Unpacking retailers’ big bets on NYC real estate – Glossy

This week, we explore why retailers are going against the grain by making big investments in NYC retail. Plus, we offer a sneak peek at tonight’s grand finale of TikTok Fashion Month. 

After relocating its single NYC store to Madison Avenue in the spring of 2020, 9-year-old Fivestory is in expansion mode. It’s opening a second store in the Hamptons on April 3, which it will follow with a Palm Beach store in late fall. 

But that’s not to suggest that its Upper East Side location is booming. In fact, sales are down a good 80% from pre-pandemic numbers, and foot traffic is down 75%. 

Instead, it’s a big bet by new owner Karen Murray. As she sees it, New Yorkers are feeling a fashion void and eventually will give in to pent-up demand. Aside from the widespread, pandemic-driven shift to wearing nothing but sweatpants, curated stores like Barneys, Jeffrey, Opening Ceremony and Totokaolo have all closed since January 2020. Shoppers who are used to discovering new brands while browsing clothes by popular designers are lacking options.

“There’s maybe Bergdorf, but they’re not carrying designers that are only making a few pieces,” Murray said.

Murray, whose resume includes CEO of Sequential Brands Group and 10 years at VF Sportswear, decided to buy Fivestory from Fred Distenfeld and daughter Claire Olshan in December of 2019. The owners were looking to sell, plagued by merchandise returns of 30-40%, and wanted to concentrate on other ventures. (Olshan founded healthy snack and tableware brand Dada Daily in 2018.) Murray was excited to fuse her own experience with Olshan’s connections in women’s high fashion. The store’s community was also a draw, namely its 62,000 Instagram followers. 

The deal was finalized in February 2020, and the next month — two days before NYC’s lockdown order was announced — Murray signed the paperwork for Fivestory’s new store location on Madison Avenue. 

Murray chose the specific space, which formerly housed Lilly Pulitzer, due to its residential feel and special elements like a winding staircase. She also liked its proximity to art galleries and popular coffee shops, including Saint Ambroeus. The original store was on less-bustling 69th Street, also in the UES.

Murray signed a three-year lease with “plenty of options,” she said, noting that the landlord was eager to rent to a multi-brand retailer versus a single-brand company. Thanks to the duration of the move and the interior design process, as well as government restrictions and neighborhood looting, the store‘s doors remained closed until June. 

“By then, everyone was in the Hamptons for the summer,” said Murray. 

Rather than sit on the $1 million worth of inventory she had purchased for the store, Murray set up shop in the Hamptons via a two-week pop-up that drove $100,000 in sales. That got her wheels turning, in terms of following New Yorkers to locales with room to breathe.

Next week, via an Instagram post in the form of a personal letter, Murray will announce to Fivestory’s followers herself as the new owner and her plans for the stores. Prior, timing hadn’t been right, she said. “People had more important things to care about than a store’s new direction,” she said. Murray recently hired PR company SB Global Communications to further get the word out and is looking to hire a creative director to elevate the stores’ marketing. The company is currently doing no paid ads, but has signed onto an affiliate program. Murray is eying ad opportunities via consumer fashion publications like Harper’s Bazaar.

In addition to opening more stores, Murray will announce a move to size inclusivity, expanding from a 0-4 range up to size 14-16, and more casual wear. She’s picked up denim brands including Goldsign and Slvrlake. She’s also introducing home goods, which already make up 8-10% of sales, and vintage merchandise (the latter is from her personal collection, which she’s been building for the past 35 years). In the future, she plans to roll out collaborations, which will kick off with a sustainability focused Fivestory X Eco Fashion collection in the months ahead.

Currently, Murray is testing a consignment offering “so customers don’t have to go to The RealReal,” she said. And, to get around the high return rate of the store’s signature special occasion pieces, she plans to introduce a “pre-worn” section in the store. Customers can purchase a piece, wear it once, and return it for 75% of the cost for in-store credit. 

It’s Murray’s hope that the Madison Avenue store will become an events hub, once events are back in swing. Thus far, it’s hosted small events, including a couples’ night. A trunk show featuring items from Rianna + Nina is set for April 8. 

Prior to the pandemic, the store was doing $500,000 in sales per month and the e-commerce site was making about $125,000 per month. In September and October of 2020, sales started picking up, with each month driving “hundreds of thousands of dollars in sales.” But from around the election in November until February, Murray said the company fell short of $100,000 in total sales, as “everyone was back in the Hamptons or Palm Beach, or maybe Aspen.”

Plus neighboring stores were moving out. In the fourth quarter of 2020, strips of Madison Avenue recorded a ground-floor space availability rate of over 39%, according to a report from commercial real estate services firm Cushman & Wakefield.

“There was a time where I just said, ‘Oh my god, maybe my timing is just so bad that I can’t do it,” Murray said. 

Now the company is making $100,000 per month between the two channels, with online accounting for 50% of sales. Based on New Yorkers’ travel trends, Murray expects foot traffic to ramp up soon and remain high until June.

For those shopping online, Fivestory is offering services from curbside pickup to delivery to personally styled looks via the Seer platform. Brands that are not available in stores are available online via dropship. 

Murray said she hired most of the staff brought on by Olshan, though she filled a vacant fashion director position with Chelsea Sutrisno, formerly a buyer at Barneys and Net-a-Porter. 

“It’s important to have the big legacy brands for loyalty and recognition purposes,” Sutrisno said, regarding her buying strategy. “It allows us to be able to take more risks, and to buy into more of the newer brands where a sale is not guaranteed.”

In the transition, Murray didn’t hang on to brands with low sell-through but kept Rosie Assoulin, Proenza Schouler and Giambattista Valli, among others. Brands Fivestory has since brought on include Markarian, worn by First Lady Jill Biden during the presidential inauguration, and exclusives like shirting brand TWP. 

“People who don’t like department stores are looking for a more specialized boutique experience to shop in,” said Sutrisno. “The customer is there. Now we’re just trying to figure out who she is and what she needs from us.” 

Mikimoto makes a case for the Fifth Avenue flagship

On Tuesday, Japanese fine jewelry company Mikimoto opened the doors to its new NYC flagship store, located two doors down from its prior location, at 730 Fifth Avenue. New features of the two-story, 3,600-square-foot space include a “showcase wall” displaying one-of-a-kind pieces and VIP client rooms for private viewings. 

According to Georgina Coleman, vp of Mikiomoto’s retail division, opening a store on Fifth Avenue still equates to “putting a stake into the ground as a household brand with longevity.” 

Coleman stressed the company’s commitment to both the New York market and Fifth Avenue, despite a “difficult” 2020. She added that the prior store was a tourist destination for wealthy clientele, thanks to its placement on an “iconic” street and proximity to other luxury stores. 

Mikimoto was in its prior space for 30 years, but it was half the size of the new store. Both storefronts are located in the Crown Building, which also counts Bulgari and Ermenegildo Zegna as tenants. 

Limitations of shopping during the pandemic inspired the move and the store’s setup: In addition to the more spacious floorplan and private shopping rooms, it has a streamlined product assortment. As with the prior store, it offers curbside pick-up and shopping appointments.

“We’re taking the necessary precautions to accommodate our clients,” said Coleman. “The days of sifting through copious amounts of product in a crowded store are over, and consumers expect more from their in-store shopping experiences.”

Mikimoto is not alone: Fellow luxury jeweler Harry Winston announced in November that it renewed the 16-year lease of its 19,000-square-foot store at 718 Fifth Avenue. What’s more, with plans for expansion, it took over the adjacent 18,000-square-foot space that was formerly part of Henri Bendel. Meanwhile, Henri Bendel closed in 2018, which at the time, retail analyst Richie Siegal owed to its overexpansion.

The strip is clearly losing cachet as e-commerce catches on and brands reconsider binding retail investments. According to Cushman & Wakefield, asking annual rent for spaces on Lower Fifth Avenue (42nd to 49th Streets) decreased 19.5% year-over-year in the fourth quarter of 2020, to $669 per square foot. For ground-floor space on Upper Fifth Avenue (49th to 60th), they declined 3.7% to $2,575 per square foot. 

Pointing to the company’s surges of in-store sales during 2020’s various reopening phases, Coleman said she’s confident Mikimoto’s customers want to try-on and experience products before purchasing them. “The balance of retail and e-tail is what creates a truly holistic consumer experience,” she said.

She declined to share lease terms for the new store, but some international retailers have shared that their landlords are allowing them to trade-up for equal rent, as an incentive to remain open. 

As for whether Mikimoto will further invest in physical retail this year, Coleman simply shared, “We’re always looking for growth opportunities.” 

The new store houses exclusives, like its Mikimoto Loves NY collection, and luxury merchandise outside of the beauty category, like picture frames and scarves. The company’s other U.S. stores are located in Beverly Hills, Orange County and Las Vegas. 

On Our Radar: Tonight’s TikTok Fashion Month finale

On Thursday evening, the second TikTok Fashion Month will close with TikTok Runway Labyrinth, a live, shoppable fashion show. Along with fashions by creator Joe Ando and designer Victor Glemauld, among others, it will feature well-known models including WNBA player Kahleah Copper. TikTok creator Tabitha Sanchez will style the show. 

“Our goals are to give the TikTok community a front-row seat to a live, engaging experience that brings together fashion, music and culture while we’re still at home,” said CeCe Vu, head of fashion and beauty partnerships at TikTok. “And we want to put a spotlight on diverse designers, models and creators.” 

Below, Vu answers five questions on TikTok’s fashion community, its upcoming runway show and the future of its Fashion Month.

How will this season’s finale fashion show differ from the first, in October?
We’re placing an even greater emphasis on diversity and our community by elevating diverse creators, artists, models and designers. Representation matters, and this is a unique moment to spotlight diversity, body positivity and female athletes in fashion that we hope will help promote a more inclusive mindset within the industry. [In October] we closed out our first-ever Fashion Month with the TikTok Runway Odyssey. More than 815,000 viewers tuned in.

What is the overlap of fashion fans and TikTok users?
The ecosystem of fashion content on TikTok is massive and diverse, as evidenced by [popular] hashtags: #fashion has 60 billion views, #tiktokfashion has 13.5 billion, #streetfashion has 5 billion, and #TikTokFashionMonth has 5 billion views. TikTok makes fashion accessible for everyone and shifts the perception of what luxury fashion is supposed to look like or who it should be for. Fashion spans multiple communities, from DIY creators to designers to fashion students. And [content ranges from] creators showing off their front row looks to dressing like a Gucci model. 

What typically resonates, in terms of fashion content?
Authenticity and creativity are everything on TikTok, and brands and creators that show up as their true selves have grown captive, loyal audiences on the platform. Fashion content isn’t highly airbrushed or curated, but instead leans into relevant trends and invites community participation. 

What can you tell me about the success of this TikTok Fashion Month so far?
​We’ve seen strong viewership and engagement from our weekly livestreams. This year, we’ve put a greater emphasis on live, interactive programming between co-hosts including Coco Rocha and Native American creator Lenise Omeasoo, and Tan France and Hasan Minhaj. Leveraging our Q&A feature has enabled our community to interact with the co-hosts in real-time, and encouraged more improvised and genuine discussions across a range of topics. 

What will you change next season?
As so many others are, we’re trying to imagine what Fashion Month should look like in a post-Covid world. When the world returns to in-person shows and events, we’d love to create a mix of digital and physical moments that the TikTok community can experience on and off the platform.

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