News

For all the believers in the brick-and-mortar retail-pocalypse, get this: The U.S. Census Bureau’s retail economy survey reported that Q4’s 2018 internet sales transactions (in other words, e-commerce) accounted for only 9.9 percent of the nation’s gross retail sales. That less than 10 percent of all buying is happening online can be shocking, especially as we’re being barraged over and over again by the news that Amazon and its e-comm contemporaries are taking over the world.

Despite being surprising, the statistics are also often ignored. By skipping over these facts, the lingering misconception that retail is dying makes it easy for us to latch on to the idea that e-commerce is the only route ahead. But although this statistic is illuminating, it doesn’t paint the full picture of the challenges independent brick-and-mortar retailers really are facing. Here are two of the biggest hurdles retailers with physical stores need to overcome.

Discovery Fatigue

We’re on our phones all the time. There are perks, of course, to being able to do almost everything from your pocket. But it’s also the reason we suffer from discovery fatigue. There are so many new products introduced or suggested to us all the time that we’ve become desensitized to the joy of discovery in real life—and sadly, it’s become almost an inconvenience to search for it. As a result, people are not walking around commercial centers as much as they used to, removing the in-person socialization that shopping (or window shopping) in real spaces used to offer us.

My store is the antithesis of the white box: The presence of the maker is all around you, and it’s meant to provoke lingering curiosity.

Michele Varian

When people come into my store, they’re always asking if they can move in, or they’ll remark on how different it is from the last time they were there. I’m constantly rearranging, constantly aiming to create a sense of hominess and comfort. My store is created for people to savor, to take time with its experience and to relish in the obscurity or romanticism of the products I make and sell—most of which are from small or emerging designers and cannot be found online. It’s the antithesis of the white box: The presence of the maker is all around you, and it’s meant to provoke lingering curiosity.

 

Varian's SoHo shop Courtesy of Michele Varian

Consumers nowadays don’t always want slow beauty—they want fast or easy-to-digest experiences instead. But the reason my audiences and my shoppers connect with me and my store in the first place is because of its nature, so it’s vital for me to consistently offer that to those who do value the old-school stimulation of discovery. I need to maintain the integrity and authenticity of my brand and my store despite this changed dialogue with some demographics of consumers.

This discovery fatigue is just one factor in the current uphill struggle for brick-and-mortar retail survival. I do my best to combat it with my own brand and space, but it’s not alone in posing a challenge to growing independent brick-and-mortar business and retail sales.

The Cannibalization of Brick-and-Mortar

Discovery fatigue is not just happening online—it’s in fact complemented by real-life retail goings-on, in which U.S. cities have oversaturated their real estate footprints with homogeneous stores. In essence, brick-and-mortar retail has become overloaded from the inside out. It has self-cannibalized.

To put it into perspective, according to the International Council of Shopping Centers (ICSC), the U.S.—with 23.5 square feet of retail space per person—has six times the amount of retail square footage per capita than the UK, and 10 times the retail footprint of Germany. There are simply too many options, in our faces, all the time.

Varian's shop, far right, on SoHo's Howard Street Courtesy of Michele Varian

The root of this retail ubiquity is that developers see retail as a cash cow to pay for new development. Every new development incorporates brick-and-mortar retail into its plan because the income (rent) from commercial spaces generates huge profits for developers. In turn, pricing wars spiral out of control. Commercial real estate developers escalate retail prices per square foot to the point where no one can pay it anymore (except big-box retail chains—and even they’re downsizing). Voilà: “Store for Lease” signs plaster the facades of storefronts across cities throughout America.

For a quick reality check, here’s a timeline of rates I’ve paid for my store’s square footage, alongside what the market has reflected:

• 2001 | Crosby Street in SoHo: I sign a lease for $40 per square foot.
• 2005 | Crosby Street in SoHo: I sign a five-year lease on a slightly larger space down the block for $60 per square foot.
• 2010 | Rent nearly triples—to $160 per square foot for this space’s new lease—and I decide to move.
• 2011 | 27 Howard Street in SoHo (my current space): I sign a 10-year lease for $126 per square foot with 2.5 percent annual escalations, bringing the rate to $162 per square foot; at the time, SoHo’s market rate was $250 to $350 per square foot.
• 2011–2017 | SoHo market rates have escalated six to eight times, peaking at $977 per square foot.

These numbers sound and feel dire to an independent creative businessperson. But we’re seeing the start of an adjustment in commercial retail rents. This leveling out is slow, though steady as of late, and it portends a promising realization on behalf of real estate developers that for their own stability, they have to provide rates that allow for adequate ROI for their retail tenants; and for the economy to grow, they have to make room for non-big-box brick-and-mortar to actually survive.

In my next column, I’ll dig into all things retail—parsing out the old brick-and-mortar paradigm and what the future looks like. I’ll also propose a path forward for businesses seeking realistic solutions in the realm of retail. Stay tuned!

Michele Varian is a designer, micro-manufacturer, retailer and retail entrepreneur. In 2018, she co-founded Guesst.co, a digital matchmaking service for brick-and-mortar retailers. She is also a prolific small-business advocate and a longtime SoHo resident. At the Michele Varian shop in New York, Varian’s own collections of textiles, pillows, wallpaper, lighting and furniture are on display alongside furniture and accessories by more than 100 designers and over 70 American fine jewelry designers. Her Case Study columns are inspired by Design Talk by MV, her resource-based editorial series.

Take me to Business of Home!

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To kick 2018 off strong, I really GOTTA KNOW why retail rents are increasing so gravely at the same time that retail, as we know it, is becoming less profitable. What gives? In the first of a three-part Design Talk, I’ll address the paradox, how it’s in total defiance of traditional supply and demand economics, and nail down a few of the reasons I see supporting the screwy trajectory.

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There is no retail apocalypse. The myriad outlets reporting on the extinction of brick and mortar retail presence are basing their claims on untruths. That said, there are trends we can’t ignore, like the ubiquitous “store for rent” signs throughout SoHo and New York City. How can this paradox be explained? If retail isn’t dying, why is commercial real estate so prohibitively expensive, why are so many brands relying on their online presence, and why are stores closing left and right?! Let’s dive in to those deep, murky waters together…

Last week, I addressed head-on the shifting landscape of New York City’s creative enclaves, and how the creators being displaced from them are moving to other neighborhoods, cities, and states to find a new sense of community and freedom. In a recent Times article, downtown artist Kenny Scharf put his lament plainly: “I really feel for artists starting out today.” His nostalgia is not misplaced. The times are a’changin’.

When so many reports are proclaiming “retail is dead” (the Atlantic’s “Retail Apocalypse” article being one of the most dramatic), it’s easy to get lost in these waves of grief for the yesteryears of a thriving brick and mortar environment.

BUT!

Save the drama for your mama, ‘cause this is hardly the full story. The truth, as many outlets have also reported on, is that brick and mortar is not dead. It is changing, no doubt, but headlines on the plunge in in-person retail interaction prompt a circulation of misconceptions on the base-level statistics of changing consumer and commercial/corporate behavior.

The truth, often obscured in dramatized reportage, is that Internet sales transactions (“e-commerce”) only account for 8.9% of the nation’s gross retail sales. ONLY 8.9%! The stat was 7.1% in 2015, and has steadily increased, despite consistently high-shooting forecasts, through this year. Because I’m frequently contested on this point – rightfully so, considering the barrage of misinformation reported upon – I want to assure you this is legit info: it’s straight from the US Census Bureau’s retail economy survey.

That less than 9 percent of buying is happening online can be kind of shocking, especially as we’re being fed over and over again that Amazon and its e-comm contemporaries are taking over the world. Even more shocking is that this statistic is in fact a high ball! Check out the official Census.gov dictionary and you’ll notice that “e-commerce” encompasses sales whose negotiations were conducted online, but whose purchases were actually made in person. Also, consider that there are tons of bigger stores, the likes of West Elm and Crate and Barrel, whose online sales account for over 50% of their gross sales, skewing and inflating the “8.9%” statistic even further.

These stats are often ignored. By eliding the facts, false truths are formed, which businesses in turn respond to in their real estate decisions, perpetuating the misconceptions that retail is dying and the way of e-commerce is the only route ahead.

To break it down one step further... commercial real estate agents, acting off of (and feeding into) the saga, are setting a Wizard of Oz-like stage. We’ll look to the easy example of SoHo now, where you see commercial agencies wrestling hold of formerly owner-controlled buildings; now, realtors or brokers (versus independents) are the only ones with access to landlords. They swoop in and focus on the more lucrative properties, exclusively showing perspective tenants the spaces with inflated market prices. The perspective tenants/businesses, then, are operating on a false assumption that other commercial tenants in the neighborhood are paying comparable rents, and are netting relative profits. This is not the reality, though, because the inflation of the “market price” for commercial rentals has skyrocketed, versus sloping gradually upward. Thus, brand spanking new tenants aside, other storefronts in SoHo were originally much more affordable to rent, and face much more realistic pressure to match sales to overhead. (The “market” rents currently being asked on Crosby Street are seven times higher than the rent per square foot that I paid when I opened on Crosby in 2001!)

It’s incredibly easy to latch on to the news that brick and mortar is “so yesterday.” We see storefronts closing and sitting empty for months on end, neighborhood staples replaced with glitzy white cube businesses, age-old chains closing down – what else could be happening, if not total retail extinction? But, again, it’s not that simple. What the statistics are supporting is the truth: that yes, the times are a’changin’, but not in the ways we think they are.

True, online platforms are a flourishing avenue for connecting with customers in ways new to us in the last couple decades. But the floodgates have opened for movement toward brick and mortar, with brands like Warby Parker, Bonobos, and even Amazon opening up storefronts in recognition that personal experience is essential to lasting customer loyalty. This movement doesn't negate that menacing trends are disabling the smaller, independent operations out there. But is does call for a shift in the conversation and national “perspective” on a “flailing” brick and mortar ecosystem. It also allows us to identify the strengths in offline retail, and challenges the thinking that we have to fulfill the precariously concocted destinies real estate brokers have crafted for us.

Wonderfully, understanding about retail and real estate is beginning to shift, as outlets as “casual” as ManRepeller and as “serious” as Forbes begin to question the rumors that e-commerce is squelching brick and mortar business. There’s still much transparency to aspire to, though. And for the sake of redeeming the reputation of our beloved storefronts and independent business owners – in SoHo and beyond – I’ll continue discussing and explaining these retail trends and conversations, hopefully elucidating some of the tougher details that can prove intimidating or inhibiting to those looking to enter into a confusing, challenging, but ever-vibrant marketplace.

In the meantime, I’d love to hear your thoughts on this all. It’s a sticky subject to deep-dive into: are there any specific questions you have about how real estate is affecting retail? Or about which rumors about what’s happening between Internet and brick and mortar are true or not? I’d love to address specifics that are of particular interest!

Next week, I’ll continue with more on the “dot com” boom and how Internet is affecting the retail paradigm.

Till then, sincerely,

MV

As told to Emily R. Pellerin

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Why cry over spilt paint? Just paint the floor with it! I have my mom to thank for the compulsion to make the most of my resources, and for an über-DIY approach to life and to business. Very early on, she taught my sisters and me that no one was going to swoop in and do the tough stuff for us, regardless of us being women.

Once when my sisters and I were quite young, when we were beginning to feel “girly,” we saw a spider on the kitchen table. We began squealing, pointing, and screaming, “SOMEBODY, get rid of it!”

My Mom came in and drew a hard line: “If you want to get along in this world, you better figure out how to get rid of that spider yourselves. No one is going to swoop in and do it for you.” And that was that.

Growing up the way I grew up in Detroit instilled in me a particular resourcefulness. My family didn’t have the means to hire people to fix things around the house, so I learned how to do all that alongside my parents. With my Dad, I did electrical work and patched leaks. With my Mom, I put up drywall and became skilled at “puttying” the seams. As a kid I was looking at floor plans and elevations, and poring over “how-to” instructions from the Time Series (I highly recommend getting a set of these books; they’re the modern day Encyclopedia for any “maker”).

When I later moved to New York City, I was surprised by how little handiwork people did themselves. This “tool belt” of knowledge seemed absent from the intellect of so many of the incredibly brilliant, talented people around me. I realized that, different from most of my peers, I tended to look at things and think about how I could fix, make or mend them, versus whom I should hire to do so.

This was invaluable when I first moved in with Brad, my now-husband. His loft, the same one we now share, was a bachelor pad for the musician ilk. It definitely needed some finessing to become a “home.” I got to work in my tool belt and painter’s pants*. First, I opened up the walls connecting the front half of the loft to the back by adding salvaged windows along the top of the partition; light could now move through the full space more fluidly. I then added large 4’x8’ mirrors in a couple different spots to reflect light toward the center of the apartment. I framed them against the wall, and left the lag bolts exposed to the effect of “intentional industrialism,” a sensibility that I continue to weave into my designs.

I put in a huge bookshelf for Brad, and added a banquette in the window of the kitchen area. I’ve always loved a window seat, and putting one in the kitchen made it a more social, approachable space.

I partitioned off a corner of the open living room with floor-to-ceiling, hand-cut tree patterned muslin scrims, creating an office space that was both intimate and, à la the kitchen strategy, approachable. This idea for the home (like so many of mine do!) trickled into the store. I put up different styles of these translucent room dividers to create new spaces within the larger one, allowing light and air to filter through uncompromised. Other SoHo business friendlies began picking up the idea, too, and incorporating my gauzy scrims into their own layout designs; solving my own spatial problems had led directly to a new design product.

The most attractive aspect of this metaphoric toolkit of knowledge – that is, the DIY approach to life – isn’t just the “getting it done;” it’s the “how” of getting it done. Exercising this precise type of creative problem solving makes me a better, more thoughtful, and more resourceful businesswoman.

How am I going to get people into the store? How am I going to get the aesthetics of the in-store experience to cooperate with one another, and resonant properly with my customers? How am I going to craft a memorable online UX? How will I rise above the noise and vocalize my differentiation in an increasingly competition-saturated market? It’s these sorts of questions that the DIY life prepares me to answer creatively and uniquely.

One thing to emphasize is that I can’t always finagle my way through those questions alone. There’s no shortage of teamwork, composited creativities, shared responsibility, and combined personpower behind the evolving responses to these questions. But they’re always tethered to a mindset – dare I say an intrinsic compulsion – to DIY that sh**.  

I’ve never been afraid to get my hands dirty with my handiwork, nor with my business strategy. I don’t cry over spilt paint. In fact, I paint the floor with it. And I don’t cry over risks or creative retail solutions that don’t pan out. I learn from them, add that new knowledge to my mental toolkit, and use that on the next go-around to get rid of that spider myself.

 

Sincerely,

 As told to Emily R. Pellerin

* Friends have asked me numerous times where I get my artfully paint-splattered jeans. Each time I surprise them: the look is not contrived, I’m just wearing them while I make stuff!

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For next week...

I was walking through a design show with a friend once when she commented on there being no shortage of “characters” at these trade events. She’s right, and I attribute that quality to the utter commitment that creatives have to their personal brand and style. Sure, some of us are funky, but that's what makes the “me” special in relation to the “we.” In next week’s Design Talk, I’ll explore this trait and track my own emergence from the “we,” citing examples of other prominent design world “characters” along the way.

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Join Melissa Joy Manning at our SoHo store for the trunk show featuring Hali Emminger, the designer behind Hechizo, and a member of the Sprig Collective. 

 

Friday, Oct 13 - Saturday, Oct 14th
12 - 6

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