The recovery of physical retail is also bringing new levels of innovation and experimentation to the in-store experience as the online and physical worlds meet and meld in creative ways.
That’s always been the M.O. of Neighborhood Goods, whose updated take on the department store model debuted in 2018 and was in growth mode when the pandemic hit, triggering some brand introspection, and now finds itself growing again and morphing in a changeable climate.
“For us, same-store retail sales grew 50% year over year in 2022. Some of that’s just coming out of the pandemic, but we generally saw strong customer behavior. We think this year there can be more than that,” Co-founder and CEO Matt Alexander told PYMNTS.
He chalks up a strong 2022 to the wider return to physical retail and is expanding more aggressively again, adding two California locations — one in Newport Beach — joining the existing stores in Manhattan’s Meat Packing district, and one each in Austin and Plano, Texas.
A big change is that as direct-to-consumer (D2C) action has slackened online, those brands, which were always present in Neighborhood Goods, are now turning more to the inventive department store as a core distribution channel going forward.
As D2C brands seek new channels like online marketplaces and wholesale arrangements, “We represent a fairly safe option,” he said. “We have a small number of stores. We have a very particular, controlled approach. It represents a lot of opportunity for them to dip their toe in the water and get a sense of what that may look like for them in a longer-term model. We work with a lot more of them simultaneously now than we ever have before.
“We started with this premise of helping direct consumer, digitally native brands get into physical retail,” Alexander said. While the original expectation was a small number of brands at any given time in stores for three- to six-month stays, he said the average duration of a partnership is now closer to 12 months.
Today, that means instead of 10 to 15 brands in a 14,000-square-foot space, “those spaces now typically have 100 to 150 brands at any given time,” he said. “We’ve ended up with a lot more density in our stores and longer-term relationships than we would’ve otherwise expected.”
That covers a constellation of D2C brands like Rothy’s, Buck Mason, Hims, and now today newer arrivals from Aesop to Rivian. “It’s come back to this sort of moment we were in in 2019 where it’s very much this focus on the artistry and experience of what a multi-brand retail experience can look like. I think that’s where a lot of people are spending time right now, whether it’s traditional department stores or otherwise.”
Using tried-and-true concepts like restaurants within department stores — Neighborhood Goods operates eateries Prim and Proper in its Plano store, and Tiny Feast in its NYC site — and that touch-and-feel experience is very much on the rise again as consumers flock to stores.
As for its in-store innovations, after rebuilding its custom website on top of Shopify, Alexander brought in Shopify’s POS Go handheld unit last year and said, “For the consumer, our teams can go all over the stores and help in all sorts of different ways [with a mobile POS] that can slip into their pocket. They get push notifications on the device when buy online, pickup in-store orders come through, and it integrates directly with our loyalty program.”
In 2020 Neighborhood Goods switched off its advanced mobile app that supported in-store geolocation and self-checkout as brand density and other factors made it too complex, but he said the app is “sitting there” and will be switched back on when the moment is right.
Using QR codes consumers can scan for more product information, Neighborhoods Goods is sticking with the in-store events and experiences that made its experiential reputation.
“We do a lot with digital signage and storytelling, and we host a huge amount of events, but our focus has always been how do we offer something that feels quite traditional in many respects, and gives people a simple experience? Now there’s this opportunity, I think, for us to start getting a little bit more playful in the store, particularly as we think about customer capture and some other opportunities. We’ll see. Probably more to come on that front.”
While online sales haven’t been a prime focus, he added, “I would love for digital to grow for us. We have a lot of initiatives in the pipeline this year that will drive that. BOPIS I think will always just continue to quietly grow. A lot of that comes down to what we’re featuring in the stores and where we’re open. But the big focus remains the stores.”
In terms of new store openings, this year will see two or three new locations in 2023, “and possibly one more than that,” he said. “Three is the target, and maybe four depending on the situation. From there we hope to maintain a similar rhythm, maybe two to three stores next year, maybe more than that. We’ll see. We’re just sort of getting back into it and trying to move our culture from one of focusing on these three stores and our restaurants and website and all these other pieces to focusing more on new markets and the challenges that come with that.”
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