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Brick-And-Mortar May Be The Only Way For E-Tailers To Really Grow

The ease and speed of online shopping upended traditional retail. Now, the companies that made their names in the world of e-commerce are finding real-life, brick-and-mortar locations are a key part of truly scaling up the business.

Brick-And-Mortar May Be The Only Way For E-Tailers To Really Grow
Kimco Realty Trust CEO Conor Flynn and Arent Fox partner Anothony Lupo

“When they open a physical store, their e-commerce sales pop, sometimes 70% or 80%,” said Kimco Realty Corp. CEO Conor Flynn, who was speaking at Bisnow’s NYC Retail Annual event Thursday morning.

Several national online brands have already moved forward into the world of brick-and-mortar. Fashion retailers Bonobos, Everlane and Adore Me have all set up locations. 

The online mattress retailer Casper opened its first store in New York City last year, where naps were reportedly encouraged, and the goliath of online retail itself, Amazon, has a bookstore in The Time Warner Center at Columbus Circle and is making a significant push with its Amazon Go concept stores.

In the next few years, hundreds more online-only retailers are expected to join them, as the data begins to indicate setting up within four walls is worth the cost and effort.

“[Casper] originally thought they would have a store that people would come in and test out the mattress … then they found, even in Manhattan, over 50% of the people who come in wanted to walk away with a mattress,” Flynn said, adding that stores are still learning how to best maximize a mix of online and physical locations.

“The consumer is spoiled. They know the cheapest way to get it and the fastest way to get it, [but] when you are able to get someone to buy it at the store, and walk away with it … that’s the highest margin.”

RXR Realty Executive Management Member Whitney Arcaro and RFK Vice Chairman Karen Bellantoni
RXR Realty Executive Management Member Whitney Arcaro and RFK Vice Chairman Karen Bellantoni

In some ways, it is not really about selling, but showcasing.

Many retailers see it as almost a museum, Arent Fox partner Anthony Lupo said.

“My clients are looking at stores as a different platform than before. … [As in] ‘come in and see what the brand is about.’”

From the brand’s perspective, panelists said, it is all about drawing more attention to the name.

“The awareness and the stores go hand in hand. … If you open up a store, your digital experience becomes much more significant,” said RKF Vice Chairman Karen Bellantoni, pointing to online wedding registry, planner and retail company Zola’s decision to open a temporary physical store in the Flatiron District.

“They are still sort of testing the waters. [But] if you look at the experience of Casper … they did kiosk, temp stores, now they have a full-time platform.”

Joel Braun, who retired as the chief investment officer of Acadia Realty last year, but who continues to consult for the REIT, said some of the online retailers don’t yet understand the brick-and-mortar business, and require spoon-feeding from landlords.

“They really are learning a whole new business,” he said. “They are faced with the same issues that every retailer has faced, you have to continue to grow … you still have to figure out how to get to a larger market.”

But the benefits aren’t one-sided. Around the world, retailers, landlords and developers are all working to figure out ways to draw people from their homes and to the stores.

More and more, people will only cut their screen time for an experience. And the owners and developers are trying to capitalize on that by working to curate a mix of food and beverage options and new retail offerings — popular digital brands among them.

Brick-And-Mortar May Be The Only Way For E-Tailers To Really Grow
B6 Real Estate Advisors partner Michael Hefferon, Cedar Realty Trust CEO Bruce Schanzer, Marcus & Millichap's Joseph French, former Acadia Realty Trust Chief Investment Officer Joel Braun and Pei Cobb Freed & Partners Architects partner Michael Bischoff

At Related Cos. and Oxford Property Group’s brand-new Hudson Yards mall, for example, several of the spaces have been filled by retailers opening their first-ever store.

On Bleecker Street, which has been riddled with retail vacancies in recent years, Brookfield is running an incubator in several storefronts that it bought along the strip last year. Many of the offerings are digital-native brands, an attempt to revitalize the street.

Kimco’s Flynn said there is no room for cookie-cutter retail offerings with today’s consumer.

“Bringing in something unique is really important. … We like to use the word 'retail Darwinism',” he said. "There is radical change going on in retail today. ... The retailers that are forward-thinking are reinvesting in stores."