Against the backdrop of a worsening retail market and a sagging consumer economy, a number of online businesses are still opting to make the leap to open bricks-and-mortar retail sites.
For many of those expanding from “click” to “brick” here in New York City, the decision is driven by location, with first-time shopkeepers willing to take on the financial risk of footing lease payments in specific areas of the city — often fringe neighborhoods with relatively low rents, like Crown Heights, Inwood and parts of Downtown Manhattan.
Some retail experts see this type of transition as a doomed venture. According to Robert Greenstone, chairman and CEO of Greenstone Realty, the current retail market is an extremely treacherous environment for any brick-and-mortar venture, especially so for newcomers. He noted that even some longstanding retail businesses are barely hanging on to their property.
“We’re seeing pieces of property on the market that we haven’t seen in years,” Greenstone said. “Consumers are just not out there spending money; if they’re spending at all, they’re spending gingerly. After Christmas, I expect things to get a lot worse.”
However, retailers are making the jump in the belief that there are built-in markets for wares that were previously only available online.
How do these storekeepers determine
“location, location, location?” Thanks to their Internet business, they’ve been able to track purchases by customer location, and thus determine specific neighborhoods that will bring them the highest foot traffic.
This month, Felicia Stevens-Niles opened the doors at a 1,700-square-foot, gallery-style space on Franklin Avenue in Crown Heights, Brooklyn, debuting Nairobi’s Knapsack, a children’s store featuring toys and books.
Stevens-Niles, who began the operation as a Web site in late 2006, knew that 50 percent of her online customers were based in the city. Also, from her communication with them, she knew that many were interested in visiting a retail site to view her merchandise.
As a longtime resident of Crown Heights, Stevens-Niles also had a front-row view of Franklin Avenue’s recent influx of eclectic cafes and shops. Newcomers, including the sandwich shop Bristen’s Eatery, situated across the street from Nairobi’s Knapsack; beer garden Franklin Park on nearby St. Johns Place; and About Time Boutique, a Franklin Avenue clothing store, have moved in this year, landing among the neighborhood’s bodegas and takeout spots.
Stevens-Niles discovered the future site of the store while walking around her neighborhood.
“There are a lot of families and artists in the area, including a lot of new people — but virtually no stores for children,” said Stevens-Niles, whose rent for the combination retail site and open gallery space runs in the $1,500 to $2,000 range — a far cry from the steep rents she had considered in nearby Park Slope, which she judges to be a saturated market for children’s retail.
Bill O’Brien, of the Brooklyn-based commercial real estate firm M.C. O’Brien, who represented Stevens-Niles’ landlord in the deal, agrees with Stevens-Niles’ assessment of her neighborhood.
“The Franklin Avenue corridor is an emerging market,” O’Brien said. “Rents aren’t through the roof there. In neighborhoods like Fort Greene, Park Slope and Carroll Gardens, a lot of mom-and-pop stores can’t be sustained.”
Anina Young, who owns Brazen Lingerie, headed up her company for five years as an online retailer before opening doors earlier this year at a 400-square-foot retail site on Dyckman Street in Inwood. Like Stevens-Niles, Young noticed an opening in the retail market in her neighborhood, because there were no competing lingerie boutiques. She had recently relocated from Hell’s Kitchen and was struck by the lack of retail lingerie options.
An array of vacant storefronts Young noticed while walking around the neighborhood convinced her that she would have sufficient options when the time came to negotiate a retail lease. She eventually signed a 10-year lease in the $1,500–$2,000 range.
According to Elliot Dweck of Besen Retail, the tenant representative in the deal, Young exhibited foresight in choosing the block of Dyckman just west of Broadway.
“She was a great pioneer for that block,” Dweck said. “The area is really growing.” He cited two new boutiques, a juice bar and a sushi bar, all of which opened in the area earlier this year.
Danielle Malka, founder and president of êShave, a high-end men’s shaving company, saw a benefit in investing in a bricks-and-mortar site despite a decade of success in online sales. In 2007, she opened her first retail site in the Sutton Place area of Manhattan, and this fall she opened a second location in Three World Financial Center’s Winter Garden.
Robert Greenstone of Greenstone Realty, however, has a less optimistic view about the prospects these retailers have in outlying neighborhoods.
Greenstone says today’s treacherous retail climate has forced fringe-neighborhood landlords to lower rents as they scramble to retain retail leases, making these spots more attractive to retail newcomers — but such areas are far less likely to have vital foot traffic.
But for Stevens-Niles, Young and Malka, testing the waters before leaping to a brick-and-mortar investment was an added level of protection against that financial risk.
Malka sees her product as possessing an established customer base. Prior to the opening of the Sutton Place store, êShave products were carried at New York locations of the beauty chain Sephora.
“We thought, if we can simply get those previous customers to know that the retail site exists, that alone will pay the rent,” Malka said.