having those conversations,” he said. “We’re talking with two or three of the big landlords, and we are seeing a lot of appetite for it.”
State & Liberty is also interested in a possible lease on Michigan Avenue, as long as it’s on a short-term basis, Moffie said. But the company will stay loyal to Lincoln Park.
“Our spot on Armitage is something we would never want to leave,” he said.