Stores: What Are They Good For?

30:44How has, speaking of controlling and developing these projects, the other thing that's happened in the last 20 years is these mixed use is an old term. But if you look at places like the rise of the country marts or there is a place, I did a story when I worked at Business of Fashion on, it was sort of tongue in cheek, like the idea of like the modernized outdoor mall, but you go to somewhere like Atlanta and there are a bunch of cool, I remember the brand Sid Mashburn would show up and they are actually at the Brentwood Country Mart. It would show up in a lot of these places, Warby Parker, these sort of very modernized developments that felt of the time and sort of, if you were going to go shopping, there would be like a cool restaurant there.

31:42It would make it feel like better than the traditional suburban mall or what have you. When did that sort of, as you mentioned, that acne store having very specific art in the store. When did that sort of, we need to be hip to what's happening in the culture start to permeate real estate? I mean, there's a few things I could point to that I think were impactful at a time, right? I think one is Chelsea Market in Jamestown, right? Where it was, hey, we're going to highly amenitize. Mixed use development is nothing new, right but typically when you see it in the bread and butter you know commercial sense it's like a horrible 400 unit apartment building that has like a subway and a basket robbins in the bottom right when you're driving down like hollywood boulevard or something like that obviously that's not what we're talking about i think obviously there were just people and developers who had foresight to make something that fed that same concept, no pun intended, but in a much more interesting way, right?

32:56One of the biggest, obviously, I think was Chelsea or Chelsea Market where you had, you know, Milk Studios where there was something creative happening and you had lots of good food and beverage operators and you had cool company. Anthropology. Anthropology and cool company offices upstairs. exactly. And, you know, a bookstore and just these like a minitized, nice environment things. And it goes back to the conversation that you, or the point you made earlier about, you know, well, how does this actually relate to conversion? Well, one way to increase dwell time to your question is get people there to do more things longer, right?

33:29It's, it's, it's fairly simplistic, you know, and, and they were very good at that. So even the, you know, in that 2012 era, they were like sort of the best at that, right? Was Jamestown. So, you know, you mentioned Sid Mashburn. That's like Westside Provisions in Atlanta where they are. That's also a Jamestown property, right? So they were like really early on that. And they were really early on the DTC train. I think they were quite like on the nose with that early. And then obviously you have, you know, at a much larger scale, things like Caruso and Palisades Village and in a smaller scale, things like all the country marts.

34:05And, you know, that's, I think. Cold drop yards in London is another example of that. When I first went there, I was like, no one's ever going to go there. And now I like to stay at that standard by King's Cross. I mean, that neighborhood has completely transformed in the last 15 years. It's wild. Look, if you're a developer who approaches a project before you build it by having a multi-hundred thousand square foot office lease with a tenant where everyone's relatively high earning like a Google, it's pretty easy to amenitize that property and give those people something that suits their interest, right?

34:44Whether it's entertainment, whether it's food and beverage, whether it's retail shopping. How long does it take for stuff to stick? There are two examples I'm thinking of. One is the Arts District in Miami, which I literally was like, this is never going to happen. You mean Miami Design District? Yeah, design district. Sorry, Craig Robbins, his people, they still pitch me all the time. I'm like, you don't need me anymore. But they used to pitch me every week something. I was like, this is never going to happen. No one's going to go to the design district in Miami. It happened. It fully happened.

35:19And then the other example, and I don't know how this is going, but Hudson Yards. And that's a weird one because of the time. but they really tried to create a new neighborhood. How long is it going to, I guess the question, both of these, both of those examples are like fully blown new neighborhoods were attempted. How do you, if you don't have a Google, Hudson Yards has a couple big companies. How do you make that happen? And how long does that take 15 years? Does that take? It's a tough question to answer what I'm always really sensitive to both whether it's store size, whether it's neighborhood and going back to the overall, how I look at positioning conversation is I'm really sensitive to scale, right?

36:05Like very, very sensitive to scale. I think there's things like a South coast plaza, which is part of its success in my opinion, and why it's one of the top performing shopping centers in the world is because of the scale, right? It's still big. It's a million square feet or so, But when you compare that to like a Dallas North Park Center, which is two, I believe it's two million. It's one and a half or two million. I can't recall off the top of my head. The scale is just like that much bigger where the flow is not the same, right? Like the way the end user, in this case, the shopper interacts with things, it doesn't have the same flow.

36:46It's like when you go to a hotel lobby and it's empty and it feels kind of like, why am I here? Again, something Ace always did really well was not make two big lobbies so that the lobby felt full so that you had some vibe. Right. Yeah. I think it's the same thing with all those places. I think Hudson Yards, you know, honestly, I don't know how it's doing. I've done one deal there ever many years ago. And I think it was. to me, it was just so ambitious that the scale did not reflect necessarily the environment of that suits New Yorkers, put it that way, right? That suits your average high value customer New Yorker.

37:26I think comparatively Miami design district took a long way, took a long time. I think it took a long time as well, because the hardest thing to do to answer your question, when, how long do these things take? The hardest thing to do is just change consumer behavior, right? If you're fundamentally changing consumer behavior from, I'm either going to this mall, Aventura, or that mall, Bell Harbor, and now I have this new area that historically was, you know, edgy and everybody has their preconceptions and things like that. It's just difficult to change, right? And so they've changed it with museums.

37:58They've changed it with hospitality. They've changed it with all these elements that in the early days it didn't have. And now it's very much a thing. So, you know, I don't know how to answer exactly how long it takes. I think it's property specific, it's city specific, it's consumer specific, you know, just like what someone in Miami buys from Dior is different than what someone in New York buys from Dior. right yeah yeah and hudson yards is an interesting one i haven't been in the mall since pre-covid but i do go there a lot to the whole foods to the um daily provisions which is an amazing place i love i think it's a great chain the food hall thing or no it's it's danny meyer's like rotisserie essentially boston market cool the bougie Boston market and they have one in like Cobble Hill.

38:51They have one or Borum Hill. They have one there and it's an easy, like if you want a salad type thing, I think it's a smart concept, but, and the whole foods and, and that stuff, if you're up there, it's like on the way home type thing. And, but, but the question of like, who would want to live there? Um, anyway, so we're, we're talking about these brand new built from scratch neighborhoods, essentially. What about neighborhoods that have been around forever? We just did a commercial project, full disclosure, with Tishman Spire and Rock Center, which honestly, a huge reason why I wanted to do it was because I am obsessed with what they've done at Rock Center.

39:38I'm obsessed with the food they've brought in. I am obsessed with the retail mix, which is, by the way, not like Chanel. It's like Todd Snyder. I did the McNally Jackson and the rough trade there. And so why do you think that's worked? And why do you think it's... Because that's a hard... That's midtown. That's not somewhere that a lot of New Yorkers want to spend time. And they do. But what I've appreciated about it is when I am in New York, I try to go to the theater. And so there's restaurants to eat at before. It's fun if I'm going to go shopping at Bergdorf Goodman to have lunch at Lodi afterwards.

40:19or what do you think, how do you revive a neighborhood that was seen as sort of, I don't want to say it was a hell hole because that can be reserved for Times Square, but it wasn't like a neighborhood people wanted to spend time in previously. I mean, look, that one, and this is not to, obviously I did deals there, right? I can't, I don't think I can speak to those deals and how they were structured explicitly, but I mean, look, when you have a, when you have a project like that or a building like that, where you're talking many millions of square feet, right? You have to take into account that a couple hundred thousand square feet of retail is not what's going to make the project work or not from a financial perspective for the owner.

41:08Right. So a project of that scale, they're able to put a significantly higher focus on making sure the retail is uh in amenity that people want to engage with versus just simply the best economic deal and what that for them and what that means is that they're able to offer you know attractive deals to tenants and that's that's a reality. So it's not to say, you know, I'm very, I'm very careful in how I'm framing this to not say that they bought all the tenants or anything like that, right? They've done a great job and I agree with you, but they're also in the fortunate position that due to the nature of the project, they're allowed to make, they're able to make deals that are economically attractive to a tenant to bring good tenants.

42:00And that's great. Yeah. And, and so a question for you would be, I think of something like South Street Seaport. Yeah. I will say I haven't been there in probably a year, but there were many attempts of doing, and I don't know, maybe that's also Tishman's Spire. No, it's not. So there have been many attempts to build the same sort of like fun mix. South Street Seaport, Faneuil Hall in Boston, these kinds of places used to be super cheesy. Abercrombie and Fitch, there was a store both of them called the Christmas Dove. I worked there in college at Faneuil Hall in Boston. There's a Victoria's Secret, like a little bit more.

42:41The prior generation of those sorts of outdoor shopping centers in urban areas were really highly commercial. And they've tried to make that. I think a lot of these developers have tried to make them more feel more with it or more of the time where people do spend more money on clothing and big ticket items. So at one point, there was a 10 Corso Como in South Street Seaport. There was, I remember Aurora James had an amazing deal there. She had a Brother Valleys there for years. That never gelled for me. And maybe it's working better now, but without you having to speak badly of any of these places, why does why do some of them work and why do some of them not is it just the person picking the partnerships and who they're reaching out to or no i i think look there's just like in a fashion brand where you know the stereotype of fashion brands from some places is just that the person at the top makes the decision and everyone's a soldier or some places they have more you know collaborative decision making and processes it's just different right and i think it's the same with the real estate companies where it's like you look at something like tishman spire rob spire is a new yorker right like he's going to want something that he's going to enjoy patronizing as a new yorker right so i think there's just a little bit more of a uh a tuned in perception of what the desire for it to be actually is right whereas if you look at south street seaport you know that's howard's used company at the time it was under the tenure of the previous ceo david weinrab right who david weinrab is dallas he's las vegas he's uh he he i think he leans more entertainment and sometimes entertainment has a tendency to feel a bit um like cheesy for lack of a word, right?

44:52Yeah, it's not going to appeal to everybody, right? So if you, I think, to me it's that simple. Like I, you know, I don't think it goes much deeper than that, to be honest.

45:31What are brands looking to get out of a store now? Are they expecting the per square foot sales to be as much as they used to be? is it more about getting people in to get them exposed so they buy stuff online? Because my experience in many stores is that I go in the store I tried on and I say, see ya. And I go online and get it for a discount somewhere. I asked my friend who has a discount, or I know that this place is going to do 10 % because I've never shopped there. And sometimes I buy direct, But, you know, I and I look like if you're one a really high net worth customers spending sometimes a million dollars a year at an individual brand, that's a different person.

46:19And that's who they're mostly relying on. But for for these stores, are these are these stores created for just the person that's spending 70 grand? They're dropping 70 K when they walk in somewhere or they or they like what is the the. goal of these stores today so i mean look you went through a period 10 15 years ago where there was very much this i'm gonna get a store on in time square or herald square or madison or fifth avenue that is never going to be profitable and it's a billboard right i think those days are long gone but i agree with you the shopper shops differently now i'm the same way like i'll buy something on Mr.

47:02Porter and, you know, try three things and return them and whatever. And it's just like part of the process, right? Which that type of behavior is fundamentally why people are realizing e-com isn't as great as they thought it was, right? And DTC isn't as great as they thought it was. Similarly, I think you're seeing the more recent shift to, you know, directly brand owned retail stores because of the complexities and challenges with wholesale, right? And all of the multi-brand stores and things like this and beyond just the, you know, issues that you hear that you've covered multiple times about actually being paid or are they going to last and they're holding all this inventory or whatever.

47:46It's just that I think as a brand, especially an incredibly high touch brand or special brand like the ones at least I we endeavor to work with and do work with is you need to control your customer journey right and at the end of the day having a store is the best venue in which to control your customer journey from a staffing perspective from a design perspective from a storytelling perspective etc right like without a doubt it's the best but that but i think brands now are maybe less strict about you know my e-com pnl is entirely bifurcated from my retail pnl is entirely bifurcated from my wholesale pnl right i think that and this goes back to the conversation about you know retail apocalypse and retail is dead and then it was wholesale and now we're back to this it's like these are shifts right these very simply these are shifts and each brand is going to have a different equilibrium in the multi-channel world that we live in of what's going to work best for them however i think as it's always been and will continue to be that retail is the best place to own your customer journey and i don't really think anyone can make an argument against that yeah okay final question for you and and maybe you can just pop on anytime we have a real estate question and do like five minutes.

49:10I am having a lot of conversations with people right now that feel extremely big and existential. And I tend to not want to get hyperbolic and also believe that everyone thinks they're living in the worst time ever and everyone needs to chill out because it's just going to get worse. And so if you frame it that way, I think the bigger thing is that the world changes and either you change with it or you don't. And if you don't, you get left behind. And that's how people should frame it. But all that said, this year has been really hard for luxury goods. This is the first time since the industry became a real industry that consolidated.

49:55So the last 25 years that they've been truly challenged. The customer in China is not coming back in the same way. It just isn't. It's fundamentally not going to happen. And I was talking to a CEO about this who's been in the industry for 35 years. The fundamental thing is that the industry is mostly consolidated, and the way consumers consume luxury goods is changing. and there aren't going to be lines out the door that are real as much as there used to be for a while. Like it's just not the, the stuff inside the stores needs to change in order to like, I think about, I always have used this anecdote millions of times.

50:44Apologies to anyone who actually listens to this more than once, but, um, I've used this anecdote about when I was in college, everyone would stand outside of tower records on Newberry street in Boston for, or a Newberry comics, whatever, if you're cooler and you went to Newberry comics, I was too intimidated, but you would stand outside for the record. I think all albums came out on Tuesdays. You would stand out and at midnight on Tuesday, you would, you would get it that off white or Supreme or whatever in 2018 was that example of youth, youth culture, people standing in line buying stuff. That is gone and something new will replace it.

51:25But I think the question for a lot of these brands right now is like, what happens in 2026? Do you have new product coming in, a revived creative strategy at a lot of these big companies, and then suddenly the consumer just bounces back and it's like, yeah, I want another handbag or I want another jacket? Or is there a total true shift in the way these companies approach how they sell things and what they sell? Yeah. I mean, look, I'm not a fortune teller or an economist, right? So I can't predict what the economic outlook is going to turn out to be. And I can't predict consumer behavior. What I do know or what I feel is that going back to the comment I made about how when DTC shifted from being discussed as a distribution model and started being discussed as a brand category, I see those same kind of patterns with the luxury industry right now.

52:29And that's what concerns me above all else, which is that I don't know that any of them, that's not true. At least within the large groups, I don't know that many of them can really articulate what it is they're selling or doing, right? And I think that's really disconcerting because even personally as a customer who, you know, I would say as a luxury customer, I buy nice watches, I buy nice cars, whatever, I buy nice clothes. I don't walk into those stores, right? I don't buy that stuff for myself. The stuff I like is like, you know, Davide Baranchini's Gaia Cashmere and, you know, like that.

53:15I want that. Like, I'm going to do, no, but I'm going to do that instead of. I tease. I'm teasing. Huge fan. But to me, that or like a Drake's or something that like. Yes. I think what the luxury brands have done that has backfired on them is the customer incentive for being a customer is shallow, right? In the sense that it's not for them. It's not for the end user anymore. It's not that, oh, I get value out of this because it makes me feel good or because I understand its provenance or because I know a story and a history about it, right? The luxury customer of today that the big groups have engendered, they don't care about that.

54:01And so it makes it very easy to just as quickly not become a customer if the value proposition you're creating for them and the validation you're creating for them after buying your product is shallow. It just disappears that quickly. So I think that's more of like an inward industry thing that needs to have a bigger conversation. Um, but I think, you know, it's, you know, you use the record example. It's like discovering a band, right? It's like, it's like discovering a band for before someone else and being to tell, being able to tell your friends about that. That's cool, right? That makes you feel good.

54:41That is what empowers you. Owning like a really expensive sweater doesn't really empower you, right? It's whatever, right? And look, everything's fun and easy and lighthearted when things are good. But to your point, as things start to soften, you start to look at things differently naturally. And that's, I think, the place we're at right now. Yeah. And I think that neither you nor I have any sort of, we know this is all a construct. 100%. Everything is all of this is a construct. But the thing is, it needs to feel good. It needs to feel like the word value is overused, but it needs to feel there needs to feel like there's a value.

55:23This is why I bought this for a reason, whether the reason is because I think it's cute and I have a bunch of money or it's because I think I'm going to wear it forever. And if you look at the brands that are succeeding right now, and I had a little thing on Monday about craft and how this word craft is definitely being overused. But also, you look at the brands that consumers, the hottest brands at LVMH or Laura Piana, Leleve. These are brands that, yes, Jonathan Anderson's a superstar designer and there are people buying for him. but he focused so much on, I went to this Loewe exhibit in Japan that was, it paid homage to him and was like very respectful of him and had an entire room of all his runway work.

56:12But also like it was about the bags and the construction, but in a fun way, it didn't take itself too seriously. It and the St. Laura Piana, whatever you think you can, they can sell$2 ,000 jeans because they're a fabric mill. and a person who can afford it is like, I know that the cashmere sweater I'm getting from there, even if I'm overpaying is the best cashmere, or I think it probably is the best. So like they did that pointy toe almond flat that I bet Kate, your wife has, or may have thought about buying. And that's under a thousand dollars. And so, yes, that's expensive, but there's a value at Bottega.

56:58there's a value in it. I think they've put themselves in a place where they've just like archetyped all their customers in such a specific way that like Kate and I and our daughter were at, we were in Cabo a few weeks ago. I don't remember what, I think Kate's birthday we went and we stayed at Las Ventanas, right? And I was like, and you see the other families and I'm like, I was like, this sounds, I can, I sounds fucked up for lack of a better word. I'm like, I can tell that family's from Miami. I can tell that family's from Dallas. Right. And then later on you talk to them and it's like, hi, I'm from Miami and hi, I'm from Dallas.

57:40And like, I'm like, everybody was very nice people, obviously. And like people we would all be friends with if we met them and hung out. But like the fact that we've, to your point of it being a construct, it's been so constructed that it's become an archetype and almost like we're memeing ourselves is the problem. And I don't know how we get out of that, but I think that's the conversation that needs to be had. Yeah. I think for a company like LVMH, and it does kind of go back to them for me and because they own pretty much every business that I write about at this point, is that that's a really diversified business and it can't just be about clothes or handbags, which is obviously a very large part of their business and has become a much bigger part of their business in the last 15 years.

58:32The wine and spirits used to be a much larger part of the pie and it's decreased. So I think the thing that they do really well is that they think about it as investing in culture. And so they invest in the places where the culture is at at the time. and then as that evolves they evolve with it that being said like this is a gonna be a big change and we don't we don't know they don't know the china piece i think is the the most complicated part i think the problem with that argument or that premise if that's what they're saying and not just them but anyone if that's the premise is that you know are you are you creating culture or are you pandering to a place where the culture's at and those are different things And ultimately at the level they're at or any group is at, if you're actually a luxury brand and making an impact, you should be creating, you should be the creator of the culture, not the, hey, I'm selling to whatever the culture demands at the moment.

59:34Well, this is a challenge for them in particular because they are second movers. So what they've done mostly is look at what other people have done, look at what Chanel in particular has done and sort of mimic that or look at what Hermes has done and mimic that. But Chanel in particular, there's no LVMH without Chanel. Those brands were built exactly on what the Wertheimers did there. Like it's there in Karl Lagerfeld, like there isn't anything different, but, and, and even if you look at the last 15 years, uh, caring hires, Alessandro and Demna, then LV's hires Virgil, like, like, so they, they're, they're fast followers and they are the best at executing of any other.

1:00:28They, they do it better than anyone else. They're the best brand managers, but I do think that you're right. Like look at the incredible success they've had with Laura Piana. It's, it's truly remarkable. And they have looked at what Hermes did and they have followed what they need to follow there and, and also just use their principles. And it is truly amazing. But this next phase, like what to me, what it all comes down to is you're right. Like how much of culture can they actually create themselves? How fast do they need to be with follow up? And also China, China, China, China, China. If they can't get people to buy stuff in China, no matter what, they need to come up with a different strategy.

1:01:13And I think to tie it all back and close the loop where, you know, you said it all comes back to real estate and you're saying they're fast followers. that this is the segment where everybody was the most concerned with co-tenancy and who they're next to and who they sit next to and not you know where i think the really truly luxury brands like you know not lowercase l fashion luxury but really luxury meaning someone doing something unique it's like no i actually want to be by like the chicest restaurant no i actually want to be like under the chicest family office where the best people, the most successful people in the world are, have their family offices and that, and then I'm going to sell them a watch.

1:02:00Right. It's not like I care about being by, you know, Louis Vuitton, Dior, Balenciaga, et cetera. Right. Like that's, so yeah. Jonathan, this was so fun. I love chatting with you. It's good that we do have similar tastes. Yeah. Because then it might not be as fun. No, but you know, you're the best. Have a great weekend. Thanks. You too. I'll talk to you soon. Bye. Fashion People is a presentation of Odyssey in partnership with Puck. This show was produced and edited by Molly Nugent. Special thanks to our executive producers, Puck co-founder John Kelly, executive editor Ben Landy, and director of editorial operations, Gobby Grossman.

1:02:43An additional thanks to the team at Odyssey, J.D. Crowley, Jenna Weiss-Berman, and Bob Tabador.