Well Made

Matt Alexander, Neighborhood Goods: Holding Space – Well Made E85

June 20, 2019 · RSS · Apple Podcasts

“From the very beginning have been obsessed with articulating and expressing some sense of fallibility and humanity in who we are and how we operate.”

The throughline of Matt Alexander’s career is his ability to curate and create community. Three years ago, on episode four of the podcast, Matt talked about building a focused set of small retail brands. Today, he’s running Neighborhood Goods — a modern department store that’s the culmination of those early ideas. Neighborhood Goods is a unique retail experience that rotates featured brands, products, in-store activations, and ultimately, the stories they want to tell.

On this episode, Matt talks about bringing together local, digitally native, household name brands together under one showroom (9:45). Rather than sales-oriented goals, he shares his hopes for helping online brands explore offline concepts (12:55). With so many featured brands, Matt created a unified point of sale through a consistent rule set, carving out in-store quadrants, and training staff to be brand experts (17:26). Matt speaks on discovery and utility with a rotating, pop-in business model (25:02), and reveals plans for opening a second store in Chelsea Market (28:01). Finally, Matt talks about combating the noise (36:09), creating a dignified retail experience (49:59), and bringing people together (54:27). Full transcript below.

Follow Matt on Twitter and stay up to date with Neighborhood Goods on Instagram.

 Matt Alexander, Neighborhood Goods: Holding Space – Well Made E85

Also mentioned on the show:

Header Image by via Neighborhood Goods

Stephan Ango: You're listening to Well Made a podcast from Lumi about the people and ideas behind your favorite online brands. I'm your host Stephan Ango. Matt Alexander, welcome back to the show.

Matt Alexander: Thank you for having me back.

Stephan: Returning champion. You were here episode four. Wow.

Matt: Four. I think I've been telling everyone I was episode two. I have a little bit less credibility than I thought.

Stephan: But still though it was three years ago, June, 2016. Oh man, it feels like such a long time ago.

Matt: That does feel like a long time ago.

Stephan: You've started a new company since then. It's called Neighborhood Goods. I can explain this one very easily like the one that we meandered through last time. But the through line that I want to talk about is your ability to curate things and what you're doing now seems like such a perfect fit for your interests and your skills. You are running a new kind of department store. You've opened several locations. You had your main one in Dallas, right?

Matt: Yeah, just north of Dallas was our first one, but we're working on quite a few more.

Stephan: Tell me a little bit about maybe what inspired you. How did that transition happen? You know, catching people up. Maybe, I'm hoping people don't listen to episode four because it's probably not that great, but can you give a little bit of a flavor of what you were doing before and how you got inspired to start Neighborhood Goods?

Matt: Yeah, so probably the most relevant thing is probably something that we didn't actually talk about when we last did this podcast, but you and I have definitely talked about before, was the sort of nonprofit concept called Unbranded that I could have found it with a guy called Brian Deluca, who was the founder of a company called Foot Cardigan here in Dallas. We sort of came together in 2014 with this concept of creating a communal popup essentially, where we could have all sorts of different local brands come together for free and be there on a different sort of thematic basis week over week in the holiday season. And so for me it was fresh off one of my brands at the time, Need had just hosted, a big sort of popup event around New York fashion week that was really successful for us. And I came back to Dallas and was sort of asking myself and my team why we hadn't thought about doing it in our hometown before. And so I came home and started asking around about hosting a popup and sort of getting a space for eight weeks or 12 weeks or whatever it was. And no one really knew what it meant or was particularly open to the concept. But ultimately we found one landlord sort of understood where we were heading and what we were trying to sort of accomplish and we ran off and did it. And I'm sort of telling the story like it took a long time, but we sort of pulled the idea together. A bunch of sponsors opened up applications from brands and all sorts of brands from all over the country apply. And it all sort of went from idea to open in about four weeks. And so we opened this concept in an area in town in Dallas, Texas called Deep Ellum. And we just took it for eight weeks or thereabouts and just settled on different themes for each week, whether it was men's wear, kids, home, what have you and lots of really fun brands launched there that are now a much bigger or didn't necessarily launch their but dabbling with physical retail that is sort of much bigger brands now. So like the Citizenry, Mizzen+Main, Ministry of Supply, lots of fun ones that have sort of gone on to become a lot bigger. I'm sure I'm missing some other good ones as well. And so this thing, that sort of started as this very playful idea, they became quite important to the city of Dallas and became sort of a pet project of a nonprofit in town called Downtown Dallas Inc. Where they sort of recognize that we were able to drive foot traffic to areas where people didn't necessarily go to shop. And that we were also able to sort of bring people together for reasons that extended far beyond just shopping. And so, fast forward a few years later, it's now, this happened every holiday season since and beyond when the Statler Hotel, which the historic hotel in town reopened, Unbranded was in the lobby and it continues to do really cool stuff for free for brands. And so in early 2017 Need and my other brand Foremost that they'd been acquired a few months prior and I was approached by my now cofounder for Neighborhood Goods, a guy called Mark Masinter, and he just sent me a cold email that basically said, you know, I've been a fan of what you've been doing for awhile. I've heard your name come up a lot. I think there's a big sort of opportunity for a concept like Unbranded to do something broader and bigger for more sort of national brands. And so we went to lunch and we're sort of scheduled to chat for an hour and we went for three or four and then met up the following week. He had helped develop a mixed use development called Legacy West, which is just north of Dallas in Plano. And he said, you know, I think there's a real opportunity for this idea. We would love for it to happen here. That we like treat this room. And we were sort of in what is now Neighborhood Goods, our first location. He said, you know, what would you do with the space? What would the business model look like? What would the idea be? And I wrote up this document that he now refers to semi-lovingly as my manifesto.

Stephan: So it started with the place there was an open location.

Matt: Well, I think the idea existed. I don't think we can take much credit for it. I think if you've been on Business of Fashion or any sort of thoughtful retail outlet in recent years, a lot of people had been talking about the need for lowering barriers entry into physical retail with the general recognition that digital brands in particular that customer acquisition costs online are rising, lifetime customer value is dropping and physical retail is a potential solution for that in as much as customers you acquire in a physical environment tend to have five times the lifetime value, tends to be much cheaper to acquire and you can sort of repurpose that physical experience for a broad variety of different purposes beyond the sort of traditional idea. So a lot of people who have been talking about, it's just no one to really gone out and executed it. And then we sort of came to the table and as I've grown accustomed to doing, we sort of brought this real sort of narrative bent to the thing and a real focus on storytelling and things of that nature. And so the idea sort of existed. And then Mark took me out to the Legacy, which was still very much under construction and took me into the shell of the space and said, you know, what would you do with this? And the idea that I wrote up and the deck that I produced off that it's a lot of the language in our deck today and then all of our materials and the stuff we use to train people, it's all the same language. It's all the same message. So it sort of came together very, very quickly. And yeah, I mean I guess funnily enough it did organize around that space. And so, you know, the idea was that we could create this, it's not really a department store, but it's an easier way to sort of think of it in terms of an experience where we design it, staff it, build it. Brands come in with a direct to consumers are digitally native brands or local brands you've never heard of before. Or even some like major traditional household names. They come in and we help them accomplish a broad variety of different goals, whether it's purely sort of transactional selling products or acquiring new customers or product testing, new types of products, so on and so forth. And so yeah, we just ended up opening the first vacation in November, 2018.

Stephan: Wow, that's so recent. It feels like it's been happening for a while, but maybe that's just because you've been giving me some updates along the way and for people who want to get even more of an idea, we've actually had quite a few brands on the podcasts that are now at Neighborhood Goods or have been like primary Rothy's, MeUndies, Sonos is there right now, right? Hims. There's like a lot of great brands that people who listen to this would know. Actually going back, I think you're totally right that this idea had been permeating because it's been a recurring theme ever since we started this podcast that many companies that are digitally-native want to be able to try physical experiences, whether it's just for marketing purposes or it's because they have a physical product that really needs to be touched or interacted with in some way before you buy. And I had written a blog post back in 2016 in which I referenced you in your previous business, but I talked about this movement of digital native brands going into pop up shops or store within a store type of concepts. There's a similar retail experimental company called Beta, that was just getting started at that time, but it felt like there was something that needed to exist there and so it totally makes sense. What I'm curious about is when you're talking to brands, what is it that differentiates you from say like Nordstrom or some of the other companies that have done a decent job of staying ahead of the curve and attracting more modern brands?

Matt: I think the totally honest answer is that, we're sort of finding that out right now. I think what makes us quite different generally is that we from the very beginning have been obsessed with articulating and expressing some sense of fallibility and humanity and in who we are and how we operate. And I think a lot of the retail industry to date has been much more invested in trying to create the shiniest object in the room rather than trying to create the best and most dignified, most thoughtful objects in the room. And so I think what we're trying to do is come at it from this very sort of human experimental position that I think affords us a lot more of a closer relationship to the brands and to the consumer on the other end of the spectrum. And so when we start with a brand, unlike a traditional sort of incumbent retailer first of all, we don't offer on a wholesale basis, brands come in they either pay us a sort of a fixed fee to be in the room per month or a lesser fee and a percentage of sales or sometimes just a percentage of sales or sometimes they come in for free if they have like a really sort of particular idea they want to accomplish that we really believe in. And so immediately the margins, the general economics are much more favorable and much easier. And then you know, the conversation can be much more oriented around what the goals are for that particular brand. Rather than focusing on, hey, you know, we want to buy X, Y and Z product from you on a very traditional sort of wholesale basis, which may be incompatible with a lot of modern brands and the general economics. And instead us coming in and just expressing in general recognition of the fact that physical resale doesn't necessarily have to be transactional these days, that brands might look at a physical retail space more as a billboard than anything else, right? They might see it more as a product testing vehicle and they might see it as something to host events and get closer and foster some sense of community around a product. And so I think for us, we go in with that question up front, you know, what are you looking to get out of it? And then as we sort of build more locations, we try to become a little bit more of an ecosystem where each location we have has a different set of features and functions that fit different goals for different companies. So it's less about, hey, we want to put you in New York, or hey, we want to put you in Dallas. Instead it's saying, hey, you know, we all recognize that there's a lot of goals here and if you are really sort of invested in trying to get into a more suburban market, we have a location that can do that and it can do it really well. Or if you're wanting to come out and do something where you want to test a more sort of particular merchandising strategy and have something more built out, we have a location for that and so on and so forth. And so we're just trying to have a much closer and more sort of intimate relationship with the brands that allows for us to be much more agile, much more collaborative, working together to reach a lot of different goals and to fulfill a lot of different ideas and all the while keeping the economics in a place that just make a lot more sense for everyone involved.

Stephan: So some of the goals that you highlighted are maybe you're testing a new product or you're testing new language or this is maybe the first time you're doing a physical experience at all. How clear do you find brands are with their goals, especially the ones who may be, have never tried doing anything in the physical world before?

Matt: Well, I think us coming in with this general sort of question and this general sort of open perspective and articulating a certain degree of fluidity and openness as to what we can help accomplish. I think that tends to be reciprocated from brands, right? So rather than trying to posture around the general economic terms and how it's going to work and which store locations they want to be featured in and so on and so forth. It's a little bit more arresting where brands turn around and say, well, you know, we'd like to accomplish this sort of thing. We may have a few of our own stores and we're testing some of this, but the stores are expensive and we want to sort of assess a new idea. Is that something you can help with? And I think what we're trying to focus on is working out where we really can try to provide value in areas where we simply won't be able to really match them or to exceed what they can already do with their own. And so brands certainly come in with a real perspective. There were certain things that when we first started going out, got a huge amount of apprehension from people. So we staff the locations with our own people. We also provide the whole point of sale experience, right? And so, when I was first going out to brands last summer and it's much less now, but still to a certain extent when we talked to them, there's a certain amount of apprehension because they want to own the experience. They want to tell the story. But something I think we've proven since launching is that we pay well above industry average and really sort of optimize an orient around a sense of hospitality in the store and the way we sort of train and zone the space so that we can have real experts for each brand. It can end up creating a really sort of fantastic and unique sort of dignified experience for all the people involved. And so all of the questions, a lot of the areas of apprehension we had are mostly now sort of resolved and gone. That makes our lives a little easier. But otherwise, you know, brands, I mean broadly tend to be pretty open. I mean maybe it's just them matching our tone or the general sort of shape of the conversation. Maybe not. But I think generally the sort of conversation in our world with a lot of these younger brands is a lot more progressive. They're being a lot more sort of flexible in their thinking of physical retail in a lot of different ways. And that matches with how we're thinking about it. And so it turns into a pretty productive conversation.

Stephan: So that's a fascinating decision though, to kind of have your own staff and not allow the brand to like staff and own that part of the experience. What is the training like? What are you asking for from brands to get your staff up to speed and how do they, I guess, make sure that it's their ideas are being communicated well?

Matt: Yeah, so I mean, the general reason for it, just to back up quickly is that with Neighbor Goods we've built an inherently inconsistent room, right? So always changing brands with us form anywhere from a weekend to 12 months. And so any areas and opportunities we have to create some degree of consistency in that environment are important to us. So that often takes place for us currently in the form of foreign staff, off fixtures, having uniform signage and some of these other sort of visual parameters. You know, the comparison I used a lot when we were first raising capital is a similar to what Apple created in terms of a rule set around the app store, where if you want to be a first class citizen within that ecosystem, you have to abide by certain human interface guidelines, right? Very much the same thing for us. And so that was something that there was certainly amount of apprehension as I say, but the way we sort of resolved it was that the first store in plan is 14,000-feet. There were about 15 discreet brand areas within that, plus our own restaurant. We had always planned for there to be 10 to 15 brands in the room. At launch we ended up launching with around 24, 25 brands. And basically what we had found was that brands didn't necessarily want anywhere from 100 to 500 square feet. Some of them just wanted to have their products in the room. Some of them just wanted to come in and host events. Some of them wanted to be in a blended space with other brands and start representing a lot of different opportunities. So I ended up a little bit more dense than expected. The way we staffed around that and the way we trained around it was to carve the room into quadrants. So if you picture Neighborhood Goods, the first location is a big square, which it essentially is. You carve it into quadrants and you end up with five or six brands in each area give an take. And then you have roughly a proportionate amount of personnel in that area to those brands. So that put sort of discreet brand areas. So there's about 15 of them. You have a minimum of one person around and so you're able to have someone that becomes an expert on each area in each brand that can have a direct line of dialogue with those brands. And then you're able to sort of train in that quadrant on sort of a cross basis so that as someone that might be an expert on Hims, can also be an expert on Stadium Goods or Buck Mason or what have you. And so then what we do is within two weeks or so, we're typically able to cross train everyone in the room on all the brands. And so what we do is when we have a downtime, call it a Monday afternoon, we're able to bring people in and move them around the room so they can sort of hear these stories, cross train on other areas and ultimately be able to sort of speak to older products in the room. The goal being that if I come in and want to shop with Rothy's and then at Draper James, I can do so in one transaction, hear the story for both and ensure I have a good experience throughout. And so, we just want to fight back against that fragmentation. We don't want it to feel like a sort of a bazaar, right. We want it to feel thoughtful and cohesive. And so that's been our approach I think.

Stephan: I think the department store model, I mean it's obviously not a new idea. A department store has been around for quite a long time, but in recent episode with Paul Munford who writes Lean Luxe, we talked a lot about this challenge, especially online because brands today are really looking to own the whole experience. It can be hard on the shopper because you're having to go to all of these different websites and in the online universe there hasn't been as much of a push to reinvent the business model of a multi brand retail. You've done a little bit of that when Neighborhood Goods because you're also doing an online store. Are those two things, your physical location and your online presence, two completely different things or where do they blend in with each other?

Matt: No, they're the same. Up until a few weeks ago, you would have only found a small smattering of product that's in the store online that changed just recently. Where now every single product that's in the stool, barring one or two is online. And the general thing for me just from the beginning has been the, you know, I don't really want to delineate and draw lines between these different sales channels, right? That digital plays a real role for us. Just as much as physical does in as much as digital can really facilitate and foster more behavioral traits in store that we are looking for. So you think about Neighborhood Goods and Plano, you think, you know, 50% of our audience is coming in there organically just to come check it out, experience it. They may be excited that a new brand is launching with us. They want to go hang out, they want to go to the restroom, whatever it is. The other 50% of people are probably people that are specifically planning to come in because they're particularly excited about one particular product that's there. So you know, Rothys just launched over the weekend. For them they have this rabid and sort of really engaged audience. And some of the people haven't necessarily bought yet because they want to go in and they want to get the experience right. And so you know, you think about that sort of customer, they might be traveling a distance to come to Neighborhood Goods to come check out Rophy's for the first time. They really want to predicate their decision on what we do and do not have in stock or they may want to be able to order for for in store pickup or for on demand delivery or whatever it is. And so I think generally for us, we recognize that digital is this big opportunity to help with some of those behavioral elements. So we're not trying right now to focus on being a digital multi brand retailer as you have mentioned. But we sort of see that as a sort of a tangential opportunity to see as we go.

Stephan: I guess what I'm curious about, so just to pause for one second, is the business model then the same, you're paying as a brand Neighborhood Goods for is a space in the physical store, but then you're also getting online exposure or is there a separate business model for transactions that are purely online?

Matt: Yeah, currently the same.

Stephan: Got It. Got It. Interesting. So you can't be only on the website?

Matt: Not yet. I mean, I think generally we've got another location or two opening this year. I think there's a big opportunity for us to introduce products on the digital platform that's available for in-store pickup, but may not necessarily be merchandised in each location. Equally as brands age out of Neighborhood Goods. I think digital becomes a big solution for us to allow for that sort of utility shopper that really loves for argument's sake, a Buck Mason t-shirt and say we move Buck Mason out of one location but they're still active in another or they're not active in both. That we can still have those top selling products available in the digital platform and enabled for instore pickup so that we can continue to serve those sorts of people, right? And so right now, yeah, they are packaged very much the same way

Stephan: You mentioned "aged out". I'm curious what that means. I'm assuming you mentioned already that some companies are specifically looking for temporary space, but I'm also wondering what is the nature of Neighborhood Goods, relationship to the customer? Are you trying to be a place where things are constantly rotating and you're kind of bringing the Internet to the people and helping them discover new things? Or do you think there's also certain brands that you see having essentially full time presence there?

Matt: Yeah, I mean there's a balance. The longest we've allowed any brands to sign for in this sort of initial six months or so, we've been open is 12 months. You know, the feedback we get from consumers coming into the store is that they're sort of hungry for fairly rapid iteration. And so a lot of that's accomplished by, we have two or three events per week. And so there's always a reason to come in. And there's always that sense of magnetism to Neighborhood Goods that has very little to do with transactions and more do with discovery or experience or community or food or whatever it is. And so we suddenly have to have the rotation, but to your point, I mean I think we have to sort of find the balance between that sort of novelty of discovery and the sense of utility that you can come in and buy something. I think that's the real difference between us and you know an incumbent department store, that if I'm on the road and I'm in New York and I spill a coffee on my jeans, I know I can go to Nordstrom and buy the same pair of jeans regardless of where I am for the most part. With Neighborhood Goods the sort of virtue of our model is that each location is going to be different and relevant and thoughtful to a given market and so I think what we have to resolve is how we can be just as useful, still play that sort of element of utility for these people whilst also maintaining the sense of novelty and discoverability throughout.

Stephan: What else do you think is an opportunity that maybe brands are not seeing, especially the ones that are digitally native about coming into the physical world? I'm assuming a lot of them maybe are doing this for the first time or just trying to figure it out. What do you find yourself educating them about?

Matt: A lot of it really comes down to at least initially came down to the staffing and point of sale piece where a lot of these brands, I think are following along from a lot of the sort of obvious leaders in the cash berry like a Warby Parker or Peloton that have created really remarkably positive and is sort of quickly expanding at retail footprints. And so I think a lot of people are just sort of going into the same areas in a given city and offering a relatively similar experience and there's nothing necessarily wrong with that, but they're all sort of following the same playbook. And I think the opportunity with something in that Neighborhood Goods is that you can go in and test all sorts of different ideas and you might be able to uncover something that's more unique and specific and exciting for your business than necessarily following what some of the other leaders in the space are doing. And so I think what we've come to appreciate and what brands are starting to appreciate is that opening at something like Neighborhood Goods. It's not like having your own store, it's not like having your own popup. And in doing so it sort of allows for you to have this broader sense of opportunity for what you can do as a brand with physical retain. And I think that's opening up a lot more sort of thoughtful ideas and a lot of really playful stuff that we hadn't necessarily expected. And so that's very much been the focus is, how people can come in, how they can do something differently. And so in some ways on a much lower risk base this and learn something unique about their business specific to that market. And so as I mentioned, as we expand now the question is how we can do that in a relevant way in each different market. And it's something I talk about a lot, but generally I think all of us in the retail industry ultimately trading in a currency of relevance more than anything else. And so what a brand does with us in Plano might be drastically different than what they do with us in New York or elsewhere. And I think that's the real utility of what they do with us, where it's not like rolling out all their stools, but it can serve something different and useful on a much broader array of opportunities.

Stephan: Speaking of New York, you're opening a location there. Where is it and how will it be different? It's your second location now. That's pretty exciting.

Matt: Yeah. So we're opening at the entrance to a Chelsea Market and Meat Packing. So very high traffic, very exciting location. We'll be right at the entrance on Ninth Avenue. It's much smaller than what we have in Plano. You know in Plano we have 14,000 feet. This cumulatively is more like 8,000 but the bulk of it's really about 5,000 on the ground floor. And so we're doing a completely new food concept in there and I think generally it's going to be laid out and sort of run a little bit differently where rather than having these 15 discreet areas like we have in Plano, it's going to be much more blended and much more organized by categories. So in as much as Plano is our take on the department store, I think Chelsea may end up being more of our take on a boutique where it's less about the curation of brands and more about the curation of products.

Stephan: The curation of products versus brands, you're thinking on a shelf by shelf basis or what does that mean to you?

Matt: Yeah, so it's more like having a consistently designed room, all the same stuff that we're doing in Plano, having our own staff, having our own food experience, capturing a huge amount of data. But I think what we're seeing in a smaller space is the opportunities to do stuff more built around castries. So having a men's area, a women's area, home area, a kids area, and then allowing brands to manifest in those different areas in a lot of different ways. And so I think you think about the unique characteristics of Chelsea versus Plano and there's a lot of differences. Obviously the sheer volume of traffic coming into Chelsea Market every day is massive. And so if your goal is to come in and product test a new Colorway or a new iteration of our product, getting it in front of a sheer volume of people that match with the general demographics that you are targeting, that's very exciting. Whereas in Plano it's more of a spacious opportunity to test a more sort of developed and broader sense of what you are as a brand. And so I think they're very complimentary in that sense. And we're just trying to get away from that world where you're sort of saying, I want to be in New York because it's New York. Or I want to be in Plano because Plano, which no one's ever said before, but maybe they will this time. We're trying to get more to the core of what utility you would find in a given area. I think for New York it's leveraging traffic. It's leveraging the coolest sort of density of the demographics of people you're looking for. And for us having a smaller space, having a blended space, it still allows for brands to have a full sort of built out manifestation of themselves. But the opportunity we're really driving at is much more on a product by product basis.

Stephan: When you look at other companies who are experimenting a lot in retailing, and you mentioned some of them on the brand side, like Warby Parker and Peloton or I was thinking Rapha was another one that we talked a bunch about on the recent episode with Paul Munford. But then on the other side you've got companies like Amazon who are doing a lot in recently with their acquisition of whole foods, but with their own stores of trying to automate the entire experience, bring a lot of technology into it, bring AI, self checkout, all of these things in that spectrum. What do you find yourself inspired by or wanting to take concepts from?

Matt: That's a good question. I don't know. I mean I think it's a really interesting time in the retail space in general. I think well we're participate in a really interesting conversation right now where I think we're fundamentally reimagining what physical retail is useful for. I think Nordstrom are doing some really interesting stuff with their local stores. I think was as saying really interesting stuff from Yes, like the Amazons of the world. A particular favorite example of mine right now that I give a lot is a Camp in New York on Fifth Avenue. It's a very sort of theme and experience driven store for kids. And people are lining up every weekend to get in, run by a guy called Ben Kaufman who's also the CMO at Buzzfeed. And it's just a remarkable experience. It's sort of thoughtfully done. They pulled it together incredibly quickly and I think it brings a lot of that sense of magic back to that experience. Even for me as an adult going in, I can only imagine how fun it would be as a kid, whether if the classes they host and the content they produce to this sort of ever changing retail. And so I'm a big fan. I think similarly what Rachel's doing introducing stories all sorts of different Macy's locations is really exciting and I'm really excited to see that experience proliferate around the country. I think, for me, anyone that's doing this sort of stuff and orienting it around this real sort of sense of human experience and not experience with a capital E sort of embarrassing buzzwords, sort of sense in the industry. But more sort of creating something really memorable and really relevant and playful and honest, that's really where I get excited. So the technology to enable it is very interesting to me. We do a lot of that. We have an app that allows for a lot of thoughtful stuff. We capture a huge amount of data from cameras, things like that. But that's relatively easy to do, relatively speaking. But developing something that feels a particular way is a lot harder. And so I think that's really sort of what I'm focusing on when I'm looking at these experiences and. I think there's a lot of people contributing. It's not particularly fair for me to even name one or two, but my go to right now, as I say, is Camp.

Stephan: If people are following the trends in retail, they'll probably know that malls in general are going through a pretty rough time shrinking. There's a lot of big retailers who are shutting down locations or going out of business entirely. Companies like Roys'R'Us for example, last year shut down hundreds of locations and went bankrupt. How does that affect what you're doing and maybe on a meta level, what does the retail landscape look like10 or 20 years from now once things settle down?

Matt: Yeah, I mean, look, if you look at older projections around the industry, physical retail continues to account for the bulk of transactional behavior for the next 10 to 15 years, at a minimum. Physical retail's not going anywhere. It's just changing. And physical retail certainly isn't dead. It's just that mundane experiences and sort of the general stagnation we've seen in the industry. It's dying out and it's signed to sort of become much more obvious who has failed to sort of capitalize on the sort of breadth of opportunity in this industry. You know, Steve Dennis who contributes to Forbes. I think his headline about it was the physical retail isn't dead, that boring retail is dead. And I very much agree with that. And I think what's going to be interesting is that there's a huge amount of real estate in the world, huge amount of specifically sort of retail real estate in the country even. And I think it's going to be interesting to see how people start engaging with that. I think ultimately at the end of the day, it's a great social vehicle. I think people still like to get together to go shopping or to gather in a particular place. The element of shopping might change a bit, but I think as long as you're designing and developing something that can be exciting and relevant and bring people together in sort of a new and different way and give people a really good reason to go to a place, I think that's inevitably a winning direction. I think the challenge is when people are focusing just on experience or technology just for the sake of it, right? Where just because you can have a particular feature in your store that will bring people there and it might do it for a short period of time, but it's not a long term solution. And so I think anyone that's trying to develop something that's contributing something to a broader conversation and trying to keep an eye on how you create something really ultimately memorable, that's going to be the direction that builds something successful. And so I think for the incumbent retailers, it's going to be for them and effort in trying to modernize their economics as to how they work with brands. So, not necessarily exclusively operating on a wholesale basis, but it's also going to be about introducing more stories and empowering more of a sense of character for their employees so that they can have this really sort of relevant mix of products that are operating on a more sort of lucrative basis for brands and them alike. Getting them away from just operating on sales and this general race to the bottom in terms of brand and price integrity. And sort of gather around this idea of bringing people in for a reason that might have some sense of ROI and some sense of economic growth in a new and different way than hadn't necessarily been done before. And so I think everyone generally it seems to be thinking about it the right way. I think the danger is when people start just focusing exclusively on having smart mirrors everywhere and having random sort of new features they can introduce in the store that aren't necessarily improving the experience their just adding more noise to it. And so, inevitably if you're introducing those sorts of features that they're fine, but they're not necessarily going to improve who you are as a business. And I think we've certainly seen that with some of the incumbents in the space who are going about things very much in an interesting and sort of thoughtful direction. But then they undercut themselves by sort of hamstring the product to purely focused on the transactional element of it or doing sort of a half baked version of an idea. And I think that's where the danger resides.

Stephan: Do you think that most online brands should be experimenting more with retail or do you think that there's certain types of companies where physical retail doesn't bring that much to them or isn't really a good fit?

Matt: I mean, I think experimentation is always relevant and it's always an area of opportunity. I think we have brands like Hims at Neighborhood Goods, it was their first of physical retail presence. And that's a very interesting sort of idea, right? They can't necessarily, they can't offer physical prescriptions to people inside our store. But they can still use it for a broader array of purposes. And now I wouldn't be surprised if they started rolling out a lot more physical concepts, right? And so I think for them, and for a lot of other brands, there's always going to be a reason. It might be that you sort of test one of these ideas and find that it doesn't work, but at least you know that now. And at least you've tested an idea. I think the brands that stick only to one particular channel over another, that's where it can become problematic. I think at the end of the day, if you're able to sort of organize your sort of community and your customers around a physical concept for whatever the end may be in your mind, I don't think that that's going to create any issues for you. It might be an expensive experiment that doesn't drive as much as you would've hoped, but at the end of the day it's going to be something positive unless you really just completely messed it up. And so I think there's certainly no harm in it and I would certainly encourage a lot more brands to be doing it. And it's not necessarily talking about us, but it's testing their own ideas. I think generally the economics we're seeing for acquiring customers online, as I sort of mentioned at the very beginning, they're not necessarily sustainable. So the more we can do to bring brands into a physical space to test new ideas and to acquire customers in a more sustainable basis, I think that that's an idea that's going to be relevant to a lot of different people for a lot of different reasons.

Stephan: Is there a way that Neighborhood Goods, you're able to get a sense from the brands of how much is actually converting to their online stores or from that discovery?

Matt: Yeah, I mean the goal is to provide customers that opt in to provide the email addresses and that journalistic transactional information back to the brands so that ultimately they can yes, track that sort of sense of ROI. I think also we're encouraging brands to look at a sort of general sale. And it's very obvious, but a sales trend within a certain sort of radius of a given location, right? And I think that's a very long standing area that a lot of people who have been tracking when they've hosted pop ups is that they tend to see significant sales lifts in a general sort of geographic proximity to that location. And so we're certainly doing the same thing and then we're certainly passing along that information. I think what gets interesting for us is that brands may come in and they may be focused outwardly on a particular demographic of people. But what we find from a data perspective inside the store is that their products might be relevant to an older or younger or whatever it is, demographic of people than they would have expected and were able to stop playing with different sort of merchandising strategies and general sort of opportunities to acquire those customers that might become really informative over a broader strategy outside of walls. And so it might be that a brand is really focused on women in their late twenties but it turns out they're really popular with women in their late thirties. And that if you remerchandise and have a slightly different mix of products that it can convert at a really, really, really rapid rate. And so these are the sorts of things we're trying to sort of focus on. Where I think where our power is as a brand is on that relational sort of qualitative aspects. So we provide the data that we provide as much reporting and granularity as we can, and then we certainly allow for these customers, these brands to be acquiring these customers. But I think the real power we're trying to do is to serve that element of experimentation. Well, we're there to say, hey, did you know that this is happening? Or this is what we think this metric means. So anecdotally, the people that are staffing your particular brand area, they've been providing this feedback on a daily basis and we're seeing this from the data. So we think we should try out X, Y and Z ideas to improve upon this. So to expand upon that, so to enhance a particular thing we've seen and that's where it gets really, really fun to start collaborating.

Stephan: Yeah, that's fascinating. And I guess the part that I wonder about there is as a company, how do you develop that competency or at that point you become almost like a consultant or something. Like you're giving the brand advice on how they should approach this experiment or how to assess the results of it.

Matt: I mean, that's exactly what we're doing right now. And I think, you asked me about how we go out and differentiate ourselves from these other brands and I told you about how we start with a question and that it's a different outcome for each brand. And then we try to have this sort of unique approach. I was talking to some other folks in the industry just last week and a lot of people are approaching brands by trying to have sort of a one size fits all mentality and that may not even do it justice. But that they do a particular thing and they do it particularly well and that's how they're going to work and that's how they can scale. I think that's all well and good, but I think the reality is that in the physical retail space in particular right now, there's such a broad array and a broad spectrum of ideas that people want to pursue for such a drastically different set of reasons. I think what's really important is to provide the sort of table stakes data and that sense of service and utility by default. So you know, ultimately at the end of the day you're going to be focused on trying to sell product or on trying to sort of bring a rural amount of foot traffic into an area and that's fine. But I think it is really important to try to bring a perspective around that data and to actively push back when ideas aren't necessarily the right ones. So a brand may come in and say, we want to do X, Y, and Z thing. And they might list out that sort of list of goals, but it may not be the right list or it may need to be challenged a little bit. And so I think our role increasingly is to sort of lean on what little sort of autonomy and agency we've been able to sort of generate and that sense of authority from a very small amount of experience, but sort of act as those sort of advice and those consultants to sort of say, here's what we're seeing, here's what we're seeing in the cash carrier, here's what we're seeing is working in this particular area and here's how we think we should help you manifest. And I think that's where it becomes really interesting for us as we expand. So when we're in Chelsea, what we're doing with a particular brand there versus what we're doing in Plano that could become really unsustainable. But you know, if we are centralizing brands and the relationship there, so that Raphy is signing up to work with us as Neighborhood Goods rather than just as one particular location or another. Then we can start to sort of talk to those brands about how we can sort of build towards solving different problems and identifying different areas of opportunity in different areas around the country. And being able to sort of think about how those sort of ideas can feed each other from different locations or how we can stop moving brands around and moving different assets and fixtures and furnishing around so that we can serve these different goals. And I think, it's a broader sort of mandate and it's not necessarily easy to do, but I think that is a big, big, big area of opportunity. And I think it really speaks to the strengths of who and what we are as a brand.

Stephan: Some companies have done an incredible job with creating hype around their products. Supreme comes to mind. Apple, you know, in maybe a previous era was known to really try and generate these long lines coming out of the store. And there's many other companies that have tried that approach. I think Everlane has gone down that path as well with its retail stores. How much of that do you think works or is a good idea or is something that you would want to try to recreate with Neighborhood Goods or what's your take on that?

Matt: I mean, we've certainly dabbled with it. In our second or third week Serena Williams came and launched her new size inclusive clothing line with us in person. Just more recently we did an event with a local street wear brand called By Way of Dallas where we did a collaborative jacket and some t-shirts. We did it as an event that was sort of invitational on the Friday evening and then did it as a public sort of drop of sorts on the Saturday morning. And we had people lining up around the building and both of those instances for the By Way of Dallas one they were lining up in the midst of a hail storm. And it just sort of shows how people can really sort of self organize around these things. And so I think that's very important. I think it's a lot of fun to experiment with and I think in as much as you can create that sense of excitement, I think it only feeds the sense of community around the thing. I think as with anything, it's a balance for us. Ultimately we want to create a really dignified and positive memory of your experience. And if you queue up in the rain and you can't get in, or you're really excited about meeting Serena Williams and you don't have the chance that can be really disappointing. And so we don't really want to be in this area that can either be like on a very polarizing basis, either be extremely memorable and positive because you've got to do a very exclusive thing. Or extremely disappointing and an object of hate because you weren't able to or allowed to do a thing. And so I think it's about finding that balance. So you know, we'll always continue to experiment with building a certain sense of hype and these sort of drops we can do in the store. We do it occasionally with stadium goods, which is a launch brand of ours. And hopefully we'll continue to do that in the future as we expand. Doing these sorts of experiments with more local brands that have sort of these cult followings like By Way of Dallas is something we definitely want to continue to do. But we also have events we're hosting with anything from Equinox to PURE Bar to The Taught to some of our more sort of communal based music events and things that are open to everyone and sort of really foster this sense of openness and inclusivity within our world. And so, we're trying to sort of do a bit of both. And I think that hype in those areas of opportunity in creating those drops, it has a real role to play. It just has to be done for us at least relatively sparingly. And so I think, we talk a lot these days about how we would develop a loyalty program. And for us, I think it's less about with traditional loyalty programs are invested in transactional behavior. I think a loyalty program for us would be more about access to experiences, right? And so it's not necessarily precluding people from being able to see something, but it's just giving them a priority or a sudden early preview or helping them buy more into a sense of community than they would otherwise. And so, again, a real balance. But I think it's a very, very powerful thing as you know, as everyone knows when executed correctly. It's just, if you exclusively rely on that, I think the value of it and the excitement of it can die out relatively quickly. Whereas if he does it sparingly and makes it this real moment deserving of excitement I think that affords you a lot more sort of permission to have these exclusive moments that might not be able to serve everyone because it becomes a lot more understandable. But that's just for us.

Stephan: There's a word that you've used a lot throughout the conversation, which is dignified, what does that mean to you or why is that an important word?

Matt: I'm not going to be able to attribute this to the right person, but when I was at Shop Talk earlier this year, I was speaking at a lunch PSFK the industry publication and it was sort of this group of sort of thoughtful people in the retail industry and it was this big sort of open conversation around the room. And someone that the remarkable thing to bear in mind about physical retail in particular is that your best memory of a physical retail experience is because of a really great store associate. Your worst memory of a physical retail experience is also because of a store associate. And I think what's important to bear in mind there is that when you're building something transactional, everyone could come in and have exactly the same experience, but for some people subjectively they might hate that or somebody might go really wrong. And then that sense of social validation starts to sort of waver because you start getting really bad reviews and whatever else. And so I think for us in as much as we've afforded ourselves more latitude to focus on creating a really sort of memorable room and create an experience that's invested in the core tenants of what would make an experience memorable. That allows for us to really focus on that sense of experience in creating something that's dignified and thoughtful. I mean it's just the same reason you would go online to buy from one of these direct consumer brands. It's the reason they came into existence in the first place is that they saw an opportunity to tell a better story, to build a better product, to do one thing really well. And I think if you extend that philosophy to physical retail it's a very admirable thing to try to pursue. It's not easy, but it's important. And so I think for us it's ultimately about creating that magnetism to our room that has very little to do with transactions and much more to do with very positive reasons to commit. Whether it's getting together for drinks or coming together for an event that's relevant to you or because a brand you really care about is launching there or because there's an exercise class or a meditation class or whatever it is. If you're coming in purely because we want to extract dollars from wallets or because there's always sales and discounts and whatever else. I think that's a quick race to the bottom in terms of our relationship with the customer. Whereas if we can focus on making that relationship a little bit more long term and giving people a real reason to keep coming back and to getting to know or to get to know the people that work with us and for us. I think that's something very, very powerful and it's something very human and something very fallible. And I think that's ultimately a very good thing to pursue in this space.

Stephan: And when I hear you describe this, none of what you just said is different than what you could have said like a hundred years ago about a retail store. And it just makes me really imagine you living in a different era because I feel like you would have run the same business a hundred years ago as you do today and the brands and the companies would have been different. And maybe the environment and the world would have been changing in different ways, but it feels like the type of experience that you want to create a sort of timeless that way.

Matt: Yeah, I mean it's an extremely traditional idea. And I've talked about this with investors before, is that and we've already talked about in this conversation is that what we're doing isn't necessarily new. If anything, we're introducing a very, very, very traditional take on the retail experience but just with more sort of progressive technology and thoughtful brands and a different sort of approach to how we scale that, right? And so yeah, I mean it's an extremely sort of timeless idea I think. And I think that we're seeing in a lot of different industries, right? You know, I talk about the media space a lot and how we're shifting away. The sort of vogue thing to do is to cancel your cable subscription and increasingly though everyone signing up for all these disparate, different streaming services and I can't imagine it's much longer before someone comes around and pitches us on here's a bundle of different streaming services that you can sign up for it's $100 a month and suddenly you have a cable subscription again, right? We're sort of contributing to very much the same phenomenon in the retail space where what is old is new again. When people talk about what our priorities are moving forward, something I talk about a lot is self awareness, which I think is the real culprit why we sort of stuck in the cycle, right? Where you look at the income and sort of department store concepts of the past 50 to 100 years. They all started doing this with this real focus on customer experience and creating that sort of really dignified experience inside the store and having a really relevant or set of products in there for a given market, exactly what we're trying to do today. And ultimately they sort of lost track of the areas of opportunities to continue to improve upon that and to leverage technology in the right and sort of thoughtful way to improve upon those experiences. And as a result, they become increasingly irrelevant and allowed for someone to come back around like us to sort of pitch this idea. And so certainly there are elements of a difference there. But yeah, I mean I think we're very much contributing to this very, very sort of traditional perspective. And there's a lot of new ideas bundled into that. But ultimately I think you're right. It is a very traditional idea.

Stephan: Yeah. So something I've been fascinated about is with the move towards buying a lot of things online and simultaneously this other kind of crazy idea that's looming on the horizon of what if more of cars and transportation was a self driving and automatic, the shape of cities will probably change quite a bit over the next hundred years. Because you don't need to have a huge Walmart in the middle of the city. You can put it further away because you can get most of that stuff delivered directly to your home. And you know, both of us, I think people will know from your accent, they wouldn't know from mine but we're both European. I grew up in and was raised and lived in France most of my life until I went to college. And the shape of cities in Europe seems like it makes much more sense for that future world because it's very dense in the middle and you have much more pedestrian type of areas. Whereas in the US we're sort of inside out. There's a lot of a wide open spaces unless you're talking about New York and some other smaller east coast towns or San Francisco. But I wonder about that in terms of how the purpose of retail will evolve, especially in the United States over the next 20 to 100 years because it feels like the shape of the city is wrong for like where we're going and when I think about what's not going to change. If the idea that you're working on could have existed 100 years ago, I think it could still exist a hundred years from now, people will probably still need pants and want to try them out. This is not really a question. As we're wrapping up, I'm trying to figure out how is America going to reconfigure itself to fit with this the new way people are buying things and want to live.

Matt: Yeah. When people ask me about where I think the industry is going and what sort of technology I see on the horizon that might make an impact. The one I always talk about that is sort of it's difficult to articulate exactly how far away it is, but I spoke about self driving cars and what strikes me as very interesting about it is that it unlocks social opportunity for people at either end of the sort of age spectrum. So that if you're sort of at a point where you're a little bit too old to drive, or you're not necessarily comfortable driving in particular situations, you could still get somewhere to gather with other people. Equally, if you're younger and you're not old enough to drive yet or you would typically rely on your parents to drive you to the mall so you can socialize whatever it is, instead, it's suddenly unlocked and available to you. And I think ultimately what's happening alongside that is the fluidity of transportation means that product availability is going to be much more universal. It's going to be easier than ever to get a hold of a product fairly quickly. But that physical experience and that social experience around it and that sense of sociability that comes with purchasing a product and going and assessing something so to speak and sort of coming together around the experiences that come along with that. I think you're right that that doesn't necessarily go away. And so I think the responsibility of these retail concepts and of these sort of developers creating new sort of mixed use developments is to really focus on having that anchor of purpose being around creating a good. And I'm going to use the word again, dignified place where people can come together and socialize for a good reason. And for us as a retailer that's introducing all sorts of different brands and all sorts of different cash greys, it's understanding that we're never really going to be able to compete with Amazon being able to get a product to you within a matter of hours, maybe less in the future, right? You can get anything, anytime you want at a really great price, but you may not be able to get it and learn the story of it and feel proud about it, which is 90% of the equation when it comes to buying a product is that you're ultimately buying into the identity that comes with it. And so I think as long as we maintain collectively that sense of self awareness, that there is that opportunity to tell stories and there is the opportunity to give people a place to gather and creating the purpose around that and allowing that to be the north star of the thing. I think that is where we have to go.

Stephan: I was fascinated with what you were saying about how self-driving kind of brings people of different backgrounds together because distance becomes less relevant in that world. And you can sort of see that today with Uber and Lyft. You know, I know that a lot of parents who will just have their kids taken around in those and it gives them a lot more freedom for people who can't drive. I think if this was a few months ago that I tweeted this at some point in the next 10 years, more creative folks will be moving into abandoned parking structures and malls than old warehouses and factories. But I'm sitting here in a loft or like apartment that used to be a warehouse and a lot of the neighborhood I've been living in and working in for the past 10 years is the arts district in Los Angeles is all just old warehouses that have been turned into retail stores and into apartments. And you see that in a lot of the so-called or "hipster neighborhoods" like in Brooklyn and all over the US. The thing that I was talking about is that these places that we have today, like malls and big box stores and huge parking lots in a world where people can get around much more easily and not have to store their car permanently on the street, you get a structure of a city that is much more oriented towards a human, almost like more medieval type of way of living where people are interacting with each other in a much closer way. And I'm kind of fascinated and excited for that to happen because I think as the Internet seems to like pull us apart, like maybe the physical way that we live might end up pulling us back together because of the fact that we don't necessarily need as much space to store our cars or all of our stuff. I'm hoping for that at least.

Matt: Yeah, I think it's a good thing to hope for.

Stephan: All right. Well this has been episode 80 something, 84. It's been 80 episodes since your last time. Hopefully we'll see you before episode 164 or 168. It's been really fascinating to hear about Neighborhood Goods. I hope that if you are listening and you're working at an online brand, you go take a look at what you're up to. If people are working for a brand or started their own brand and are interested in being at Neighborhood Goods what should they do?

Matt: Go to neighborhoods.com you can apply right there. You can also see all the different brands we have and all the upcoming events we're hosting and see some of how we're presenting a product online. So that'll give you a good sense of things. You can follow us on most social channels as Neighborhood Goods and send us a message there. The one exception is on Twitter, we're @nbhdgoods. But yeah, I mean there's a lot of different ways to get in touch and we welcome you to come through any and all of them.

Stephan: All right. Well, Texas in Plano and now Chelsea Market. Very exciting. Hope people get a chance to check it out. Thank you so much, Matt.

Matt: Thank you.

Stephan: Oh, one last thing before we go, I'm talking to you at home. What's your favorite brand these days? Is there something that you think is really well made or maybe someone that you love for me to talk to? Send us a tweet. We are @lumi on Twitter. We're making this show for you. So tell us what you want to hear and we'll make it happen. Thanks. See you next time.

You can find this and all future episodes on iTunes, Google Play, and here on the Lumi blog. This episode was edited by Evan Goodchild.

Innovative brands use Lumi to manage scalable and sustainable packaging.

Learn more →