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New Faces Pepper Retail’s Physical Landscape

Young brands are seizing the opportunity to expand their brick-and-mortar presence as the world weathers the coronavirus pandemic.

Rhone

In March, men’s activewear and basics brand Rhone expanded its small fleet of stores after seven years of largely operating online. The New York-based label announced that it would be opening its third Manhattan store in the city’s Flatiron district, as well as a location on Boston’s Newbury St., this spring. Prior to Thanksgiving, Rhone opened its first West Coast flagship at Newport Beach’s Fashion Island shopping center, and a location at Los Angeles’ open air Westfield Century City mall will open before the end of the month.

Rhone's newest store at Newport Beach’s Fashion Island shopping center.

Rhone’s newest store at Newport Beach’s Fashion Island shopping center.

“Fortunately, Rhone is in a category that was almost pandemic-resistant” in terms of assortment, vice president of retail David Benavides told Sourcing Journal. “We have athletic, athleisure and business wear, and we’ve been able to get ourselves a bit more exposed to the market based on our offerings.” But despite Rhone’s adeptness at owning an e-commerce “a majority of the people still want that ‘high touch,’ personalized customer experience,” Benavides said. “It really makes them get excited to go to a store.”

For some shoppers, lockdown rekindled their desire for in-person browsing and buying, he added.

“A lot of companies moved to e-commerce, and a lot of them didn’t do it well,” Benavides said. Shipments arrived late. Inconsistent fit proved an issue. Returns took weeks to be processed and refunded. In some instances, retailers’ efforts to quickly develop new channels for business ultimately “created a bit more complication” for consumers, he said.

“People might see it as kind of crazy, in terms of opening brick-and-mortar, but I think we’re starting to see digitally native companies have a hard time turning a profit,” he added, because of the rising costs of consumer acquisition in an increasingly crowded online landscape. Retail stores not only provide a channel for sales, but they serve as a marketing tool, fueling brand engagement through all channels.

The interior of the new Fashion Island store.

The interior of the new Fashion Island store.

What’s more, flexible work schedules are giving consumers new opportunities, Benavides said. “We’re no longer tied to shopping after five o’clock, and we’re no longer tied to shopping Saturday and Sunday,” he added, noting that today’s workforce might stretch a coffee break or lunch date into a quick retail jaunt, knowing that office hours have become less structured for some. “I think that flexibility has allowed people to enjoy the experience of shopping again.”

The brand’s study on male consumers has also yielded insights into the ways they like to shop. “I think for the typical male shopper, it’s all about instant gratification—getting in and getting out as quick as possible,” Benavides said. “I think that’s why a lot of males sometimes struggle to shop online—because they don’t want the hassle of buying something and having to return it. They’d rather go into a store, try it on, and make sure that it works.”

While physical retail accounts for just 8 to 10 percent of Rhone’s current business, the executive hopes to see that figure grow to about one-third of the company’s revenue over the next four years. The pandemic has prompted an evolution in the rental markets in metropolitan areas like New York, Los Angeles and San Francisco that have favored the brand’s expansion. “Rents were escalating astronomically in a lot of these markets, almost unfairly so,” Benavides said. Rhone has been able to negotiate for space in busy, high-value areas in part because of retail’s recent struggles. “The pandemic kind of shifted things, and now a lot of landlords have become a lot more equitable.”

Rothy’s

Rothy’s chief operating officer Heather Skidmore Howard says today’s “really unprecedented times” have resulted in brands that “have shuttered” while “others have succeeded.”

The six-year-old San Francisco-based footwear and accessories company known for its 3D-knitted, recycled polyester slip-ons and sneakers began as a digitally native label serving Silicon Valley’s practical professionals. By early 2022, Skidmore Howard said Rothy’s will have 12 stores across the country, a number it plans to double in the coming years. “We feel incredibly bullish and excited about our retail expansion, and we’re putting resources behind that,” she said.

The company currently has outposts in Los Angeles, New York, Boston, Chicago, Washington, D.C. and its hometown of San Francisco, along with a new location L.A.’s Larchmont Village. A storefront in Manhattan’s Nolita neighborhood will soon open its doors, and Pasadena and San Jose, Calif., as well as Atlanta and Scottsdale, Ariz. locations will break ground early next year. “We will continue to expand from there,” she added. “We absolutely believe in physical retail as a means of connecting with our customers.”

Rothy's opened its store in L.A.'s Larchmont Village in November.

Rothy’s opened its store in L.A.’s Larchmont Village in November.

There’s an “inherent benefit” to shopping for the brand’s products in person, Skidmore Howard said, as footwear sizing can be tricky and some of the finishings are more impressive when viewed up close. “The second somebody puts the shoe on for the first time, everybody has the same reaction of, ‘Oh!’” she added, referencing the shoes’ built in comfort features. “I love working in the stores because it happens all day, every day for those new customers, and you can’t get that online.”

Recent pandemic-related headwinds also forced Rothy’s to evolve, quickly adopting omnichannel services that offered the convenience of shopping in-store while maintaining a virtually contactless experience.

“It’s not a new concept, but [the pandemic] actually opened the door to much a faster roadmap to developing an omnichannel experience,” she said. “That’s the silver lining—it’s forced everybody to look at things in a different, more innovative way.” Covid put “retail at the forefront of our strategic thinking,” as consumers demanded new options for engagement, she added.

In developing plans for store locations, the company combs through data to see where its customers live. It also looks for opportunities to reach untapped demographics. New stores are situated near “a healthy blend of both existing and potential new customers,” Skidmore Howard said. “We look at neighborhoods where we actually truly can connect with communities,” she added. “They should be full of character, walkable, and offer a mix of retail, restaurants and cultural activity.”

The shoe brand's Larchmont store boasts a minimalist aesthetic.

The shoe brand’s Larchmont store boasts a minimalist aesthetic.

Some of these hotspots have been relatively dormant during recent seasons, she said. “One area I could point to is Melrose,” she said, referring to the tony boulevard that is home to L.A.’s hottest retail. While the Rothy’s store on Melrose Ave. continues to see high sell-through, foot traffic to the area has suffered, and many of the brand’s contemporaries were forced to shutter last year.

However, Skidmore Howard said, those neighbors are beginning to return. “Glossier is coming back—the other brands that have had left are coming back,” she said. The reopenings are a “big indication” that consumers are likely to return in “full force,” she added.

Vuori

Vuori has had a whirlwind two years, propelled, in large part, by men’s and women’s athleisure, casual garb and workout wear. The eight-year-old digitally native brand has catapulted from cult status among West Coast millennials to mainstream nationwide success, garnering the brand a $400 million investment from SoftBank in October that puts Vuori’s current valuation at $4 billion.

With nine stores in the U.S., Vuori is now aiming for a brick-and-mortar expansion that includes international doors. All in all, the company plans to open 100 more locations over the next five years. Catherine Pike, Vuori’s senior director of retail, attributed the company’s ambitious goals to two factors: “momentum,” along with changes in the real estate market.

In September, Vuori opened a store on trendy Abbot Kinney Blvd. in L.A.

In September, Vuori opened a store on trendy Abbot Kinney Blvd. in L.A.

“We’ve had an incredible gust of wind carrying us forward and we’re really hitting a tipping point,” she said. Vuori implemented omnichannel features like curbside pickup and local delivery to weather the pandemic’s early days—both services it has pulled back on as consumers return to in-store shopping.

“The second piece is definitely the disruption in real estate, which makes expansion really interesting right now,” she added. “When we think of where we want to be in cities and in shopping centers, there are some really great opportunities out there—it feels like the right time to jump on those.”

Not only are there fiscal incentives, or “Covid discounts,” of which to take advantage—there are also higher quality spaces available for rent now that many larger brands have decided to downsize their retail footprints, Pike said. These prime locations, which are now being redeveloped and updated, “would never have been available in recent years” if not for pandemic disruption.

“There’s a financial piece, and there’s also new locations and a redevelopment of tenant mixes that’s happening right now,” she added. “In all my years of doing this, I haven’t seen so much occur at the same time.”

As the brand looks to expand, it is using a mix of e-commerce and wholesale data to inform its decisions about where to focus next. “We can tell where there’s a large concentration of people who have found Vuori and fallen in love with it, either online or purchasing through our partners,” Pike said. “So that’s obviously a strong guiding light like that tells us, ‘Hey, there should be a store nearby.’”

The interior of Vuori's Abbot Kinney location.

The interior of Vuori’s Abbot Kinney location.

As a lifestyle label, Vuori is also researching cities and communities that have become havens for active living, health and wellness. A now-remote workforce has scattered over the past 20 months, making smaller cities and towns more viable prospects for new stores than the traditional big urban centers.

“You’re seeing people gather in really cool communities and towns like Boulder, where we actually opened our first store outside of California,” she said. “We’ve just had tremendous success there,” despite the fact that the city isn’t even among the top 10 largest in Colorado—much less the nation. Still, the city is known for its blend of cityscapes and mountainscapes, making it an ideal landing place for adventure-seeking urbanites.

Venturing into new territory will prompt new considerations when it comes to assortments and delivery times. “We’re learning as we go—Boulder is our first ‘cold’ store, unless you count the Bay Area,” she said. “We’re definitely seeing that Boulder can take jackets a lot earlier than our Southern California stores, so we will absolutely look at things regionally.” The brand sees a particularly strong opportunity to reach shoppers in the northeast, where temperatures fall considerably lower than sunny SoCal during the fall and winter months.

But according to Pike, the key to Vuori’s confidence in its expansion plan lies in the line’s built-in versatility. “We haven’t seen a huge need to create big separate programs depending on the area because the core product really does translate very well across all seasons and all regions,” she said.

Athleta

Despite Gap Inc.’s struggles to make headway in recent years, one bright spot in the firm’s portfolio continues to be its women’s athleisure label Athleta. In August, the Bay Area company announced its highest second-quarter net sales in more than a decade, led primarily by the athletic apparel brand as well as Old Navy. And while Gap Inc. this summer announced it would shutter about 75 of its flagging Gap and Banana Republic stores across North America, it detailed plans to expand Athleta’s footprint by 20 to 30 locations.

“Putting the customer at the center is core to our Power Plan to reach $2 billion in net sales by 2023,” an Athleta spokesperson told Sourcing Journal. “Our highly profitable fleet of more than 200 stores are the top customer acquisition and brand awareness vehicles.”

The label has worked to intentionally position locations within their consumer’s natural ecosystem, “allowing her to easily stop in to shop our latest collection on her way to work, a workout class or a grocery trip,” and has deepened ties with shoppers through women-focused events and in-store fitness classes.

“We know our customer is constantly bouncing back and forth between digital and physical worlds, and she’s shopping with us across multiple channels more than ever before,” the spokesperson added. “These omni shoppers are extremely valuable to us because they spend 3.5 times more than single-channel shoppers, and we’re laser focused on providing the convenience of shopping options that meet these women where they are through both our stores and our digital platforms.”

In addition to expanding its co-op partnership with REI to 135 stores across the country, Athleta is on track to open 20 new stores by the end of the year—including its first two Canadian locations.

“This is an exciting growth milestone for our brand,” the spokesperson said. “We can’t wait to bring women across the U.S. and Canada even more inclusive sizing options and ways to shop with us.”

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