The Retail Innovation Factor 13 brands who get it right

Retail is in the midst of a dramatic disruption.

But, this does NOT mean brick and mortar

retail is dead.

In fact...

Close to 90% of purchases still occur in store.

The key shopper demographic

MILLENNIALS

have demonstrated that they are not traditional shoppers. They hunger for

experiences and a personal relationship with brands.

And, in-store customers are often more loyal. According to Birchbox,

its in-store customers have

3X the lifetime value.

Smart retailers understand the benefits of the in-store experience

to consumers. At its core are

discovery, trial and instant gratification.

A 2016 survey revealed that

85% of consumers prefer in-store shopping to online,

due in part to the personalized and tangible experiences physical retail can deliver.

How are brands capitalizing on today’s brick and mortar

experience?

Traditional Retailers

In-store innovation

separates winners

from losers

& Other Stories nails the “total brand” experience.

Each seasonal collection has a story of its own.

For example, the fall collection offers four “stories” each based on a different city - Stockholm, Paris, New York

and Berlin. These stories are told both in-store and online.

The clothes, jewelry, lingerie and cosmetics all complement and coordinate with each other. For example, the pink nail

polish matches the pink in the coat.

Everything is very purposeful, thoughtful, and intentional.

2013 2014 2015 2016

H&M launches “& Other Stories” – the

fast fashion giant’s answer to the luxury market

Opens first U.S. location in NYC

Opens second NYC store on Fifth Avenue

Opens stores in Costa Mesa, CA,

World Trade Center, NY, Georgetown in

Washington, D.C.

& Other Stories Timeline

“H&M continues to dominate the apparel category because of their commitment to

brand storytelling and new store openings in strategic locations.”

- Nick Koeijmans,Partner, RetailUnion

“Everyone is trying to think about how to differentiate and distinguish their brands, and lifestyle is the way they’re doing it.”

- Dana Telsey, CEO, Telsey Advisory Group

Anthropologie & Co.is taking experientialretail to the next level.

Its 30,000-square-foot destination superstores* attract more foot traffic and compel customers to carry on with their

shopping for more than 30 minutes.

*Locations: Walnut Creek, CA, Palo Alto, CA, Portland, OR, Newport Beach, CA,King of Prussia, PA, Westport, CT (2017)

75% of consumers prefer customized experiences – which is the key to success

for retailers, whether they operate through clicks or bricks.

“We love our stores. It’s a way for us to really connect with

the customer. They get to feel [the brand], not only through the

clothes but through the environment and our

people.”

- Billy Reid,Designer

“We really started Shindig to connect people to Alabama and show them what we were doing. It started to expand to not just our

community, but to photographers, chefs, artists or musicians. Eventually it became much more of a happening, sort of like a festival.” - Billy Reid

2008 2010 2016

Opens Bond Street Store in NYC

Launched the annual “Shindig” event concept

Wins CFDA/Vogue Fashion Fund Prize

Operating 13 total brick and mortar stores in

nine states: NY, LA, GA, TX, TN, AL, DC, SC, IL

Billy Reid Timeline

2017

Taking Shindig event concept “on the road.”

“Billy Reid goes above and beyond, leveraging

real estate, curated events and southern hospitality to connect with customers and build fierce loyalty.”

-Daphne Berger,Vice President, RetailUnion

Consumers appear to favor services and experiences over merchandise. By 2020,

consumers will be spending $2 on services for every $1 they spend on stuff.

services merchandise

vs

“We incubated MiniLuxe with the vision to ‘Starbucks’ the nail salon and bring more professionalized standards to the industry.” - Tony Tjan, CEO & Managing Partner, Cue Ball Capital

2007 2014

Opens first salon in Netown, MA with $1 million in seed

funding from Boston’s Cue Ball Capital

Secures $23 million in Series C round of funding from outside

investors

MiniLuxe Timeline

2016

Now there are 18 MiniLuxe locations and counting in CA,

MA, RI, TX

“MiniLuxe has done for nail salons what Starbucks did for coffee shops. They have elevated a weekly necessity into a luxurious

and pampering experience located right in the

neighborhoods of their best customers.”

-Carey Moen,Vice President, RetailUnion

Luxury fashion houses are opening a wave of stand-alone

“Beautiques”to create brand awareness and attract the Millennial customer.

Dior opened four beauty boutiques in the US: Forum Shops at Caesar’s Palace, Valley Fair in Santa Clara, Highland Park Village

in Dallas, and Westfield’s World Trade Center NYC.

“This move is a bid to embrace a younger customer who perhaps feels too intimidated to shop in Dior’s fashion

boutiques, or who maybe didn’t see herself as a department store counter customer.” - BeautyMART

E-tailers

Driving sales growth

through physical

storefronts

There are more than

800,000 online stores all vying to attract customers through the

gateway of Google.

“It’s very hard to launch a brand these days that’s just online-only. It’s an incredibly difficult and crowded e-commerce environment.”

-Sucharita Mulpuru, Retail Analyst, Forrester Research

Omnichannel shoppers buy

254% more on average than single channel shoppers.

Single channel Omnichannel

“Consumers want an on-line experience in a three-dimensional retail

setting. That’s really what we think the

Millennial customer is interested in--having a

holistic, compelling experience that’s

memorable.”

-Harvey Kanter,CEO, Blue Nile

“We want to see if the one web room, which has really had great results, can be extrapolated to five. And if five web rooms perform even similarly, I think it would become part of the broader strategy and a major growth

initiative in 2017 and beyond.” - Harvey Kanter, CEO, Blue Nile

1999 2015

Launches online store

Opens first stand alone brick and mortar “web room” on

Long Island, NY at Roosevelt Field Mall

Blue Nile Timeline

2016

Opens 4 web rooms: The Westchester in NY, Tysons Corner Center

in VA, Washington Square in OR and

Bellevue Square in WA

2013

Tests brick and mortar with two “in-store” Nordstrom

locations

Warby Parker, an early online-only entrant, opened its Soho flagship store in 2013 and

now has 36 stores in 17 states.

Warby Parker stores average

$3,000per square foot.

Co-founder Neil Blumenthal said he could envision

a future with 800 to 1,000

physical stores.

“We see a halo effect where stores themselves become a great generator of awareness for our brand,

drive a lot of traffic to our website and accelerate our e-commerce sales.”

- Dave Bilboa, Co-founder, Warby Parker

The average order size in Bonobos’

stores has proven to be

2Xthat of online, with a higher

proportion of new customers also coming through the guideshop.

2007 2012 2020

Launches online store

Opens its fleet of brick and mortar guideshops in response to digital

customers who wanted to try items on before buying.

Plans to have 100 stores open. Founder Andy Dunn expects a “tidal wave” of e-commerce companies to

make a similar leap.

Bonobos Timeline

“The Beverly Hills store is a sanctuary where people can feel and see what we’re all about. We’re all familiar with Alo from seeing it on the yoga instructor in the class, but to actually have a tangible place to

walk inside and experience it is pretty unique.”

- Danny Harris, Co-founder, Alo Yoga

2008 2021

Launches online store

Plans to have opened 19 more US locations

Alo Yoga Timeline

2016

Opens Flagship Beverly Hills store

Food & Beverage

Destinations for

consumers seeking

experiences and

community

Eataly, the largest Italian market in the world, is “a veritable theme park for foodies—Epcot for epicures,

if you will.” – Entrepreneur

“Since opening in 2010, Eataly has

emerged as one of New York’s busiest

shopping destinations and tourist attractions, welcoming 8,000 to 10,000 guests each

weekday and 12,000 to 13,000 per day on

weekends.”

- Entrepreneur

2007 2010 2013

Opens first store in

Turin, Italy

Opens first NYC store

near Madison Square Park

Opens the largest store in the U.S. on Michigan

Avenue in Chicago

Eataly Timeline

2016

Opens second NYC store at Westfield

World Trade Center

2017

Opening first LA store at Westfield Century City

2018

Opening at Park MGM Casino in

Las Vegas

Wally’s Beverly Hills is a small space – about

7,500 square feet - that unites the

world’s best wine with a contemporary restaurant, hot social

scene and food market together into one

experiential concept.

“We went from being a traditional, small wine and

spirits store to reaching out all over the world and selling products globally. The market has changed

dramatically. Our customers’ needs and desires have

also evolved. My goal is to have a vehicle that allows

me to expose people to food and wine in a

passionate, curated way.”

- Christian Navarro,Co-owner, Wally’s

Non-traditional

Retailers

Disrupting old practices

and exploring new

avenues

Disrupting the auto sales model

Tesla started in Silicon Valley in 2003, and now consistently produces

2,000 vehicles per week. Tesla expects to deliver

80,000 cars in 2016.

“Traditional independent

dealerships are usually built on large plots of land in out-of-the-way locations. In contrast, Tesla stores are better off in areas that have

a lot of foot traffic like malls and city centers.”

--Todd Maron, General Counsel, Tesla

Transforming into an auto AND mobility company

FordHubs are urban storefronts where consumers can explore the company’s latest innovations, learn about its

mobility services and experience exclusive events.

Opening in New York, San Francisco, London and Shanghai.

“These aren’t places where we’re trying to sell something. We

want to hear people’s thoughts, and we want

to show them what we’re doing to solve the transportation issues of today and tomorrow – and not just in their city, but around the world.”

Stephen Odell, Executive Vice President, Ford

Innovative Real Estate

Solutions for Bricks

and Clicks Retail

RetailUnion is a retail real estate firm known for representing innovative tenants and helping them find the right location near the right brands

for the right price.

The leadership team brings 70+ years of combined experience and unparalleled industry relationships. They have secured tenant locations in every top-rated shopping center and on all the

great streets of the world.

Koeijmans Robinson Moen Berger

RetailUnion tenant rep services include:Market analysis

Strategic planningMarket tours

Sales projectionsFinancial evaluation/pro forma

Board and executive presentationsSite disposition

Economic and business negotiationsLease execution

Want a winning growth strategy?

Contact: Brett Robinson

brett@retailunion.com 214-243-8999

Nick Koeijmans nick@retailunion.com

214-668-6244

Sources:Slide 5: https://techcrunch.com/2016/04/18/the-next-frontier-is-retailing/Slide 6: https://techcrunch.com/2015/07/13/beauty-product-subscription-service-birchbox-is-opening-more-brick-and-mortar-retail-stores/Slide 7: https://techcrunch.com/2016/04/18/the-next-frontier-is-retailing/Slide 8: https://storage.googleapis.com/realmassive-reports/The_Retail_CREcosystem_RealMassive.pdfSlide 9: http://www.cnbc.com/2016/04/29/cramer-retail-isnt-dead-millennials-are-changing-the-game.htmlSlide 15: http://fashionista.com/2012/09/hms-new-luxury-line-other-stories-to-launch-spring-2013Slide 17: https://www.businessoffashion.com/articles/intelligence/anthropologie-super-storeSlide 19: https://www.businessoffashion.com/articles/intelligence/anthropologie-super-storeSlide 20: http://www.forbes.com/sites/didemtali/2016/09/13/high-street-retail/#7548844c36daSlide 21: http://fashionista.com/2015/01/billy-reidSlide 22: http://observer.com/2016/03/billy-reid-wants-to-take-his-shindig-festival-on-the-road/ Slide 23: http://www.fashionnstyle.com/articles/89392/20160831/jack-white-alison-and-matthew-mosshart-and-more-at-the-billy-reid-shindig-no8.htmSlide 25: https://nrf.com/news/top-100-retailers-2016Slide 26: https://techcrunch.com/2014/10/07/miniluxe-brings-its-high-tech-beauty-salons-nationwide-with-23m-in-new-funding/Slide 27: http://www.forbes.com/sites/boburlingham/2016/01/27/cue-ball-group-went-looking-for-the-next-starbucks-and-found-a-fresh-approach-to-venture-capital/#3e3d9be86487Slides 29, 30 and 31: http://www.stylus.com/tyhdldhttp://thisisbeautymart.com/magazine/2015/01/08/boutique-beautys-new-retail-trend/Slides 33 and 34: https://www.theguardian.com/business/2016/jan/30/future-of-e-commerce-bricks-and-mortarSlide 35: https://storage.googleapis.com/realmassive-reports/The_Retail_CREcosystem_RealMassive.pdfSlide 37: http://www.geekwire.com/2016/amazon-books/ Slide 38: http://www.theverge.com/2016/7/6/12112506/amazon-physical-bookstore-new-york-city-opening-manhattanSlide 40: http://www.geekwire.com/2015/for-online-diamond-seller-blue-nile-brick-and-mortar-stores-may-be-key-to-millennials-wallets/Slides 41 and 42: http://www.designretailonline.com/projects/technology/Blue-Nile-Launches-a-Webroom-25208.shtmlSlide 43: http://www.wsj.com/articles/warby-parker-bonobos-have-big-plans-for-physical-stores-1475767980 Slides 44 and 45: https://techcrunch.com/2015/11/26/3-ways-amazons-new-bookstore-flips-the-script/Slide 46: https://www.theguardian.com/business/2016/jan/30/future-of-e-commerce-bricks-and-mortarSlide 47: http://www.wsj.com/articles/warby-parker-bonobos-have-big-plans-for-physical-stores-1475767980Slides 48 and 49: http://www.wellandgood.com/good-looks/alo-yoga-clothing-first-store/Slides 51 and 52: https://www.entrepreneur.com/article/238389Slide 53: http://www.eataly.net/it_en/who-we-are/about-eatalyhttp://newsroom.mgmresorts.com/mgm-resorts/latest-news/company-news/eataly-to-open-in-las-vegas.htm https://www.entrepreneur.com/article/238389Slide 56: http://marketwatchmag.com/wallys-christian-navarro-leaders-2016/Slide 59: http://www.theverge.com/2016/8/3/12370868/tesla-earnings-q3-2016-model-3-investmentSlide 60: http://fortune.com/2016/01/19/why-tesla-sells-directly/Slide 62: https://media.ford.com/content/fordmedia/fna/us/en/news/2015/01/22/research-and-innovation-center-palo-alto.htmlSlide 63: https://media.ford.com/content/fordmedia/fna/us/en/news/2016/01/11/fordpass.html