The death knell for the bricks-and-mortar store? Not yet

Despite fears that e-commerce would take over the shopping world, luxury brands are finding success with an integrated model

Companies like Oscar de la Renta are finding the playing field levelled by the rise of the smaller shop (Rex)

On a quiet strip of Rue de Marignan, just down the block from the Paris power-lunch spot L’Avenue, Alex Bolen, the chief executive of Oscar de la Renta, was standing outside No 4, where the brand is to open a store next May.

“We think long and hard before we enter into a lease,” Bolen said. “With all that’s going on in retail, we need to think even harder. For a luxury brand, what’s the point of a store, at least a bricks-and-mortar store?”

It is a question many in the industry are asking, and trying to answer anew. In a difficult climate for retail, the stakes are very real, as 4 Rue de Marignan makes clear. Above the doorway, a sign hung reading “Reed Krakoff.” Krakoff, now the chief artistic officer of Tiffany & Co, shuttered his namesake brand in 2015 and never opened a shop in the space.

Recent years have seen store closings from small brands and seismic contractions from major retailers, including Hudson’s Bay Co’s sale of the landmark Lord & Taylor building on Fifth Avenue last month to WeWork, the office-sharing startup. (Lord & Taylor will rent about a quarter of its former space to continue operating.)

But the solution, say several retail innovators, is not the end of bricks and mortar, as some in the industry once anticipated.

“There was a time six or seven years ago when there was only talk of pure play e-commerce,” said Stephanie Phair, the chief strategy officer of Farfetch, the marketplace and retail platform that helps brands do business online. “What we’ve seen from a millennial consumer behaviour point of view is customers really want that joined-up online and offline experience.”

What that means is a renovation of the old bricks-and-mortar ideal. Instead of the arms race for the biggest location on the most desirable street, a new model focused on multifunctional, integrated stores is gaining currency: less storehouses of product than event spaces, classrooms, community centres, showrooms or studios.

In the case of Oscar de la Renta, the two-story Marignan space will serve as not only the brand’s retail home in Paris but also the showroom for its four annual wholesale presentations.

Jeang Kim, an interior designer and sister of Laura Kim, the brand’s co-creative director, is designing it as a modular space: displays can be cleared for customer-entertaining events and dinners, like the brand has begun to hold in New York following its runway shows, and a tailoring studio will allow customers to have fittings and alterations done on site.

But while the physical stores continue to drive business, Oscar de la Renta has been finding new customers outside of its usual channels. Since joining Farfetch earlier this year to expand its e-commerce, often by way of the site’s personal shoppers, the company has seen sales in the range of $200,000 a month, mostly from new customers.

“Two hundred thousand dollars, seemingly out of thin air,” Bolen said.

The brand’s stores now are inviting those personal shoppers to visit, to learn more about the collections. And they, in turn, may take their clients to the physical shops.

The model for success, as Bolen sees it, is a combination of on- and off-line. “We think bricks and mortar is going to be a critical part of it, but a very different part than it’s been in the past,” Bolen said. “Bricks-and-mortar stores – those aren’t necessarily advantages anymore.” Especially in second-tier markets, he added, “stores might be a real millstone”.

Where brands affiliated with major luxury groups, like LVMH Moet Hennessy Louis Vuitton and Kering, once had a clear competitive advantage in negotiating for real estate, given their ability to leverage entire portfolios of brands, smaller companies like Oscar de la Renta and the upstart London-based evening wear label Galvan are finding the playing field levelled by the rise of the smaller shop.

“I was with these very big brands that sell tens of thousands of units a week and have flagship stores,” said Paul O’Regan, the chief executive of Galvan, who previously was an executive at the Gucci Group (now Kering) and Burberry. “Everyone’s closing stores around us and the fashion model’s changing.”

Galvan just opened its first store, combining its workspace and showroom with shopping for walk-in customers and by appointment. And its location in the Notting Hill area of London ensures lower overhead than on a luxury retail strip like Mount Street, a few miles east.

Not only will the store have the current season’s options but customers also may order from the next season’s collection and browse past collections to have pieces revived in custom colours, working with personal shoppers or, in some cases, the founders themselves. Appointments also may be made at a client’s home or office.

“We wanted to throw away all of those preconceptions and say: ‘What would be the dream scenario for a woman buying a dress?’” O’Regan said.

Robert Burke, whose New York-based company has consulted on retail strategies for industry players including Ralph Lauren, Chloé and Bulgari, has seen such thinking emerge in recent years. Even the larger retailers, he said, “are looking at just how many flagships or large stores they really need. That format worked for decades and decades. With the growth of online, it doesn’t seem to be working. Bigger isn’t better, necessarily. More focused is better, I think. And more intimate and more personal.”

The distinction, he added, was between the old idea of department stores and the emerging model of the “apartment store”.

Technically speaking, the store-as-home – or hub – is nothing new. Harry Gordon Selfridge, the founder of Selfridges in London, once decreed that “a store should be a social centre,” and put an ice rink and a shooting range in his. But after several years of chilly, gallery-like shop design, a homey feeling is again becoming dominant.

MatchesFashion.com, the London-based retailer, began as a single bricks-and-mortar store in Wimbledon Village (called simply Matches). But while business from its (now three) stores has been dwarfed by its global e-commerce, as its rechristening as MatchesFashion.com suggests, the company is continuing to invest in new stores.

After a year of testing smaller, homier stores as part of a pop-up program called “In Residence,” it is scheduled to open a new permanent space (the company prefers not to call it a “store”) at No 5 Carlos Place in Mayfair in the spring.

The space will have two floors of retail as well as floors for private shopping, but equally important will be the floor that is to house the company’s broadcasting and content hub. Classes, panel discussions and events will be held there, all of which will be streamed on Facebook Live and YouTube, its social channels and its website. And all of it will be digitally shoppable.

“That’s the beauty of what we’re doing,” said Ulric Jerome, the company’s chief executive. “You don’t have to create an enormous department store to have a reach that is 10 or 100 times bigger than that department store. The reach is way bigger than the physical space. But the physical space enables you to produce amazing content.”

The Carlos Place store will have fewer choices than the full MatchesFashion.com range; it will be “the curation of the curation, and we’ll change the product quite often,” Jerome said. But iPads will allow browsing in-store, and all products will be available within 90 minutes for delivery within metropolitan London.

But at the company’s existing stores, 40 per cent of the sales already are done via iPad. It reflects the reality that, for Matches, the online dwarfs the physical in every way: 95 per cent of Matches’ business is online, Jerome said, and 85 per cent is done outside of Britain.

Jerome has confidence in the hybrid online/offline model, with smaller physical and larger digital space.

“We tested it,” Jerome said. “Now we are investing in it. We think it’s part of the future of the way we see retail.” And he added that Apax Partners, which in September announced an agreement to take a majority stake in the company – one that values it at about $1bn – is fully supportive.

Even those brands born online are stepping into the physical world. The RealReal, the online luxury consignment giant – it receives 8,000-10,000 consignment items per day, according to Julie Wainwright, its founder and chief executive – has spent a year testing pop-ups. And this month it is setting up a permanent retail space on Wooster Street in New York City.

Wainwright is envisioning the space as community centre as much as shop: RealReal’s staff of experts, from watch gurus to fashion historians, will offer clinics and classes and offer appraisals, and the store will include a coffee bar and flower shop.

It will also, lest one forget, have a curated selection of the website’s clothes, shoes, accessories, jewellery and more: a fraction of the online offering, but a selection tailored to New York consumers.

The RealReal’s pop-up experiment last December in New York revealed a particular synergy between on- and off-line shopping, and a customer base ready and willing to combine the two, Wainwright said. And, she added, the average purchase at the pop-up was larger than the average one online.

“If you walk into the store, everything you see will also be online, and anything you see online you can see in-store,” she said. “What we saw when we ran the pop-up, some people went in, saw the item, thought about it, ordered it online that night and picked it up in the store that next morning.”

Such synergy is what drives Wainwright, and others like her, toward their new approach. While the death knell for the bricks-and-mortar store has been premature, the online experience is never far away.

“There are going to be iPads everywhere,” Wainwright said.

© New York Times