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Breakout Retailer Awards

BY Marianne Wilson

Four dynamic retail concepts — Fabletics, Fresh Thyme Farmers Market, Marbles: The Brain Store and PizzaRev — were honored at Chain Store Age’s annual SPECS conference as the winners of CSA’s first-ever Breakout Retailer Awards.

Chosen by the editorial board of CSA, the Breakout Retailer Awards recognizes emerging and innovative retail/restaurant concepts that have crossed the “newbie” line and are on track for growth.

Executives from the four breakout brands were on hand at SPECS not only to accept their awards, but to share insights into their companies founding and what lies ahead at a special Q&A session. Representing their firms were: Dustin Netral, VP retail operations, Fabletics; Tracy Lindsey, VP construction, Fresh Thyme Farmers Market; Scott Brown, co-founder and chief merchant, Marbles: The Brain Store; and Robert Baek, VP business development and real estate, PizzaRev.

Here is a look at each of the winning concepts:

Fabletics

Co-founded by actress Kate Hudson, Fabletics is positioned in the white-hot “athleisure” market, with stylish activewear that works in the gym, yoga studio — and beyond.

After building its brand online via a subscription-based e-commerce model, the retailer has expanded to the physical space with stores that blend the best of both worlds. It’s also added men’s workout gear to its mix.

Unlike some other popular activewear brands, Fabletics’ offerings tend to have a higher fashion quotient and a lower price point, making it more accessible to a wider audience. Plus, it has the advantage of having a high-profile spokesperson with a huge social media following in its celebrity co-founder.

“We believe we are the first true fashion athletic wear brand in the market today,” said Netral during the Q&A at SPECS. >

Fabletics opened its first store in fall 2015, with six locations to date. The company is testing the physical space with stores that range from 1,400 sq. ft. to 2,200 sq. ft. While its store of the future model is apt to be around 2,200 sq. ft., the newly hatched brick-and-mortar retailer is not done experimenting.

“We will soon be testing a few locations that range in size from 2,500 sq. ft. to 2,700 sq. ft. as we continue to perfect the overall experience,” Netral explained.

With an upbeat vibe and a modern, contemporary look, Fabletics stores combine the best of the online and physical worlds, with mobile points of sale, free shipping from warehouses for out-of-stock items, in-store fitting appointments, and a buy-online and pick-up in store service.

In May, Fabletics will open its seventh store, at Mall of America, Bloomington, Minnesota. More are in the works.

“Our year-end store count will be approximately 18 locations, with many, many more opportunities over the next several years,” Netral said.

“Finding the right location, in the right shopping area, with the right landlords is the cornerstone of our expansion.”

Fresh Thyme Farmers Market

A small grocer with big ambitions, Fresh Thyme combines the spirit of a farmers market with the convenience of a neighborhood store. The fast-growing chain specializes in fresh and organic foods at value prices in a fun, easy-to-shop environment.

Just two years out of the gate, the Chicago-based company now has 32 locations throughout the Midwest. Its aggressive growth strategy calls for at least 60 stores by 2019. Minnesota, Illinois, Missouri, Indiana and Ohio are among the states targeted for growth.

Fresh Thyme combines the spirit of a weekend farmers market and the convenience of a neighborhood grocery store with the nutritious offerings of a natural food marketplace. Value prices distinguished the concept from the start.

The company says it is bringing the natural organic lifestyle to the masses by offering attainable prices.

With an average footprint of 30,000 sq. ft., Fresh Thyme stores are colorful and inviting. In a twist on the traditional supermarket model, center store space is devoted to produce.

“Our stores don’t follow traditional grocery store design or have tall aisles or fancy fixtures,” said Lindsey.

Fresh Thyme stores are simple and easy to navigate — so easy that it doesn’t number its aisles. Fresh produce, much of it locally grown and organic, weighs heavily in the mix, along with other perishables. Indeed, more than half of the store’s real estate is dedicated to produce, meats (hormone free) and seafood.

“Our target demographic is really anyone who is active and healthy and wants to eat healthy while remaining cost-conscious,” Lindsey said.

Marbles: The Brain Store

Brain fitness might seem an unusual specialty for a retailer, but it’s proved a sweet spot for Marbles: The Brain Store. The Chicago-based company sells games, puzzles, books and software that stimulate the brain and challenge all ages.

Marbles offers a dynamic, hands-on shopping experience that allows customers to try out product and watch how-to-play videos. The company made its debut in 2008, opening a kiosk in a local mall.

“It really wasn’t successful,” said co-founder Brown. “People wanted a more engaging shopping experience and we needed more room to display our product.”

The retailer went back to the drawing board. It opened its first store, in downtown Chicago, putting all its merchandise out in the open so that customers could test-drive the products. It named its associates “BrainCoaches,” and required them to test out the inventory so they could better help customers.

The formula proved a hit. Today, Marbles operates 35 locations stores and also sells via its e-commerce site and catalog. The shopping experience is very hands-on, with all the merchandise out for play. Friendly associates demonstrate products and make personalized recommendations.

The merchandise lineup includes games, puzzles, books, gadgets and software, all designed to boost brain power. The premise is one gathering worldwide attention. Research firm SharpBrains predicts the global brain-fitness industry will surpass $6 billion in revenue by 2020.

Marbles carries some 250 SKUs, with products for toddlers, teens and adults. Approximately 30% of the mix is exclusive to the retailer, created by an in-house team, called Marbles Brain Workshop and headed up by Brown, that is dedicated to the development of the branded product line.

Marbles has been prudent in its brick-and-mortar growth. It will open five stores this year. As to the long-term outlook, Brown said the company will continue to grow as long as the opportunity continues to present itself. The real estate strategy includes malls, lifestyle centers, tourist destinations and neighborhood shopping centers.

PizzaRev

Fast-casual eatery PizzaRev is bringing food customization to a new level, with a “build-your-own” approach that allows customers to customize their pizza from start to finish.

Founded in 2012, PizzaRev now has 31 locations up and running. But it’s gone on the fast track and plans to double its footprint by the end of 2016.

“We’re entering a total of five new states this year, including Massachusetts, Nevada, New York, Ohio and Tennessee,” Baek said.

The growth strategy calls for both corporate- and franchised-owned locations. The company primarily seeks out endcap sites with high visibility in power centers. But it is exploring other viable, alternative sites. It will open its first food court location this year, at CambridgeSide Galleria, in Cambridge, Massachusetts. It also has signed a franchise agreement to open 20 locations in Mexico.

PizzaRev eateries average about 2,200 sq. ft. and have a simple, modern look. Exposed ceilings, concrete floors and natural tones give the space an inviting but minimalist atmosphere.

“We want to give our guests an interactive pizza experience they can’t get anywhere else,” Baek explained.

The experience puts the customer in charge. It provides patrons with plenty of options for crafting their own pizza, starting with the selection of the crust and sauce. From there, customers can choose from an array of cheeses and 30-plus artisanal toppings, with everything on display and each pizza assembled in plain sight of the customer. Pizzas are fired up and ready in less than three minutes.

PizzaRev does not lack for competition. But with its emphasis on customization; fresh, quality ingredients; healthy options (gluten-free crust, hormone-free meat); and sleek store design, PizzaRev seems to have hit many of the sweet spots of today’s consumers.

The chain is bullish on its future. The company currently has 150 units in various stages across the United States and Mexico.

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The Unlikely Champion of Ashley Stewart

BY CSA STAFF

James Rhee is a tech-savvy numbers and operations guy, but the private equity investor-turned retailer relied on more than business smarts and technology to help revive Ashley Stewart. Realizing that the plus-size brand inspired a deep love among its customers, he developed a core strategy of kindness and loyalty, a strategy that recognized Ashley Stewart represented respect, community and joy to its shoppers.

Rhee’s strategy, coupled with key business improvements, have breathed new life into Ashley Stewart, which was close to liquidation when he took the reins. Sales increased some 30% in 2015, with earnings of $20 million. (Ashley Stewart had been losing money for the previous five years.) The company is now debt-free. It has closed underperforming locations, leaving it with 89 stores and a growing e-commerce division.

Rhee has brought a new culture to the chain. It’s a culture where everyone is meant to feel they have a stake, and where most of the employees at the home base in Secaucus, New Jersey, work out in the open — including the CEO himself.

CSA editor Marianne Wilson caught up with Rhee, 45, who has emerged as a most unlikely champion of plus-size women.

After two years on Ashley Stewart’s board of directors, you resigned in the summer of 2013 to become CEO — at a time when the company was failing. Why?

I did not want the company to liquidate. I had been a member of the board since 2011 and loved the brand and everything it stood for. Ashley Stewart had been founded to provide plus-size fashion in boutique-like settings in urban neighborhoods across the United States.

After listening to our customers, I came to realize that the brand stood for more than that — values like respect, empowerment and joy. Despite the company’s history of failure, I believed that the brand could capitalize on several macro-cyclical trends with a reinvented business model.

How does your background as a private equity investor (and, before that, a teacher) play into running Ashley Stewart?

I always say that we run this company like a hedge fund. That is the level of math that we are doing at the company on a daily basis. When we were re-writing all of the planning algorithms and business reports, the math and operational discipline was done at the level at which a blue-chip investment firm would operate.

As a high school teacher, I know the importance of creating a teaching culture, which Ashley Stewart now has. I reinforce the most important messages, talk about value systems, and everyone gets the ‘James speech.’ I instill in our team that every single person and expense should please our customer.

What were the most important steps you took in turning the company around?

There were so many things that had to be done during the reinvention of the company … we redid every planning algorithm from scratch, created reports to properly analyze the business, relaunched the website, overhauled our supply chain, moved offices, documented all IT processes and changed the culture.

All that being said, the most important thing we did was listen to our customer. We went back to the stores and talked to our customers and field team and asked them what they wanted from us. We then quantified those emotions with new pricing equations and portfolio math.

Your operating philosophy is “grounded in algorithms, lean processes and technology.” What does that mean?

We use measurements that are not prone to manipulation: time, return on investment, loyalty and return on capital. We use technology to amplify both the math and the emotion.

How do you define the brand?

Friendship, resolve, kindness and fun.

How important is company culture and values to the success of the brand?

It’s imperative that our company culture match that of the Ashley Stewart brand. If we’re going to empower our customers through innovation and kindness, we needed the same values internally to be successful. Kindness is not just about being nice. It implies a certain empathetic spirit. Throughout my career, the best results come from teams that are transparent with one another. >

There are no people or ideas that are too small. We focus on mentoring, and everyone is allowed to speak. This helped cultivate a fun, hardworking culture and establish a true team. This shift in the company’s overarching culture enables anyone to be innovative, and allows us to deliver a better experience to our shoppers.

How would you describe the current Ashley Stewart culture and value system?

High-performance family that focuses on development and principles, rather than winning at all costs.

How does Ashley Stewart engage its store-level associates?

We have made significant investments in technology to facilitate real-time communication between store associates and the home office. But nothing replaces old-fashioned values like respect, transparency and meritocratic recognition.

We are currently rolling out a state-of-the-art time and attendance system, which serves as an example of our commitment to marry technology with good old-fashioned relationship building.

What are key initiatives for 2016?

We are finding that there are many women out there who do not know about Ashley Stewart despite its long history (it was founded in 1991) and national and international footprint. Fueled by our new technology and CRM-driven culture, our e-commerce and social media efforts have taken this brand to new heights and visibility.

When I first parachuted in during the summer of 2013, the company did not even have Wi-Fi at its corporate offices. We are now on the cutting-edge of digital engagement, boasting one of the most engaged social media efforts in the world and an e-commerce penetration of about 35% of total sales. Our loyal and expanding customer base is creating exciting licensing opportunities and real estate options.

As the company expands online, what role will its physical stores play?

With 89 stores across the country, our physical locations have played and will always play a vital role in our relationship with our customer. We are actively looking to expand our store base, and with our improved technological foundation, we are in a position to offer more experiences for our customers than ever before.

We are now exploring new store options. We are taking our time to best understand the cities and locations where our newer customers and existing customers want to visit us, with a goal of opening several stores in 2017.

What is the percentage of online sales?

We are now a leader in digital sales, with e-commerce sales accounting for roughly 35% of our total sales. We believe that we over-index on mobile traffic and demand as well.

Word is that you eliminated the C-suite physical offices at headquarters? Why?

I do not believe that our customers care whether I have a large office or a small office. It is not important to her, thus it is not important to me. We moved to a new office on a shoe-string — basically moving ourselves in U-Hauls. I still do not have an office. I sit at a desk, with no drawers, in the middle of a wide open, trading floor-type space. There is no correlation between seniority and office size — only those who need real quiet to do their jobs get offices. Merit is rewarded; insecurities are not.

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Ready for Prime Time

BY Marianne Wilson

For all their differences, the shopping center owners and brokers from around the world who will gather at the end of May in Las Vegas for retail real estate’s annual RECon confab are alike in that they are all on the lookout for new retail concepts to lure and entice shoppers.

The good news is that there are plenty of newer brands ready to spread their wings. Some have been around for a couple of years, but are flush with new financing. Many are formerly pure players now turning their attention to physical stores.

“The surprising trend of 2015/2016 is the number of online retailers that have realized that they also need a brick-and-mortar presence,” said industry consultant Jeff Green, president and CEO, Jeff Green Partners. “Some of these online retailers, such as Bonobos and Warby Parker, have become the targeted retailers of the future, and shopping center owners are rushing to get to them first.”

None of the brands listed below are household names — at least not yet. But they show plenty of potential for prime-time retail. Here’s a rundown:

• Adore Me: The fast-growing online lingerie retailer targets young women with its low prices, wide variety of styles and a personalized shopping experience that offers a curated selection tailored to each customer’s specific style and size preferences. It’s now testing how to recreate the experience in the physical space, opening an appointment-only store at its headquarters.

• Duluth Trading Co.: Duluth Holdings built its brand online, and now, fresh off its move public, the apparel retailer sees the potential for as many as 100 Duluth Trading Co. stores. Duluth describes itself as a lifestyle workwear brand for the modern, self-reliant American. Stores are engaging and entertaining, and each one has a theme, displays, photos and found objects that honor “hardworking” men and women past and present.

• Flying Tiger: The Danish retailer sells an eclectic mix of quirky and colorful home goods, accessories and tchotchkes — much of it designed in-house and priced under $15 — in a fun, maze-like format. It made its U.S. debut last summer, in Manhattan, where it recently opened a second location.

• NYX Cosmetics: The online cult makeup brand — often described as a Mac for the masses — went offline in September, and is quickly ramping up its mall presence with locations on both coasts. NYX stores are a playground for beauty junkies, and combine digital technology with a hands-on, self-learning environment that includes interactive makeup stations.

• Sweaty Betty: This London-based Lululemon competitor has opened four stores in the U.S. to date. But the pricey brand, known for its fashion-forward, colorful stylings and in-store classes, is gearing up for growth across America. In December, it named former Bain & Co consultant Erika Serow as its U.S. CEO after receiving a new round of growth funding from private equity firm Catterton.

• YogaSmoga: The made-in-America, yoga-inspired athletic apparel retailer is on a tear, online and off. With 14 stores nationwide, the brand has set a goal of 100 stores by 2018. It will open 25 stores this year. Positioned in the high end of the athletic wear market, YogaSmoga develops and manufactures all its products in the United States, and utilizes “eco-conscious dyeing practices” to create its proprietary fabrics.

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