I often imagine how fun it would be to open a store in New York City. Except for the lease negotiations part. And the giant security deposit part. And the storefront renovation and permitting part. And the whole to-do with hiring and training salespeople. Good lord.
But when Matt Scanlan, chief executive of New York City-based women’s clothing company Something Navy opened a Manhattan store earlier this month, he didn’t mess with any of those daunting tasks. “I just don’t know how to do that!” he admits.
Instead, he partnered with Leap, a New York-based company that provides just about everything needed to open and operate a store. You provide the merchandise, Leap pretty much does the rest.
It was Leap that located and signed the lease on Something Navy’s storefront at the corner of Madison Avenue and East 80th Street, renovated the space, designed the layout and installed the fixtures. The checkout system is provided by Leap, along with the data-analytics system. Shoppers have no idea that the stores’s salespeople are all hired, trained and employed by Leap.
“I’m very practical and pragmatic, and this is a very practical and pragmatic way of going about retail,” says Mr. Scanlan.
Something Navy is just one of a growing number of local clothing brands working with Leap to open storefronts in New York City. And it isn’t just for the company’s bricks-and-mortar expertise. It costs a lot to open even a small store in Manhattan—$150,000 minimum for a reasonably well-trafficked location—and Leap bears most of the upfront costs.
Andrew Codispoti, co-CEO of self-described “premium essentials company” Goodlife Clothing—its core line features $60 T-shirts—says he spent a year considering storefronts all over Manhattan and realized opening a shop would cost a lot more than expected: “It’s a daunting experience.”
Reluctant to tie up the fast-growing company’s capital in security deposits and renovation projects, he turned to Leap. Goodlife has since opened two Manhattan stores largely on Leap’s dime, and is looking to launch additional locations.
I think it’s great, given the struggles of storefront retail in general and the city’s high retail vacancy rate, that someone is making it easier to open and operate a shop in New York.
The service comes at a price, of course. Leap collects all the revenue every month from its partners’ store sales. It withholds an amount equal to the location’s operating expenses, including the cost of insurance, rent and staffing, plus a surcharge of about 10%. It extracts an additional fee equal to 5-20% of the store’s sales.
Leap Co-founder and Co-CEO Amish Tolia says partners’ operating expenses are typically lower than they’d pay if operating solo because of the economies of scale realized when many brands run on the same technology platform, while sharing a common pool of management executives and salespeople.
Partners also benefit from Leap’s bricks-and-mortar expertise, he says. Every store, for example, is laid out to include several “hot zones,” including a “landing zone” at the entrance to create the first impression and a “power wall” displaying fast-selling core merchandise. “We know how to create the optimal customer journey to drive performance,” Mr. Tolia says.
So what does a Leap store look like?
I visited several last week, and each brand definitely has its own flavor. The Something Navy stores were whimsical and feminine, for example, festooned with fake flowers and pastel furnishings. Goodlife had a straightforward, contemporary vibe, with black-tufted benches, neutral colors and nubby rugs.
The salespeople were uniformly helpful and enthusiastic about the brand they were selling. One Something Navy salesperson, for example, went on about how he accessorized the store’s pink-ruffled jacket and shorts set when he last wore it. When I asked about a nearby place to get a salad, he whipped out his phone to locate a lunch spot.
One complaint: These shops were all pleasant enough, but in the bland and perfectly calculated manner of stores at an upscale mall. There was nothing mom-and-pop about them.
“I appreciate that comment,” said Mr. Tolia when I shared my gripe. My impression was largely due, he said, to the fact that Leap typically partners with “digital native” brands that launched online. They’re all about sophisticated marketing and product design—it isn’t Uncle Harry looking to open a used bike shop.
Leap isn’t the only New York company offering an easier way for online brands to establish a physical presence. Most notably, multistory SHOWFIELDS on Bond Street offers food, events and a revolving cast of digital-native brands operating out of mini stores staffed by SHOWFIELDS employees.
The SHOWFIELDS model may prove more popular, says Brandon Singer, CEO and co-founder of Retail by MONA, a retail real-estate advisory firm. When it comes to customer acquisition—a key consideration for digital-native brands—he believes SHOWFIELDS, which he represents, is seen as offering a more flexible activation time and better return on investment.
I’ve been to SHOWFIELDS and it’s a lot of fun. But the newfangled mall does nothing to enliven the city’s retail strips.
The Leap model, meanwhile, could create specialty shopping districts throughout New York City, says Adam Henick, co-founder of Current Real Estate Advisors, a commercial brokerage that works with Leap. Entire blocks could be “curated” with similar, complimentary tenants rather than individual landlords renting to random retailers.
“Sometimes they might take a brand that’s good on paper and pays the rent, but it isn’t a decision that is best for the neighborhood,” Mr. Henick says of property owners.
I’m not sure I want our neighborhood retail strips curated by experts. But anything is better than failing stores and vacancies. And Mr. Tolia says that while Leap is currently focusing on e-commerce brands, it someday could work with a wider range of retailers, perhaps even mom-and-pops: “That’s act two.”