Earlier this week, retail startup Neighborhood Goods, which stocks mostly direct-to-consumer brands, opened its second store in New York’s Chelsea Market. Its first shop, in Plano, Texas, opened for business in late 2018, before receiving an $11 million Series A in September 2019. The company also has additional plans for a third store in Austin, Texas.
Matt Alexander, Neighborhood Goods’ CEO and cofounder, said the Manhattan location serves a different type of customer, one who’s a bit more familiar with the DTC brands it stocks or a tourist looking for a unique gift.
“In SoHo, there’s a huge amount of vacancy, and it would make sense for us to be there—but we’re relatively redundant in this sort of format,” Alexander said. “A lot of those brands can be there; it’s relatively easy to get in.”
Neighborhood Goods is often a digitally native brand’s first or additional brick-and-mortar experience. Dollar Shave Club, acquired by Unilever in 2016, used the Plano location to target its active subscribers as well as lapsed ones. In New York, consumers are more familiar with Dollar Shave Club, Alexander explained, so the Dollar Shave Club product assortment is pared down. Other brands in the space include Maude, Rothy’s, Fossil, Homesick Candles and Pop Up Grocer.
The company’s business model is more flexible than a traditional lease, allowing brands several lease options: a monthly fixed fee; a fixed fee and percentage of sales; or a fixed fee and an additional brand integration into the space.
Neighborhood Goods provides all customer service and checkout staff, but does not provide brands with first-party customer data (unless the customer opts into providing their email to the brand they’re buying from).
The Chelsea Market shop will also include a mixed bar concept called Tiny Feast, coming in 2020, that will serve as a coffee and snack shop in the afternoon and a bar in the evening.
“We are always focused on brands we believe are elevating and of high quality and that are interesting, and some of those will be venture-backed consumer brands and others [won’t],” Alexander said. “We’re motivated to keep working with the most thoughtful, interesting, valuable people we can find, and sometimes it’s going to be a brand that’s two months old and sometimes it’s a brand that’ll be 30 months old.”
For now, Neighborhood Goods is recommending brands stay in the Chelsea Market space for three to six months. The shop is smaller than its Plano location, with only 4,5000 square feet compared to 14,000 square feet. However, about 40 brands will rotate throughout the space, giving them access to a customer that’s otherwise hard to reach, Alexander said, as most of the surrounding area is already leased out to other retailers.
“There’s not a better place for us to be and articulate who we are and how our model works [than] being right in this area and this sort of traffic,” Alexander said. “That’s not to say we’d never do a SoHo [shop], but we’d have to approach it in the right way and space.”
The sky’s the limit for Alexander and his team as they continue expanding Neighborhood Goods.
The retailer is looking at former department store locations to keep expanding, with Alexander saying “never say never” to the possibility of acquiring one of these brands—such as Le Tote did with Lord & Taylor. More so, he wants to remain focused on Neighborhood Goods’ distinctive position in the market and what it can offer to brands and consumers.
“In a space like this, where the relationship isn’t predicated on a transaction and you’re much more focused on hospitality, and storytelling, and events and food and things like that, it tends to drive a much higher conversion rate,” Alexander said. “Customers still gravitate towards thoughtful experiences in retail. If we’re just doing it to say ‘we own this now’ or have great real estate—it’s not worth it. We can get the real estate, we can get the brands, so we’ll always look at these opportunists and ideas.”
While DTC brands thrive on first-party data, upcoming privacy legislation such as the California Consumer Privacy Act would limit its collection. But that’s not deterring Alexander—in fact, he agrees with CCPA, and other similar regulations such as GDPR in Europe.
He’s also not concerned about the potential of a recession, adding that Neighborhood Good’s Plano location didn’t see the traditional dead January slump, as most retailers do.
“We don’t rely on raw traffic, and we don’t run sales unless our brands want us to reflect something they’re doing,” Alexander said. “We don’t own inventory—we don’t have that pressure. In the event of an economic downturn, we’re not a fixed to a particular price point. We are here to be relatively flexible and fluid so if something’s not working, we can change it relatively quickly. Everything sort of modifies on the fly. It’s very easy for brands to pull and modify.”