Risky Business: Independents Open Shops Despite COVID-19
It takes guts to open a fashion store, especially during a pandemic.
Yet some that still have the entrepreneurial spirit, the passion for retail, and a lot of that “light-at-the-end-of-the-tunnel” optimism have forged ahead. In some cases they’re opportunistically signing leases with terms that are less onerous compared to a year or two ago; in others, they’re trying to make the most out of commitments made pre-pandemic, only to find themselves stuck opening stores in suboptimal conditions.
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“I loved the retail landscape around New York City, pre-COVID-19. But with the closing of Jeffrey, Barneys [New York] and others, not only did we see an opening here, we didn’t think the customer really fled New York for good,” said Jesse Dong, cofounder of Two Minds, a 3,000-square-foot luxury fashion store that opened Wednesday at 34 Gansevoort Street in Manhattan’s Meatpacking neighborhood, on the site of a former Rebecca Taylor store.
Dong was an all-around buyer for men’s and women’s merchandise for eight years at Jeffrey until the famous designer emporium on West 14th Street closed, leaving him contemplating what was next in his career. Along with Robert Rosenthal, who owns and operates retail concepts in the Midwest including Xhibition and Next, the two started searching for sites in Manhattan for their retail concept.
If Jeffrey, a store with a wide reputation and following, failed last year, what would be the chances of a smaller, untested luxury concept succeeding with the pandemic persisting?
“It is definitely risky,” Dong acknowledged. “There were many times we thought to ourselves, ‘are we crazy doing this in the middle of a pandemic,’ looking at spaces when it seems everyone was fleeing to south Florida or the Hamptons? But we believe in the designer customer, the fashion customer, and we believe that we can provide a store in New York with a positioning that brings freshness and newness to that customer.”
It’s less risky for big, long-standing retailers with multiple locations to open stores in the current economic climate, given their clout with landlords, their rapidly growing digital businesses that support brick-and-mortar operations and compensate for the loss of in-store customers, and the familiarity shoppers already have with them. Burlington Stores, Ulta Beauty, Urban Outfitters, Sephora, Athleta, Aerie, TJX Cos., Old Navy and Dollar General are among the retailers opening significant numbers of stores this year. They’re taking advantage of mall vacancies, landlords loosening up on rent and lease terms, and forecasts for the second half of 2021 that predict higher levels of shopper traffic as more and more people get COVID-19 vaccinated and are less afraid to go out, restrictions on crowd capacities get lifted, and tourism picks up. Malls already are seeing increased foot traffic as a result of all of those factors.
Yet the owners of Two Minds didn’t really get much of a break from their landlord when negotiating their five-year lease. “We thought there would be a little more concessions. Gansevoort landlords seemed to stick to their guns, but we definitely were able to negotiate a bit,” said Dong. “We are confident that with our space and with the overhead we have, we can be successful.”
Pinko, the privately owned Italian fashion brand with about 260 freestanding stores and 1,500 shops-in-shop inside department stores around the world, on Sunday opened a 5,000-square-foot shop at 143 Spring Street and the corner of Wooster Street, in Manhattan’s SoHo district. It’s a playful, airy, three-story environment with a huge glass window for a full view into the store, exposed brick walls, open sales floors, lilac and fuchsia carpets, and an inflated purple man known as Peter Dance.
“We used to have a store on West Broadway in SoHo, but then the pandemic hit and we had to close it down,” said Emanuele Bianchi, Pinko’s chief marketing officer.
The brand also closed its Madison Avenue store, and suffered dearly last year, with a 23 percent drop in sales. According to the company, it was its first negative performance in 30 years. In 2019 Pinko generated sales of 220 million euros. “Then we obviously took a hit in 2020, but we are now aiming at 240 million euros for 2021, and we are confident we can achieve it,” said Bianchi.
The Carini Group, a commercial and residential real estate brokerage, represented Pinko on the real estate deal. “We have negotiated lease terms for Pinko that are at a very significant discount from the overtenant’s lease, indicating continuing real estate savings opportunities for retailers planning expansions in New York City and in other major U.S. markets,” said Alex Carini, president and founder of the Carini Group. He said the yearlong agreement (a sublease from Bed Bath & Beyond) calls for $30,000 in monthly rent or 15 percent of sales value, whichever is greater.
“For us, coming from a small town in Italy called Fidenza, outside Parma, it was like a dream come true to be able to move into an historical stone building in SoHo,” dating back to 1818, said Bianchi. “The motivation, in one word, was ‘opportunity.’ We decided to bet on this fabulous location. It will be a test run in the U.S. market. If it works, we will extend the network to the states.
“One of the upsides has definitely been the chance to negotiate very favorable lease terms that would have been unthinkable in the past, allowing much facilitated operating costs,” Bianchi said.
“Also, the rules that used to work don’t matter anymore. There are great [real estate] deals in SoHo and people are reshaping the shopping experience. Two years ago, we would have hired the biggest architect and completely redone the location. But we signed on for 10 months and if things work out it will be permanent. We have made it eye-catching and impactful but every four months we can change the feeling. In SoHo, we will either have a temporary flagship or a permanent flagship. What’s really cool is that it’s a very old landmark building and there is one side completely renewed with a giant window.”
With the building’s architecture, “There’s a clash between old and new,” said Bianchi. With Pinko’s brand identity, there’s also a clash. “It’s a very feminine brand mixed in with references to men’s. We’re always attracted to opposites. Pinko offers trendy products that ride the code of luxury at a reasonable price, from everyday sophisticated looks to the boldest outfits and recognizable statement pieces.”
Charles Krypell Fine Jewelry, after 45 years designing and manufacturing jewelry, opened its first store Dec. 1 at 25 Northern Boulevard in Greenvale, N.Y., on Long Island.
“This has been a dream of my father’s for quite some time,” said Evan Krypell, one of Charles’ sons and the company’s director of retail operations. “My father is extraordinarily passionate about designing and creating fine jewelry. His biggest passion is with the final customer, the end user. He felt that without a store, you lose the magic of dealing with the end user of the product. Being in wholesale for so many years, you don’t get much interaction with the final customer. We built our store to create a one-on-one purchasing experience.”
The 5,000-square-foot store, in a building owned by the Krypell family, took three years to complete and had been well into its construction when the pandemic hit, delaying the opening from September to December last year.
“Just the interior fit out of the store cost over $3 million,” said Evan. “We really wanted to build a store that was extraordinary, that feels almost like a residential environment. It’s a comfortable place. Not your traditional setting.”
As the pandemic spread and construction on the store continued, there were mounting concerns. “We didn’t know where the world was going,” said Krypell. “We totally thought this was a risk. My father looked at us and said, ‘We’ve reached the point of no return.’ But we never wavered in wanting to continue. We feel very strongly that there are few industries that will always need an in-person experience, and fine jewelry is one of them.”
A new air filtration system was installed, everyone has been wearing masks, and each time someone tries on a piece of jewelry, it’s sanitized, said Krypell. Also on Mondays, with a reservation, clients can get the run of the store by themselves, for exclusive service.
“December was strong,” said Krypell, discussing the state of the business. “That’s really the season for jewelry.”
When the open-for-business sign went up by the entrance, “We had clients coming in without advertising and returning multiple times to the store. We are a huge word-of-mouth business. January was difficult, but every single month since January has gotten better and better, with the vaccinations and more people becoming aware of the store. People are wanting to buy something with a little bit of permanence. Jewelry is one of the only items to last a lifetime.”
Krypell said the family-run business specializes in “classic jewelry with a twist. All of our products have a lifetime guarantee. We use the highest-quality goods.” He said 80 percent of the jewelry is made by the Krypell company, with a lot of customizing. “If someone has an illustration on a napkin, bring it in and we’ll design it.”
“We really are seeing a demand for classic diamond jewelry and bridal with engagement rings, as well as custom-designed lockets, which had previously gone out of style, but became popular again as people wanted to honor loved ones lost to the pandemic.” At the same time, the pandemic has created somewhat of a wedding boom, Krypell said. “Many couples decided to cohabitate and were working at home, and either decided they love each other and want to get married, or they broke up.”
In mid-March, designer Adam Lippes opened a “flagship” in Brookfield Place, the mixed-use complex for retail, dining, offices and events, situated by the Hudson River in lower Manhattan. Lippes has not had a storefront for roughly a decade, when he designed in a more contemporary aesthetic compared to his current, more classic approach.
“There was a lot of deliberation and conversations about the calculated risks,” Jeannie Yoo, the president of Adam Lippes, told WWD, discussing the decision to open a store in Manhattan. “It was tough to see past the pandemic and our immediate business needs. And a lot of vendors and brands have been sheepish on signing new leases in the height of the pandemic. For us, however, we saw a great opportunity to lean into,” with the space that became available at Brookfield.
“Ultimately, we came to the conclusion that things are going to recover,” said Yoo. “The feeling is optimism. When customers decide they are ready to shop again, we wanted to be there for them.”
Yoo declined to divulge any details about the lease at Brookfield, though she did say, “It was not only about the financials. It was about the marketing support, the Brookfield name. They have a lot of experienced marketing and PR professionals.
“If you walk into the store, it feels very much like Adam’s home in Brooklyn,” said Yoo. She said the fitting rooms have silk faille, the shelves and rails are brass, and there are antiques, beautiful marble dog bowls, chandeliers and candles. “It’s the world of Adam Lippes, in a very luxurious and authentic way. It’s all the things Adam loves personally.”
Gene Spiegelman, vice chairman and principle of Ripko Real Estate, negotiated the deal for the Allure store opening on Lafayette Street. It will be Allure Magazine’s first store, selling beauty products, and it’s scheduled to open in the fall. The store is being opened by Allure’s publisher, Condé Nast, in partnership with Stour Group.
“We need these green shoots of new brands whether they get on Bleecker Street, in the Meatpacking District, or on Fifth Avenue,” said Spiegelman. “It’s those new types of deals that will pull us out of this,” he said, referring to the pandemic-influenced downtown in retail leasing.
Spiegelman said that over the last year, Ripko has been in discussions with six to nine direct-to-consumer brands looking to have a brick-and-mortar location, but not ready to commit to traditional 10-year leases. More likely, they would go for three-to-five year leases with options to get out of the lease on a six-month notice, according to Spiegelman.“Some of these brands were showcased in Barneys or Saks, or hoping to be in Nordstrom,” he said.
As for Two Minds, the store was designed in collaboration with the ICD Workshop architectural and interior design firm. The idea was to create a very neutral setting so the merchandise would stand out not be overshadowed by the decor. There are exposed brick walls that are typical of the neighborhood, furniture that sets a residential tone, and verde marble stone countertops, reflecting the olive “brand color” of Two Minds.
The store’s lineup of designers ranges from established labels such as The Row, Tom Ford, Givenchy, Alexander McQueen, Dries Van Noten and Jacquemus to emerging labels such as Thebe Magugu from South Africa and Amina Muaddi from Italy. Categories include women’s ready-to-wear, shoes and handbags; and men’s rtw, shoes and accessories.
“This is a different concept from Jeffrey,” said Dong. “It’s my point of view. I tend to believe I have a little bit of a younger sensibility. We want to be able to service everyone. We want to serve the Upper East Side woman and young fashion students at Parsons or FIT. We believe the store will become a community place, where people can come, look and learn, and where we take the pressure off only thinking about making the sale. Some people might not have the money to purchase some of these designer brands, but we welcome them to still come in and feel the fabrics, talk to the staff. With a young student, we want to communicate with them and really explain to them who we are and what we are doing. The pressure of buying is not what we are about. It will be an educational space, helping young designers to have talks.”
The owners hope that emerging designers use the store “as a platform to create exposure about their collections and the cultural references in their designs.”
“We look to have formalized talks from designers, storied designers,” said Dong, which should help create some buzz around the store.
Two Minds also plans to use Gansevoort Plaza outside the store for events, possibly this summer when there’s less risk of COVID-19 and the streets get busier. “That was one of main incentives to signing the lease,” said Dong. “We birthed Two Minds in a positive light believing that tourists would come back and international travel would return. We’re being super positive about the business climate of New York in the future.”
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