Can D2C Department Stores bring life back to our malls?

Sears has been reincarnated. Well, not Sears exactly. But the idea of the Sears department store is reemerging with D2C (direct-to-consumer) companies like Dollar Shave Club, Bonobos, and Warby Parker at the helm. Earlier this year, the world’s first D2C Department Store opened and many more are following suit. But first, why would D2C brands, born online and thriving online, open physical stores?

Opening stores seems counterintuitive to the D2C plan of eliminating overhead and pouring those savings into making their goods faster, better, and cheaper.

This hasn’t stopped more than 22 direct-to-consumer brands from opening brick-and-mortar stores. Or the estimated 850 retail stores opening in the next five years from D2C brands.

M.M.LaFleur wants customers to have a place to vent their clothing frustrations, as if they’re at home trying on clothes with their friends. Casper is calling their stores a playful science – inspired by museum experiences.

It’s also generally paired with a heightened level of service from brand-obsessed store associates who in the case of Indochino spend up to an hour with clients.

Dean Handspiker, Retail Dive

In other words, come hang out in our showroom. Learn more about the brand. Realize we’re cool people. Maybe try on some of our stuff. Find the right size, style, and color. And then we’ll ship it to your house.

It’s a completely new ideology for physical retail. But that’s the investment D2C companies want to take.

Realizing not every D2C brand can take this plunge into physical retail, one company is taking a page from the Sears playbook.

Enter the D2C Department Store

Neighborhood Goods is channeling its inner-Sears, opening up the world’s first D2C Department Store, offering up physical spaces to digital-native brands. In the process, aiming to avoid the pitfalls of major department stores.

Some of their secret sauce includes – rotating departments of rising brands. Focus on great design. More than retail, with communal spaces to hang out and throw events.

There’s going to be something happening just about every day that gives shoppers a reason to come back and discover something new and different.

Neighborhood Goods Founder, Matt Alexander

In a way, it’s like a high-end flea market meets pop-up events.

That’s why they’ve already attracted some impeccable, digital-native brands like – MeUndies, Hubble, Draper James, Stadium Goods, Hims, Field Notes, Simplehuman, and Framebridge.

Aside from being a novel retail experience, there are a few aspects I’m intrigued by:

  • Rotating departments means that this will be highly performance-based.
  • Potentially acquiring (or creating their own) D2C companies, giving prime real estate to the products they own.
  • They don’t have to carry the entire force of marketing because they’re bringing in these other major brands (who are excited to enter brick-and-mortar for the first time).

I’m interested to know what Neighborhood Goods’ cut of the deal is, considering huge percentages (upwards of 60%) of product sales have been a major downside to renting department outlets.

Neighborhood Goods isn’t alone either. BrandBox, The Gathering Shops, and Fourpost are all hot on this trail. Similarly, Uppercase is a real estate company that is specifically renting retail space to high-growth D2C companies.

There’s a lot of entrepreneurs coming to a similar conclusion. That D2C brands and the D2C Department Store could bring dead malls out of the depths.