Welcome to Executive Action Items, a Glossy+ member-exclusive series driven by monthly focus groups with subject matter experts. The bi-weekly series will offer immediately actionable takeaways for workers navigating the rapidly evolving beauty and fashion industries.
To kick off the series, Glossy compiled a group of retail-focused executives to share their thoughts on the state and future of physical retail. As they compared notes and shared solutions to current challenges, the conversation landed on four main topics. Below is a recap of the first two: how to choose the right store location, and how to win and keep valuable store associates. Check back in two weeks for additional retail recommendations from this executive focus group.
Focus group members:
Matthew Krell, managing director at the 5-year-old retail strategy and consulting firm Alvarez & Marsal Property Solutions, which counts 25-30 clients including Patagonia, Kendra Scott and Toteme.
Wendy Kunkle, president and owner of Kemo Sabe, the 35-year-old high-end Western wear maker and retailer with six experiential stores in Aspen, Vail, Jackson Hole, Park City, Round Top and Whitefish.
Amish Tolia, co-founder and CEO of Leap, the 6-year-old retail-as-a-service company powering 106 stores across 12 markets for 53 brands, from Godiva to Ring Concierge. Leap’s top markets include New York, L.A., Chicago and Miami.
Angela Dotson, svp of client and new market development at Fashionphile, the 26-year-old luxury handbag reseller with two showrooms, four stores and counting, and selling salons at 10 Neiman Marcus stores.
Melissa Gonzalez, principal at the 54-year-old global architecture and design firm MG2. Melissa leads MG2 Advisory, experiential design, brand development and thought leadership for the global firm, which has offices in Seattle, Irvine, Washington, D.C. and Shanghai.
Choose the right store location (if you can find one).
Opening a store is a big, risky investment, but the focus group participants have established best practices that have served them well. They include prioritizing profitability; doing a vibe check on the neighborhood; leveraging customer data from e-commerce, pop-ups and retail partners; and waiting — however long it takes — for a space with desirable adjacencies, for example.
Krell: “When you get to brands that have 150-200 locations, they often have to get more creative and focus on opening locations that are truly profitable. They consider, ‘How do we maximize profits from day one?’ And, over the past 24 months, my team has gotten very creative in the types of variables that we’re looking at in data sets. The majority of the work we’re doing is highly focused on every single aspect that goes into the strategy prior to day one of the cash register being turned on: What are the construction costs and the store employee costs [based on the] living wage index? Those are the two variables that we look at today more than ever before in my career. But brands also want to know: How do we maintain profitability? We know what our cost to operate is, so how do we maintain it? And how do we keep our margins within X percent?”
Kunkle: “We do not look at anything like, ‘Does this place have enough visitors?’ We don’t do market research. We go into a place and — like in Jackson, for example, I was at a bar. I called a person that was selling retail spaces, and I bought one that day. That works. If we love the place, it feels good and our customers go there, we’re going in. … But we do have our Road House, which is this traveling Kemo Sabe. We plop down and see if we like what we see, and that’s very helpful.”
Dotson: “There are a few very important factors that we’ve looked at as we’ve built out our brick and mortar. One is whether we were already successful at acquiring customers in a Neiman Marcus location [in that city]. You can test and learn a lot of things through a wholesale channel. And there’s a pretty good chance everybody is going to follow us into brick and mortar. … The other part is just knowing what markets have worked over a long period of time and what newer markets have been showing [strong] comps, having worked in retail for a long time. We also have a lot of data from our online [business]. We know what geography people are buying from and what kind of items they’ve been buying from us year after year.”
Gonzalez: “A lot of digital natives that are going into physical retail are going to need some data before they open stores to see how things are performing before they go for that round of funding. The VC world has gotten a little tighter, and profitability is important. So, a pop-up has become more of a requirement, whether it’s a physical brick-and-mortar pop-up or a mobile pop-up. They’re opening in their strongest zip codes and then seeing how it’s performing and resonating to test the market.”
Tolia: “It’s also worth noting the challenge that real estate is at the lowest vacancy rates in the last 15-20 years. And so, finding high-quality real estate is not easy; whether you’re in a resort town like Jackson or in New York City, it’s tight. If you want to go find a 2,500-square-foot flagship in Soho, you’re going to be spending through the eyeballs. And the prices on upper Fifth [Avenue] in New York City are back at what they were 20 years ago, adjusted for inflation. They’re the highest rents I’ve personally seen, and the market is commanding them.”
Krell: ”That is entirely accurate. There’s virtually no space available anywhere. The malls are packed. There’s very, very little space available. And, speaking of malls, I would certainly love to see a push to street retail. I feel like I’ve been stuck playing around in the enclosed mall game for the past couple of years. But a lot of the clients that we work with want that. They want that guaranteed, specific, safe environment that malls have.”
Gonzalez: “It’s hard to find good space — that is, in the Class A properties with the right adjacencies. You could even be at the best mall, but it doesn’t matter if you’re not in the right location of that mall, based on the way today’s customer is shopping.”
Think outside the box when hiring retail associates.
The focus group members said that — though hiring effective, brand-perfect store associates is a challenge — they’ve found success by hiring bartenders and waitresses, recruiting from other areas of their business, paying more than competitors, and becoming known for a “winning culture.”
Kunkle: “Everyone thinks they’re gonna get brick and mortar, and then, ‘Yippee! It’s so easy.’ But, no. [Finding the right] employees is the most difficult [aspect], by far. You can get stuff to sell, but if you don’t have the right people selling it, you’re doomed. … We do not like to hire retail people. We hire bartenders and waitresses. Those people know hustle, and we’re not a store where you can just stand around. We’re running and jumping and going crazy. They’re smart, they’re savvy, they’re funny, and they know how to talk to people. You need that energy. And you better pay them more than anybody else in your city, by far, because bartenders make a lot of money. I want to have the highest-paid employees in every town I land in.”
Gonzalez: “Store associates are the front lines. They are the touch point you’re relying on in the store. So there’s definitely an ongoing conversation around: What’s the right investment? Even with pop-ups, sometimes we’ll get budgets, and we’ll be like, ‘This is not a realistic budget allocation if you want workers who are seasoned.’ Customers are coming into a brand having researched it — they already have information, and they already have an opinion. So they’re expecting the person they’re engaging with to be able to answer any question they walk in the door with, and with a smile. … It’s important to deliver that layer of hospitality in the retail experience. And engaged and seasoned [workers] do need to be well compensated.”
Dotson: “We don’t recruit from the competition — it’s not necessarily a good fit. And you can’t necessarily take somebody from luxury because you need that person to think differently on their feet. We’ve found success by moving our team members or promoting our team members into the retail world — prior, they were working in procurement or maybe authentication or other areas where they learned so much about all the brands and every aspect of a Birkin, a Chanel flat or a Gucci Jackie. They have this incredible product knowledge that is vast, across multiple brands, rather than coming from one luxury house where they only know about one brand. When customers come to resale, they want to make sure that whoever they’re working with can really answer their questions. It helps to make them feel confident that the product they’re getting is authentic.”
Tolia: “We staff about 1,000 retail associates who work across our stores, and they bring these different [brand] experiences to life [across our stores]. On one side of the network, they’re selling $40,000 tennis bracelets, and on the other side of the network, they’re selling boxes of six T-shirts for $28 at True Classic. … We’ve been successful at hiring and keeping associates by creating a culture of winning. That is the No. 1 thing that keeps retail employees emphatic about seeking more shifts on the schedule and wanting to show up and create authentic experiences and relationships with shoppers. Way more than pay, frankly, [employees] want to be a part of a winning culture.”