#romancescams | Fifth Wall Invites eComm Pure Plays To The Mall

Mall landlords strike again. In a good way, of course, as alt-VC firm Fifth Wall closes on a $100 million fund to help eCommerce pure plays expand to brick-and-mortar locations, as reported by The Wall Street Journal. The fund’s investors include retail landlords like Acadia Realty Trust and Macerich. Those companies will be the middlemen if eCommerce companies look to follow Amazon, Warby Parker, Casper and others as they seek new revenue flows and omnichannel synergies.

“Retail is not dead — it’s changing,” Fifth Wall Co-Founder Brendan Wallace said in an interview last summer. “There will never be a 1,500-store retailer that is truly ubiquitous. You will never see a Gap again. There’s an interesting dichotomy in the sense that, yes, there is a bankruptcy that’s happening in the retail industry, but there’s also a lot of life and birth that’s happening in the real estate industry. You will see more 25 to 200-store brands that emerge as consumer choice expands.”

That’s apparently the play behind the new fund. The trio of retailer-VC-landlord is emerging as a new development model as landlords take a more active role in who their tenants are and how they will survive in a post-anchor tenant economy. But will it work? Can it stem the rising tide of retail bankruptcies and bad earnings?

“Stores serve as an extension of the online-shop where customers can interact with the brand,” said eCommerce analyst Matthias Perrot. “For these pure players, the main purpose of opening stores is not selling products first. It is more to activate the interaction of their brand with customers; what bad brick and mortar do not still understand.”

Some of the most successful pure play-to-physical examples have been able to do what Perrot describes. UNTUCKit, for example, was once direct to consumer (D2C) and online only. It now has than 75 physical retail stores across the U.S. and Canada. Its stores were designed to get customers used to the brand and the look, which can be a challenge when your customer base ranges from 25 to 70.

“We realized early on that a certain percentage of men, potentially up to 70 percent, always would want to touch and feel the product before buying,” said UNTUCKit Co-Founder Chris Riccobono. “And typically, the older the older you are, you want to experience the brand and try on the clothes and touch the clothes before you buy the clothes.”

Fifth Wall’s new fund also makes sense when you look at market share numbers. Even with a rock solid Q4 behind it, eCommerce market share is around 15 percent of total sales. Bank of America estimates that projecting total U.S. online sales will grow 13 percent this year to reach $672 billion. Amazon currently takes 44 percent of that number, up from 40 percent in 2018. Walmart is a distant second at just 7 percent followed by eBay at 5 percent and Target at just 2 percent. Bank of America is projecting 15.7 percent online GMV growth for Amazon, -5.8 percent growth for eBay, 23.1 percent growth for Walmart and 18 percent growth for Target. Bank of America says the big four will account for 56 percent of the 2020 online shopping market. So unless a pure play can carve out a niche in the 46 percent, growth is hard to come by.

“What these brands are realizing is that it is so hard to grow online,” Wallace told the Journal. “Amazon is the company that destroys brand differentiation rather than augments it.”

When it comes to best practices in clicks-to-bricks retailing, Wayfair comes up frequently. It opened up its first store last August in a design studio motif that showcases home design experts, virtual reality room design and flexible payment options.

“… Wayfair as a digital native already had the modern infrastructure in place and the expertise to build a store that mimics the online experience,” said Aerospike Chief Strategy Officer Lenley Hensarling. “Wayfair and other online retailers are driving the future of retail. Traditional retailers need to build an omnichannel strategy backed by a modern data platform with real-time data analytics to create a next-gen customer experience. If they don’t do what Wayfair and others are doing to bring the online experience to the store, then may find themselves the next obit in the retail apocalypse.”

Maybe so. If the new model of VC-landlord-pure play starts to work, it could reshape rather than continue the retail landscape.


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