Leap in Chicago, IL with Rebecca Fitts
Guest: Rebecca Fitts
Topics: Leap, physical retail
Transcript:
Chris Ressa 0:01
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris ReSSA. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management.
Welcome to retail retold everyone. I am excited today. Today on the show, we have Rebecca Fitz Rebecca has been in the industry for about a decade. She’s the director of real estate of LEAP, which is an interesting, new concept. I think you’re all going to really enjoy hearing about what Rebecca has been doing at leap. And so, Rebecca, welcome to the show.
Rebecca Fitts 0:47
Thanks so much for having me excited to be here.
Ressa 0:50
Rebecca, what why don’t you tell us a little bit about who you are and who leap is and what you do?
Fitts 0:56
Sure. So for me, I have been attracted to retail forever and have had a couple of different depths from the marketing side to doing my own pop ups to working for some of the big developers to jumping the shark and working for Warby Parker’s real estate team. Now I’m currently the director of real estate for leap, which is
really great concept we basically operate stores, we think of ourselves as the Shopify of physical retail. So brands can go on to our technology platform, put in some information. And then bleep essentially underwrites the brand, so takes a lot of the risk out of doing stores, for retailers. So to break it down, we take the lease on the space. So the brand is not signing out a long term lease or license agreement. We do all the capex, we have an amazing program that’s interchangeable for any category. And then we do all the retail operations, which includes the human side. So if you have a store that’s powered by leap, it’s a leap employee, but certainly totally knows your brand inside and out. And that also includes the technology portion of it. And then the brand and leap going together on retail marketing. We roll that up into a four wall p&l, and this allows brands to focus on being a brand and not having to hire a Director of real estate or director of operations and, and so on and so forth. And there are a couple of pieces of great kind of secret sauce within the the LEAP platform. You know, one is that you get a brand new creative store, which means if you are public rec you get a public rec store, which happens to be a very cool direct to consumer brand out of Chicago. The other parts of it are a little behind the scenes, but but we clustered our stores together. So that that drives down some of the costs or drives down costs for retail operations, and also real estate.
Ressa 3:13
Got it. Um, so the way it works is you go and sign a lease with the landlord. And then you guys go and you’re like, you’re not only the outsource real estate from a human capital, you’re literally the outsourced real estate your, your a little bit what you know, call and you can correct me if I’m wrong we work does where they lease it from the landlord. And then they they sublease it out to other you know, Office tenants, you’re obviously doing more, which is you’re leasing it, but you’re also providing human capital marketing and helping them really do everything as it relates to operating a store and as you call it, letting them be a brand. And I guess the way you guys are making money is the brand is paying you some sort of fee for this.
Fitts 4:12
Correct. So we refer to it as kind of cost plus so, you know, we’re clearly not taking on all of the costs. And then, you know, charging a fee for what we you know, actually do. Got it.
Ressa 4:27
And are you signing long term leases on these locations?
Fitts 4:35
Always a great question, depending on who you are on what a long term lease actually is. So, in the current environment, we’re doing some shorter term leases. But we also have within the portfolio, you know, three five year leases as well. And I think you know, as we build our way out of the pandemic, we’ll certainly be doing longer. terms because I think, you know, brands are going to be, you know, getting more and more comfortable with the retail environment.
Ressa 5:06
And how,
how challenging is it to get these brands interested in wanting to taste physical retail? is how much of it is you convincing brands that they should or them knocking on your door?
Fitts 5:26
I mean, the great thing is there’s there’s both, which is great. And the pandemic has certainly helped not only prove the LEAP model, but I think, you know, not necessarily have brands, you know, pounding down our door, but saying, Hey, should I really be operating my own store, and then we certainly do have a BD team, where we’re going out and talking to folks, I think there has been an interesting kind of fulcrum point within the, and you and I were talking off air earlier about direct to consumer brands and modern retailers, which is, you know, Warby kicked it off, and, you know, think was like, we don’t necessarily need to do physical retail, and then, you know, almost 200 stores later, they’re doing physical retail, I think Everlane founders did something very similar. And now, you know, they’re doing stores. So there’s not a ton of convincing, I think the proof is in the pudding in some ways, and that, you know, how you acquire customers is an expensive venture, if you are a brand that can continue to do it through social media and other ways and exist online, kudos, but a lot of brands are finding, again, that there’s this fulcrum point where the world is going to want to interact with you touch, feel, and buy your product in real life.
Ressa 6:52
I agree with that premise. I also agree with kind of what you were alluding to earlier, which is, you know, customer acquisition cost, and it for a lot of brands of being unprofitable to be online only. And I think that’s, you know, they say customer acquisition cost is the new Brent. And I think I think that, you know, in the CEO of Everlane, he was on Jim Cramer and and Jim Cramer and I’m paraphrasing, but he said, you know, what, online only company is really profitable. And he says, basically, none of them that’s the dirty little secret. And so I think it’s interesting what you’re doing, and I suspect you’re gonna have, you know, some interesting demand from, you know, brands, are you, you know, when we see you mentioned, the other thing you mentioned, was DTC. And I told you before, it’s such a funny word to me, because these DTC are direct to consumer brands, you know, we think of the Warby is in the untuck. It’s in the bonobo bows of the world. But I also think of like, there was DTC brands to stay with D to C in some regard, you know, back in the day and still are like, Nike, they have their own stores and their own website, and Apple. And Ralph Lauren has their own stores. And you can buy it at Macy’s as well. But you can buy it at TJ Maxx and all those but they’re their own stores. And they’re doing direct to consumer as well.
And so
is it all up and coming like public rec cool lifestyle brands? Is it? Is it are you guys working with any legacy brands.
Fitts 8:34
So we are not working with any legacy brands yet. But there’s this nice, happy medium that we’re delighted with. And I think, again, really, you know, how we’ve proven the model, again, you’re one of a startup is kind of proved the model. Year two is about growth. Even in a pandemic. What was interesting is some, I’ll refer to them not as legacy retailers, but some modern retailers came to us and said, Hey, maybe we shouldn’t be running our own stores, or it would make our lives a lot easier. And our balance sheets maybe look a lot better. If we do this, and then you know, the other place where I think we’re getting a lot of traction, and as super exciting. Is there brands out there that might already have, you know, more than a handful of corporate stores want to continue to grow their fleet of stores, and we allow them to accelerate by doing some of their stores and they still hold on to some of theirs in areas that we are either going into or we’re already into that they don’t care to operate their own stores. And so we give them you know, agility to open, which I didn’t say in the beginning, but one of the things about the platform and the whole model is that if you go on the platform as a brand and you put in your information, we can you know get a store open in 30 days, which is kind of incredible. When you think about how labor intensive retail can be, and also big part of the model that we didn’t talk about is that since we take the least if you take a two year commitment with us as a brand, and we have a five year commitment on the lease, you know, then we have another brand on the platform that would go into that space, that we’re almost operating. I don’t want to say like a mall, but we’re a box of boxes in many ways.
Ressa 10:29
The Shopify of physical as you called it, there,
Fitts 10:33
I’m waiting for Shopify to come and talk to me about that. But I’m gonna use it until then.
Ressa 10:40
And how did this all get started? How did leap get started?
Fitts 10:45
So we have two amazing founders who had a couple of companies together. And I think they just, you know, they had an epiphany about the retail landscape and what was going on. And I think we’re really kind of looking around at some of these direct to consumer brands, in a good and a bad way. I mean, Warby is certainly an amazing success story. But there are definitely brands. And I think it’s kind of an interesting story from the real estate side, you know, that flounder, and that, you know, they’re capable of getting the space and they’re capable of doing a couple of the other things. But there is so much time and energy that goes into running a full blown storm running it well. And if you’re gonna go and spend the time money energy to do a physical store, it’s also about building this relationship with your customer. And they just weren’t able to do all of it. And I think it was a real bird’s eye view of, hey, we can make this happen for brands, we have a great idea for the model and how it will work and what the pricing will be and why it will, you know, add value to the retail environment and to retail brands. And, and it came alive the first year, we were in four different markets. 12 different stores working with nine different brands.
Ressa 12:08
Wow. So and so is that those the numbers today 12 to 12, stores, nine brands.
Fitts 12:15
Right around there, and I should have crunched the numbers before we came on. But we’re still holding it 12 stores and we’re amazingly adding stores in the fourth quarter.
Ressa 12:24
Congrats. Yeah. And that’s awesome. So
Fitts 12:29
and yeah, and got a store open. You know, in the middle of pandemic, it happened to be something Navy, which is, you know, an Instagram sensation kind of brand. So people were more than willing to come out and wait in line and and shop.
Ressa 12:44
Well, I want to get, you know, to something a little more that I think the audience just given the job market and what’s going on out there right now, how did you find Leaper leap find you?
Fitts 12:59
It’s a great question. And by the way, I’ve loved we’re touching on so many things. So I had just left the developer side of the business and was looking around for kind of what I wanted to do next. And I was doing some consulting. And one of my, you know, real estate really is quite a nice community. I know, we don’t always have the best reputation. But one of my developer friends said, hey, you know, I’m talking to this company called Leap, you know, you should probably, you know, chat with them, I think you might be a great fit. And so I met with the founders, you know, a year out, and I don’t think they were quite ready for a director of real estate. And I don’t know if I was quite ready to go with them. So I went and spent some time at Warby Parker. And then, you know, a year out after they had proven the model and you know, kind of opened up this first round of stores, they were ready. And it was just a delight, because we’d already had kind of that past relationship. And also that it came to me not through a job listing, which just, you know, not to get too preachy, but if you can have that happen in your career, I think those are probably two of the best sign. Awesome.
Ressa 14:18
Well, congrats to you. Thank you. Do you guys have a vision of how big this can get or how big you want it to get?
Fitts 14:27
We do. And, you know, we don’t necessarily I don’t know if it’s pen to paper, but you know, particularly for the real estate team. I mean, it could be 1000s of spaces that we have. And you know, tons of dozens of brands, there’s really not, you know, a limit as we keep entering markets and brands keep on coming onto the platform.
Ressa 14:50
So I want to get into the story. We’re going to talk about a story in a second but before we do that, I want to talk about the types of real estate and how you’re looking at real estate. And I’ve got a, I have this thing about DTC that. I think some brands could be missing. And so I’m curious. So how are you thinking of real estate? What types of real estate are you go into? And in? Sure,
Fitts 15:19
so let’s start thinking, you know, not really controversial mall is not a four letter word. So we just talked a little bit about some of the DTC history where people were like now and by the way, even when I got to Warby, which was not so long ago, you know, I want to say they were nine years into the business, and there weren’t a ton of mall deals really being put up in real estate committee. And I think then, you know, folks found and when I say folks founders, see the numbers of what shopping center, or mall brands can put up, and they realized that there’s a lot of value there. So we are looking at real estate, probably like most every other brand out there. I think there are a couple of tweaks, though, yes, I’m looking at major retail corridors, I’m looking at top level centers, I’m obviously have an eye to some outdoor centers. But if you are an enclosed mall, and you have the nerve system, I’m all for it. And, you know, then we’re looking, I think more on the side of it’s how we operate. So I think there are ways that we can partner with landlords. And that’s really, I think, where we might be a little different than your normal tenant, where we’re really looking to partner with landlords. And that has really been a big shift. And I think it started a long time ago, with omni channel and the market falling out in 2008. And I don’t want to say it’s been accelerated, it’s still an evolution. But I think now tenants and landlords realize that we need each other even more. And so we’re really looking to play with landlords who are open to some variable deal structures. And it’s not about hey, we’re winning, because we’re not paying rent, we’re paying a percentage of sales. It’s about really opening up our books to them and being transparent about that. We’re going to show you what this brand and what we can afford. And then we’re going to decide together if we belong in this thought, and we’re here at this day. So I think that the mindset there is a little different. And then the properties we’re looking at, yeah, I want you know, Maine and Maine and Scottsdale, Fashion Square and everywhere else.
Ressa 17:36
Do you say you want outdoor centers, you want enclosed centers, you want high street, retail, anything that’s a preference from product.
And everything,
Fitts 17:46
we’re really open to everything, I think there will be, you know, some challenges that we will need to get over in categories that we’re not necessarily and and I think we’re really open to it and actually excited to do it. So, you know, comb is, you know, off off the charts. I think beauty definitely has some challenges. But, you know, it’s something that we’re based on the model, we’re just so agile and able to adapt and able to pivot quickly. That, you know, we can handle, hey, it’s a pandemic and nobody wants to try on makeup. You know, how do you handle that? And I think kind of the best example is, you know, we have the pandemic, just like everybody else on March 13, we closed all our stores, we furloughed, all our employees, you know, the difference is, is that, you know, we went out and negotiated all the lease amendments and came back to the brands. Without them, they were thinking about lots of other problems they had to work through, and then how they would open up and come back into retail. So, you know, all of those things, I think, lend themselves to a really flexible environment where we can take on lots of different things.
Ressa 19:04
And, sure, so, staying on this topic, one of the things and I said I think there’s opportunity for DTC brands that when they’re looking, you know, you mentioned the word major retail corridors. I think there’s a lot of places in the country that are dynamic real estate, but not markets that some brands think about. will use extreme you told me you were from Plattsburgh New York.
Fitts 19:32
Well, he’s gone way extreme here. I don’t I’m not sure if there’s any retailer. It’s like, I gotta be in Plattsburgh New York.
Ressa 19:38
So there’s that there is but I have looked at your
Fitts 19:42
portfolio by the way, so I’m aware.
Ressa 19:46
I’m not in Plattsburgh. But I guess you’re not. But I guess the point. The point that I’m making is like, you know, you take someone you’re from upstate New York, you know, you know, you know, a retailer like Wegmans. Yes. I would think that being in a Wegmans anchored center would be for a lot of DTC brands. I mean, it’d be hard to get more exposure than being next to a Wegmans per se. But I if you looked at Wegmans centers across the country, and then because they’re not not all of them, you know, some they just they they’re in, I think they’re in some they’re getting into some denser markets, but then Wegmans, you’re in some just normal suburbs, which I’ll call but they, they crush it, it wouldn’t be what a DTC might model out to be at but I would venture to say if you’re, if you’re there’s a Wegman center with TJ Maxx and Dick’s Sporting Goods and whatnot, it’d be good. It’d be good real estate for some DTC given the amount of traffic that goes through there. But when they think about it, they think about going to LA Chicago, downtown Chicago and New York City. And one challenging because real estate prices are much higher in those places than in others and to
the
eye, it’s sometimes the availability of real estate is is is it’s funky. It’s some of the spaces are not traditional spaces, it’s harder to lay it out. There’s parking challenges. And so I you know, I often wonder, you know, at some point, I think DTC because one of the things I’ve seen with DTC is, and I heard this from one d to c brand, they are looking at when they were thinking about opening stores, they were looking at, where do all their online sales come from? What are their highest percentage of online sales and like, that’s a market we want to penetrate. And I and I’m going well, that’s good to go deeper where you are, but some whitespace, and I’ll use a random market. If you’re not in Minneapolis, meaning no one’s there in Minneapolis, who knows your brand? Would it be interesting to go to Minneapolis, and open a store there so people can start to learn about the brand and know who the brand is? Since you’re not getting that traffic through E commerce in Minneapolis, let’s say and I’m using media. That’s the City of Minneapolis, I like Minneapolis, things. Just an example.
Fitts 22:17
Shout out. So you touched on so many important things. I mean, one is going back to the platform is that it’s data driven. So there is totally the model that if your Shopify data says this is where your shopper is, then that’s probably where you should go. And so we’re you know, that it’s, it’s kind of hard to fight against data that if you go there, and it’s matched up, well, you’ll have a customer that said, folks who are coming to leap are really looking to us for the real estate and the real estate strategy. And our eyes are wide open to a ton of things that you just said, which is I hate that they’re called secondary markets, because I don’t really you know, I have a little bit of a derogatory, so I just call them new market. But we certainly did an exercise of, you know, where’s the demand coming for some of these brands that is outside of New York, Chicago, LA, San Francisco, and where should we be heading that we are going to be able to open stores more quickly, rents will be more affordable. And also, I think in the data, there is a great amount of this is kind of intuitive data. But if you’re a Warby shopper, it also shows that you use your credit card at a Whole Foods or Wegmans. So why wouldn’t you be going into those centers and then I think, you know, a third point is, essential goods is all we’ve shopped for for the last nine months, practically. So if I am going to venture out, I do like to buy my own groceries, I’m gonna physically go there. And if you’re anchored for you know, buy a whole foods and there are other things that are open there that might be non essential, the chances of me going are gonna, you know, go up exponentially. So, yes, I think we’re we’re living in a whole new world. And then I also think there’s something about store count. So yes, it is kind of, you know, you’re starting out and it you don’t even need to do any analysis on Hey, should I have a store in New York if I’m a certain kind of brand, but I think when you get to a certain store count, not only our I won’t call them secondary markets, new markets are important. And what are going on in in the suburbs, because of the pandemic drip centers? I mean, why should we count them out?
Ressa 24:44
So I think and that’s what I own obviously, so you know that so it’s a little biased but but but the I think even more than the Plattsburgh so it’s when we think of New York we think of the city and I’d love New York. I think it’s the greatest city in the in the world.
I think that, you know, there’s a lot of same demographic, different location. A lot of people in Bergen County
shop lifestyle brands, they might not be going to the city that often. But they might put three stores in the city, consider Bergen County, New York Metro and then move on and be done. And I think they’re missing some some groups. You know, other retailers might call those infill markets or infill, but I think there’s a piece of that. That’s also when I’m talking, you mentioned the suburbs, but I’m talking about that not just different markets, but also same market. But different, right. You know, there’s definitely lifestyle brands that have locations, maybe they’re within an hour of me, that my wife shops, but I don’t know that she’s going to their store, because it’s in some, you know, where I live in the suburbs. And then the second piece on the white space versus the the non white space. One of the things though, so they’re the one of the things that I think retailers, Legacy retailers did well and do well, is they go oftentimes and say, okay, my brand is recognizable in X market. And that’s where the, you know, let’s enlighten the the digitally native brands they’re saying to recognizable in X city, and I have a lot of customers there. I’m not having this market, let’s call it Minneapolis, we’re using Minneapolis as the example. But the demographics of my customer here are the same there. They just don’t know me. That’s different than it’s not the right customer. It’s just a customer who doesn’t know me, right? Because we didn’t mark it in Minneapolis, and they’re not finding me on Instagram, per se, I’m not showing up but same demographic income level same as whatever the the Nashville market where they’re going. And so
I’m curious to see the evolution of that. So
Fitts 27:18
me too. And by the way, you know, as a real estate person, I think I do get a little nervous sometimes where I’m like that nobody knows who they are. You made a great point, though, about Instagram. So it’s, you know, I might not be you know, let’s take a I might not know who Warby Parker is, but I’m following them on Instagram. And so I think social media has helped certainly in that, you know, not even as an advertisement, but then you’re excited when that brand comes into your market, even though maybe Warby hadn’t been running, you know, advertisements on television in that market. So I think those things are, are important. And I think brands have a little ways to go and kind of figure them out.
Ressa 28:03
Awesome. All right. So the next part of the show is the story. So what market are we going to and what is the brand?
Fitts 28:19
Sure. So we are already in Chicago. But we took another space in Chicago. And this was a real adventure because it was about proving a new product for leap. And so we went to 66 days, Walton and the Gold Coast. And basically took the space and rotated brands through every three months to and this is at the height not at the height of the pandemic. But I’ll tell you we opened up about a week after the first round of looting went on in Chicago. So there was definitely some trepidation there was a lot of broken glass down in this area for people who know Chicago, I’m sure they’re familiar. And what we did is we rotated brands and for three months ah, for a couple of reasons. I mean one there was there was demand to be in the Gold Coast, your brand was a good fit there. Number two is you may or may not have been having some inventory issues that you wanted to move so it’s a product before we went through the next season. But without you know plastering sample sale or inventory sale on your store. You were able to open a brand new creative store, be open for three months, move through some inventory, test the market, get used to what it’s like to operate a store in a pandemic, and then leave and assess whether this was something that was good for you or not and and also, you know, have a good experience with LiPo Lay. So we took 66 days, Walton, we put in on Australian brand called Charlie holiday. Then we put in a brand called hatch, which is maternity wear. We have not been there right now. And I’m forgetting there was one and a brand called ALC, which is, you know, higher brand almost in the luxury category. And we will probably continue to do that at 66 days one.
Ressa 30:29
Interesting. So, a couple of things there. So one
I love hatch because I think there’s a huge you know, interesting because I think there’s an open a bye for physical maternity because destination motherhood, maternity, you know, Anna pod
Fitts 30:47
there were there, those guys aren’t around, not around.
Ressa 30:51
And now, I made this point. And someone told me Oh, you’re missing it. Chris, the new maternity wears Lululemon and Athleta, which was interesting. But I thought that was interesting, because I’m not a customer. So but I thought that was interesting anyway, but like that brand,
I guess the
a couple of things. One, which brings us to something we didn’t talk about when we said we were going to talk about earlier, that sounds a lot like show fields and neighborhood goods. And you’re you made the point, you’re traditionally you, you are different. So why don’t you take us through what is the difference between show fields, neighborhood goods, and
what you all do?
Fitts 31:31
Absolutely. And by the way, they are friends. And I’d say family, and we’re all in the same category, which is, you know, retail as a service. The differences is that you know, when hatch opened up in the space at 66, a lot and it’s a hatch stores ruins bro. And so there’s no other product. And I love going to a show fields, and I love going to neighborhood goods, because there’s a variety of products in there. And there’s a variety of price points. And there’s a nice sense of discovery, not that you can’t have that in our store. I think what happens a little bit and you know, there can also be this add a show field and add a neighborhood good is if you go into a store that is its own brand. So it’s all hat or it’s all Naadam, or it’s all Charlie holiday, that you have a different brand experience with the brand itself, as opposed to having a number of smaller experiences with different brands. And um, I would not say one is better than the other. I think if you’re a retailer, they may lead to different places, and how a consumer reacts to their shopping experience with you. But both can certainly be, you know, super positive.
Ressa 32:51
I guess the follow up to that is where did the different experiences lead me to as a shopper?
Fitts 32:58
Well, but the hope is certainly to some loyalty and that you’re a returning customer kind of 101 of retail. And if you already know the brand, then you’re a fan. And you’re thrilled to see that they’re physically you know, in your neighborhood or, you know, coming to you somewhere near you. So I think that there are some of that. And I think there’s also a you know, something to term and how long you actually stay, you know, so if you’re, you know, going to be in show fields or neighborhood goods for a very short amount of time, I think it might be harder to have the click. But again, we just had brands who went in for three months eight,
Ressa 33:45
do you think you might start doing more of that? Are you pretty focused in general on making the store
that brands store?
Fitts 33:55
You know, I don’t know if we’ll ever get into putting multiple brands in the same space. Because again, I think that’s a huge part of the secret sauce. And it’s why people are coming to leave, they’re really ready to do their own stores. And they don’t want to say they’ve maybe graduated, they’ve probably though experimented maybe being in someone else’s space. And that may work for them too. I think, you know, what I’m hearing from the retail world is that there lots of different ways to do physical retail. And you may you may do a lot of them just like you were saying it you know, a YSL is inside of some department stores but they also have their same standing store so they’re double dipping on the model as well. I think now they’re just they’re more choices for brands to do
Ressa 34:43
that. Got it? And yeah, and I guess if you’re not going to do that, do you see yourself doing more here I
guess wears one brand in the store that’s it, but cycling them through like you me engineer? Ah,
Fitts 35:01
yes, I know, I mean, I think it’s going to depend on the environment. And the intention really is, is that, you know, you we try each other on, you try out a market you try on, you know, maybe it’s retail for the first time, and then you graduate to our core product, because I think there’s a lot to be said, and there probably studies on this about just staying longer. And, you know, building your brand awareness moving through more inventory, all those other things, but certainly pop up or, you know, temporary stores have a place, and how for quite a long time within the retail landscape.
Ressa 35:42
Got it makes sense. And so when did you sign the lease? In Chicago? Here,
you’re given we’re in a pandemic, and you were amidst civil unrest at the time, when did you sign the lease?
Fitts 35:58
In total transparency, probably the week before, and there was, you know, some back and forth, I think, what, what’s great one about being on this program and being leave, we’re, we’re new, and we’re a little different. And so there’s definitely some landlord education on who we are, what we’re going to do when we come into the space. You and I are both on the real estate side, which obviously, I think we both love and, you know, thrive in. But it’s an older industry, I think it’s evolved incredibly, but I think there’s an education process, the thing about doing some of these shorter term leases or license agreement, is that you can do them quickly. I know I have a real estate process set out and I have one for the short term product, and I have another for a long term product, because as you know, leases it, you know, a longer time than than a license agreement, sometimes that comes into bite you and it’s the other way around. But you know, it allows, again, this agility and this flexibility in the world we’re living in?
Ressa 37:05
And who was the former tenant in the space before you who was there before Lee? Thomas pink? Ah, so you took the Thomas pink space and God and you negotiate this deal? And you sign the lease? Oh, and how much work in capex did you have to do.
Fitts 37:29
So here’s something about the model we didn’t talk about. So I mainly look for spaces size wise, between 1002 1000 square feet, we’re obviously pushing up a little because of capacity constraint. And I look for, you know, white boxes or second generation boxes. So we really, you know, it’s coming from, I wouldn’t say Warby is a legacy retailer, but folks who are really doing these kinds of amazing build out. And I love and I think it’s a huge part of the brand. It can also be a little bit of your enemy. When you’re really crunching the numbers. And looking at a p&l, though, if you have a build out that costs half a million dollars, what’s that gonna do to the rent structure and all these other things. So by taking second generation boxes, again, we can go very, very quickly. And we’re also sometimes avoiding construction and permitting and that we can really come in with our FF money, and turn a space very quickly with vinyl, a coat of paint, you know, the brand imagery going up, and, you know, a space that you walked by that was vacant the next day, you know, is a store.
Ressa 38:43
And that’s, that’s awesome. And I haven’t been to one. But if you were
to take a before and after photo of the Thomas pink and Charlie holiday, which was the first one that went in,
did it feel like Charlie holiday?
Fitts 39:00
It did. And again, I go back to that as the secret sauce. So putting elements of who they really are. And I mean, they’re an interesting brand. They’re all Australian, not a ton of people know them, I think, you know, they hit it at the right time in Chicago where people still wanted to wear you know, pretty floral dresses and be outside. But it spoke to the brand. And I do think that you know, we’re saying we’re we’re taking, you know, a lot of the risk out of retail, so you can focus on the brand, we should certainly put that back into to every single store so that you’re having that brand experience.
Ressa 39:35
How did you get four different brands,
who didn’t have much of a physical presence to want to open up stores in civil unrest in a pandemic?
Fitts 39:48
I have a really good BD team, I think I think their special talent is persuasion. But outside of that, and that’s tongue in cheek. I think that if you’re bullish on physical retell which these four folks certainly are, you know, why not test a market? Now the civil unrest was unplanned and it was certainly a nail biter. And you know, we added on to our insurance in, you know, lots of different ways. But I think really it’s, you know, the last quarter of this year is not, you know, I think we can now see into the future a little bit election vaccination, things that are happening that really now is the time that you can begin to gear up and start to experiment with retail, if that’s where you are, or get back to physical stores and getting them up and running. Last questions
Ressa 40:44
ready?
Fitts 40:45
All right. Yeah. Wait, she
Ressa 40:46
wants now they’re easy ones. So I think one from a market perspective.
How big
is the demand? Clearly? I know, it’s probably a little stupid of a question, because you all have made a big bet on it. But how big is the demand for some of these digitally native brands to open up physical stores
kind of across the country?
Fitts 41:16
I would say a little how to how should we play this? Let’s do a scale from one to 10. Because that’s related and easy like that one, to two. So I would say, you know, if I’m cautiously optimistic, it’s about an eight. If I’m really being Dali positive, I really think it’s a nine or a 10. And again, they’re they’re really looking to folks that came before them. And then they’re they’re making their own runway, which I think is fantastic. I’ll take a brand called studds.com. Who is is not on the platform, but I have the pleasure of chatting with the founder about lots of different things than if she’s going to be the next Claire’s of ear piercing. Think about how many stores they had. But I think she’s thinking about it in a light where maybe she’s not running all those stores under her her corporate umbrella. And by the way, it doesn’t mean she’s doing a leap it maybe some of them are franchised. There’s there’s all there’s lots of different ways now to get your retail up and running and and do it in a really smart way.
Ressa 42:24
Interesting. Last question of this.
How are you forecasting sales for these retailers? Is it them that are making a sales forecast? Is it you? Is it some software? Is it a combination of the three?
Fitts 42:41
Very carefully firstly, and, and kind of a combination? Again, because we get all their data when they come on to the platform? Then we’re able to you know, do a sales forecast? Is it hard to forecast and a pandemic? I just had someone on the merchandising say to me the other day, I’m not really sure what to order because I wasn’t alive during the Spanish flow. So we are I know I thought it was a really good comeback, by the way. No pressure. But so I think there is there are challenges for sure in that. But if you really look at the data, and if they’ve had some kind of foray of the brands had some kind of foray into retail, then you have a good baseline of what we think they can do. You do have to layer on Hey, what’s going to happen with a pandemic, but completely data driven? So using AI place or using their Shopify information, using their financial?
Ressa 43:37
I’m just curious as to how you translate either. See, I think it’s easy for
Starbucks or TJ Maxx to look at play sir. And probably or geofencing, and kind of get somewhere around well, this is at this type of traffic and these type of demos, we, we do this and it’s easy. It’s replicatable.
For someone who doesn’t have a store, how do you translate that into actual revenue?
Fitts 44:07
Yeah, I mean, you do a sales projection and you you hope that you’re, you’re spot on. So I mean, you got to know somebody’s coming. And you know, I think to your point about, hey, are some of these folks gonna go to strip centers and what have you, I think you’re pretty cautious stores one through 10. And then you start to get the heartbeat of it.
Ressa 44:27
Got it. All right. That was fascinating. And one more time the four brands that were in that location in Chicago.
Fitts 44:38
You’re testing my Charlie holiday patch, ALC and Naadam.
Ressa 44:44
Awesome. Well,
everyone, check out those brands, check out leap. And we’re now into the last part of our show. Are you ready?
Fitts 44:52
I’m ready. All right. Question one.
Ressa 44:56
What is your best piece of commercial real estate advice?
Fitts 45:01
ask ask for what you want ask for what you need, particularly in this environment. It’s it’s never been a better time to work with landlords, we need each other.
Ressa 45:10
Awesome. Question two. What extinct retailer Do you wish would come back from the dead?
Fitts 45:17
This is a tough question. Don’t judge me, but I still have some clothing from this place. And it it had a lot of PR issues around it. But at American Apparel was, you know, it had a lot of great basics. I think I have tank tops from there of a colors. Interesting concept. And you know, they did quite well for for quite a long time.
Ressa 45:46
Last question. It’s not the exact one.
But given we were talking about digitally native brands, I went to my closet. I dressed specifically for this podcast today. So I am wearing a untuckit Vest. And so in the spirit of digitally native brands, I am on on Target’s website. It’s not the exact vest, but I am looking at their quilted field vest.
What is that retail for?
Fitts 46:18
I’m gonna say $75 Wow.
Ressa 46:23
So it was 128. But now it’s 85. You were close. Not there. Thank you for playing.
Fitts 46:28
Thank you for having me. I love love that game. By the way. I’m a lot of on my own podcast. I constantly say I’m a gold metal shopper, but clearly I’m a little off so.
Ressa 46:40
Well, listen, this was great. I really appreciate the time. Thank you so much right
Fitts 46:45
back at you. Thanks so much for having me, Chris.
Ressa 46:49
Thank you for listening to retail retold. If you want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at retail retold at DLC mgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode