Small Stores Squeezed by Rising Rent Get Creative

Small Stores Squeezed by Rising Rent Get Creative

Last March, Emily Schildt opened Pop Up Grocer on the corner of Bleecker Street in the West Village, selling artfully packaged condiments, beverages and other products in a paid business model developed by small, emerging brands.

Customers can buy artisanal hot sauces or pumpkin chips from brands like Peepal People and Van Van, which pay to be on the shelves. Typically, 150 to 200 brands are on display at any one time, and some are changed quarterly.

“If we were just dependent on product sales, we would have to sell at a much higher volume,” Ms. Schildt said. “When you’re talking about a store of completely unfamiliar merchandise, that’s just not possible.”

Rents for retail space in New York continued to rise last year, making it harder for independent businesses to survive, according to real estate services firm CBRE. A 27-square-foot space in Manhattan’s affluent West Village was recently listed for $5,000 a month. But some ambitious entrepreneurs are experimenting with business models like charging shelf fees or selling wholesale to make ends meet.

“You have to be creative or you have to leave New York,” Ms. Schildt said.

Tomai Serdari, who teaches marketing at New York University’s Stern School of Business, said retail is being restructured to meet the new customer’s values. “Innovation necessarily comes from those who innovate their business models,” he said.

But independent retailers face challenges, including high operating costs and finding a model that works.

“Technology is evolving, our cell phones are evolving and our brick-and-mortars are evolving,” said Ani Sanyal, who with her brother Ayan founded Kolkata Chai Co., which sells its products online and at two retail locations in midtown Manhattan.

Their company sells hot tea, Indian street food like samosas, seasonal chai soft serve, along with tea blends and bags of their goods. Foot traffic is steady at both locations, but the company’s e-commerce business accounts for 75 to 80 percent of its revenue, Ani Sanyal said.

Kolkata Chai Co. also sells wholesale tea concentrate to Equinox, Juice Press and Boba Guys. The company has partnered with brands like Transcendence Coffee, collaborated with celebrities like Hasan Minhaj, and all of them have been featured on social media feeds.

By using an omnichannel approach – e-commerce, wholesale and in-store – the brothers think they can expose a large number of people to their tea and create lifelong customers. Ani Sanyal said, “Since tea has long been a debased and somewhat misrepresented product in this country, it was very important for us to have an authentic experience of our culture.”

Dolce Brooklyn sells gelato and ice cream from a shop in the Brooklyn neighborhood of Cobble Hill, but it’s the company’s wholesale business that makes a profit, selling to high-end restaurants, some of which have two Michelin stars. “You have to find different revenue channels,” said company owner Pierre Alexandre.

Rachel Krupa’s omnichannel approach for her company, Goods Mart, includes the development and distribution of snacks in hotels, coffee shops and corporate cafeterias. At his minimalist store in SoHo, one of three locations, he sells packaged snacks from 200 brands, mostly emerging manufacturers, such as garlic chili crackers by Mama Teav’s in Oakland, Calif.

The Goods Mart was one of Mama Teav’s first accounts when it opened two years ago, and today Mama Teav’s products are carried in 420 stores across the United States. “As a small producer, a new brand, we’re not looking to jump into Whole Foods right away,” said Christina Teav-Liu, founder of Mama Teav’s.

Ms Krupa said she wouldn’t be exposed to brands like Mama Teav if they were landlords just trying to make money. Its first landlord, Bret Trenkmann, saw value in its mission and, like another landlord, Tishman Speyer, gave it fair rent in SoHo, as did its second location in Rockefeller Center.

Consumers, especially tourists, want authentic experiences they can’t get at home, said Ms. Krupa, who runs Krupa Consulting, a public relations firm that works with packaged food and health brands. “You’re not going to say, ‘Oh my gosh, I went ice skating at the Rock Center — and I ate at Chili’s,'” he said.

Homeowners play a big role in the growth and survival of independent businesses, said Stacy Mitchell, executive director of the Institute for Local Self-Reliance, a nonprofit advocate for independent businesses. National chains may be a safer financial option than an independent contractor, but leasing to them is short-sighted, Ms. Mitchell said.

Giving small business owners a break can be good for homeowners. “The quality of the businesses at street level affects the rents they can get for the upper floors, whether it’s offices or apartments,” he said.

The United States is undergoing a cultural shift in retail shopping, said Syama Bunten, founder of Scaling Retail, a consultancy in San Francisco. The direct-to-consumer model pioneered by companies like Dollar Shave Club and Stitch Fix was an innovative approach years ago, but it’s now saturated.

The new phase of shopping falls into two main categories: cheap and easy on Amazon and with a sense of connection in brick-and-mortar.

Another way for independent owners to build business is through connection and community through vibrant street life, foot traffic and in-store events that bring like-minded people together. Ms Bunten says a bus shelter ad can gain brand visibility, but creating events and spaces for customers creates a stronger emotional connection.

“100 percent of visitors may not convert into customers,” he said, “but you have a 100 percent chance that your brand will have a longer-term impact than a traditional ad.”

Despite finding a level of success, some small retailers wonder if it’s worth the effort. Many of them invested their life savings in their businesses and raised additional funds through institutional and angel investors, not to mention friends and family. They work with sustainable business models and are constantly posting on social media. However, leasing and space creation costs remain a barrier.

“Something has to change,” said Ms. Schildt of Pop Up Grocer, who spent 18 months searching for the right storefront.

Kolkata Chai Co’s Ani Sanyal says if city officials and landlords don’t recognize the prohibitive cost of rent for independent retailers, “the city will lose its colour”. to New York.”

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