Underneath Amazon's Shadow, Local Retail Is Reinventing Itself in Seattle

Retailers throughout the city are getting creative in their fight for survival—and many are thriving
| FROM THE PRINT EDITION |
 
 
GETTING EXPERIENCE: The new SoDo Starbucks Reserve store is tapping into a consumer demand for experiences, sometimes called “retail-tainment”

This article appears in print in the July 2018 issue and was written in partnership with Seattle Business magazine. Click here for a free subscription to Seattle Business and click here to subscribe to Seattle magazine.

This March, an unusually subdued guest dropped by Jimmy Kimmel Live. Though once widely beloved by millions of American children, Toys R Us mascot, Geoffrey the Giraffe, had recently fallen upon hard times. Earlier in the evening, the late-night host had declared that Amazon, the Seattle-based online retailer, “won’t rest until every other store is an abandoned warehouse teeming with raccoons.” Everybody “bought toys on Amazon, and now I’m out of a job,” the mascot agreed before stumbling off the stage and into the shadows where he and the toy purveyor join other once-untouchable stores, including Sears, Staples, Payless, RadioShack and JCPenney, that have found themselves irrelevant in rapidly changing times.

As Amazon casts its shadow on shops all over the country, local retailers aren’t giving up even in the face of the big losses racked up in 2017—with 8,000 stores shuttered—making last year the most ominous one for retail, even trumping 2008 during the height of the recession.

“It’s not that all retail is going away,” says Dick Outcalt, a Seattle-based retail consultant and strategist who, along with business partner Pat Johnson, closely watches America’s rapidly evolving retail landscape. The pair’s 30-year partnership has bred some predictable banter at cocktail parties, where they’re constantly approached by people asking if shopping as we know it is about to disappear.

“About 90 percent of retail still happens in traditional stores,” Johnson explains. Despite the steady cascade of closures, the pair notes that another 8–11 percent of retailers still start up each year. “You wouldn’t know that, especially living here in Seattle, where we’re just surrounded by Amazonians,” she says.

Nowhere is the battle between “bricks” and “clicks” more apparent than at Seattle’s downtown Macy’s, a historic store that has lost so much ground—literally and figuratively—that Amazon has agreed to convert six full floors of its building into office space. But despite Bezos and company’s exploding presence in Seattle, Outcalt and Johnson still consider Amazon’s current domination just the latest chapter in an industry constantly pulled by shifting tides.

“Twenty years ago, Walmart was going to ruin all independent retailers,” Johnson recalls. Then there were the category killers, like Toys R Us, and before that, the advent of shopping malls that threatened to upend Main Street stores. And while Amazon might be retail’s current darling, e-commerce also transfers a lot of responsibility to the customer. “You’re doing all the work,” Johnson says of the online shopper’s new onus to weed through daunting selections, investigate products and prices, handle the transaction, plan for delivery and, frequently, prepare for returns. “And you think that is saving you money somehow?”

Driving through the heart of downtown Seattle along Fourth or Fifth Avenue, or walking through Pacific Place and Westlake malls, it’s easy to spot numerous empty storefronts. But if you think these are signs that brick-and-mortar retail is in trouble, try telling that to shopkeepers in downtown Seattle, where explosive growth—largely because of Amazon—has beckoned new residents, fresh construction and retail opportunity.

Amazon’s decision to plant its world headquarters downtown “put Seattle on the map,” says commercial real estate broker Maria Royer, fostering a robust economy that’s also helped elevate Seattle’s overall appeal to national brands. “What we’re hearing downtown from our members is that business is going really well,” agrees Jacqueline Gruber, a senior economic development manager at the Downtown Seattle Association (DSA). Retail sales have grown by 34 percent since 2010, and in 2016, downtown merchants grabbed a cool $1.5 billion, according to the DSA’s latest economic report.

While downtown Seattle has recovered nicely from the days of the recession—partly because of the boom in new restaurants and bars—retailers are taking advantage of Seattle’s flourishing economy to reinvent themselves in creative ways that will lure and hold customers. That often means embracing both online and brick-and-mortar platforms, and “catering that experience to who your audience is,” says Gruber.

She points to brick-and-mortar stores that have incorporated digital strategies while online-only retailers, including eyeglass company Warby Parker and clothing business LumberUnion, have grown into physical spaces to foster brand loyalty. Competitive retailers are finding they need both traditional and online platforms.

“It’s not really two separate [models],” she says of the industry’s increasingly omnichannel approach, which includes suburban concepts, like Target stores flirting with urban concepts downtown (and reportedly looking at neighborhoods like Ballard), while other retailers, including Walmart, realize that incorporating e-commerce means they can make do with smaller footprints and fewer brick-and-mortar stores.

Meanwhile, malls—those that are thriving—are finding success by morphing into mixed-use spaces, incorporating more restaurants, residences, events, hotels and even health clubs to foster regular foot traffic. (Pacific Place, which announced its own multimillion-dollar renovations would commence this year, is further hedging its bets with a grand entrance facing Amazon.)

Of these, the interplay between food and shopping feels particularly important, with retailers finding that restaurants are an excellent way to drive traffic. “We used to talk about how you need to have restaurants in the shopping center to keep people from leaving when they get hungry,” says Jennifer Leavitt, vice president of marketing for The Bellevue Collection, an early pioneer of the mixed-use concept; unlike many U.S. malls, The Bellevue Collection is seeing a healthy start to the year. “Now restaurants help draw for shopping,” says Leavitt. It all comes down to creating a social experience, she says, describing these social aspects as particularly important to younger demographics.

TEATIME: Steepologie courts customers with retention programs: Staff is trained to remember customer names and a supply of board games to encourage them to hang out. Photo courtesy of Steepologie

This experiential retail—or “retail-tainment” as it’s sometimes known—is the buzzword right now, according to Leavitt. It also aligns with growing consumer demand for experiences—in other words, things that can’t be replicated online. Examples abound, such as Starbucks Reserve Roastery on Capitol Hill and its newer Reserve store at the company’s SoDo headquarters (the first of 1,000 planned Reserve stores); Pioneer Square’s Drygoods Design where sewing groups and workshops are offered along with fabric for sale; and downtown’s Steepologie, which provides an experiential showcase of more than 300 loose-leaf teas and central tables piled high with board games. “You can’t just throw stuff on a rack and expect it to sell,” says co-owner Joe Raetzer of the store’s approach, which invites customers to put down their smartphones and engage with the product.

Nordstrom, which has long played to retail’s social aspects with restaurants, bars, cafés and pop-up shops, is also experimenting with a new “showroom” concept, Nordstrom Local, in Los Angeles. It eschews the typical inventory to offer guests a 360-degree experience with in-store fittings, personal styling, curbside pickup, an on-site bar and a nail salon. (In a clear sign of the brand’s commitment to taking its legendary service online, Nordstrom has also recently incorporated two e-retailers, BevyUp and MessageYes, which will help the Seattle brand deliver its trademark shopping and style advice straight to customers through their mobile phones.)

“It’s the best of both worlds,” says Gruber of the store’s standing invitation to shop products online and then try them on in the store, which also alleviates the age-old dilemma of turning up only to find the store doesn’t have your size. “No one has time for that anymore,” says Leavitt of today’s time-strapped shoppers, who are also—owing to technology—more informed, discerning and know exactly what they want. Savvy stores are responding by incorporating multiple sales channels for added convenience, including options for consumers to buy products online to pick up in the store. 

“It has to be frictionless,” says Leavitt of the modern shopping experience. And it should leave consumers feeling like they got some added benefit, be it a social experience, great service or something else that makes them feel like it was worth the trip. “In the end, although we believe really strongly that bricks-and-mortar and online are very important to each other, we also know that for there to continue to be that balance, that bricks-and-mortar has to provide an experience that can’t be found online,” she says.

Bonobos, the men’s clothing shop with a storefront at University Village, is one of the retailers driving the “show-rooming” trend—which basically means that you can try something on in the store, which is then ordered online, later to be delivered to your home; it’s similar to visiting a furniture store or car showroom, where you can try products, but don’t expect to walk out with that exact item on that same day. 

Bonobos happened upon the concept almost by accident when, as an online-only store, it invited customers to try on clothes inside its New York City office. “It was more of an internally focused showroom,” recalls Micky Onvural, copresident and chief marketing officer. “We realized we were kind of onto something when we saw the metrics,” she adds, recalling surprisingly high rates of conversion—that is, the rate that customers who tried on the clothing wound up purchasing those items. 

Six years later, that data-driven approach informs Bonobos’ explosive growth, which includes opening 48 brick-and-mortar stores (which it calls “guide shops”) around the country—including 18 last year alone—in locations driven by customer analytics. “We’re just removing the guess-work of a traditional retailer who doesn’t have a strong e-commerce presence,” Onvural says. The showroom model also has cost efficiencies, requiring only a curated selection of inventory, less floor space and freeing staff to engage with customers. 

“I call these very smart retailers,” says Susie Plummer, vice president and general manager of University Village, of the growing movement of online stores into brick-and-mortar spaces. “They’ve started online, but they’re able to enter individual markets with loads of knowledge about their customer.” There are a number of such stores in University Village. In addition to Bonobos, Plummer points to Amazon Books—the online retailer’s first brick-and-mortar location—which features curated selections of what Seattleites are reading, sometimes honed all the way down to ZIP codes of University Village shoppers; eyeglass phenomenon Warby Parker; and Oiselle, a local women’s athletic apparel company that started online, then strategically grew into a multipurpose store and runners’ clubhouse. 

Despite many stories that have predicted the death of brick-and-mortar retail, Phillip Raub sees a lot of reason for optimism. He’s president and cofounder of Bay Area technology retailer B8ta, which leases brick-and-mortar space to emerging online brands. It opened its second store in University Village in 2016, displaying new tech products that customers can try and buy. “What’s happening is a lot of legacy retailers are shuttering their doors because they’re not being able to adapt to the times, they’re not getting ahead of the technology curve,” he says. And they don’t understand and use data to figure out who their customer is, he says (something his company can also help retailers with). 

To Raub, who worked at Nest and Nintendo prior to opening B8ta’s first Palo Alto location in 2015, retail is undergoing a fundamental shift. “There are so many brands that are emerging that grew up online first,” he says. “Traditionally, if you were going to launch a product, you figured out how to get into a department store or a big-box retailer. Now retailers can open a Shopify account and start selling online, but they also get to a point where they hit a ceiling,” he says, pointing to successful brands such as Casper, an online-only mattress company that is now opening stores and partnering with Target. “They realize that there’s only so many Facebook ads that you can do before you’re going to hit a saturation point about who your target audience is.” To have strong brand recognition and mass appeal, online retailers eventually need to open retail stores, he says.

“Discovering a product, experiencing it, that’s part of what a store does now,” says James Adams, whose Seattle-based design agency, 5ive Creative, partners with brick-and-mortars to help them leverage their physical space—including Elliott Bay Book Company, a case study in retail design. Rather than blink in the face of encroaching Amazon Books, the bookstore has seen a 40 percent increase in sales since moving to a Capitol Hill space.

Stores like Elliott Bay Books use their storefront to connect with customers with knowledgeable staff, in-store displays and events. At Elliott Bay, cozy seating, reading tables and a café offer guests an opportunity to linger for hours. All of this presents a unique opportunity to engage with customers—and find opportunities for impulse buys—that still can’t be replicated online, says Adams. “There’s a way to create a stronger bond with your customer if there’s a physical point where you get immersed in it.” He likens the entire process to online dating. “It’s great to email back and forth, but at some point, you really want to meet the person and exchange on that human level, and stores have that opportunity.”

And like a date, they’ve got to be good and make you want to come back. Ultimately, for failed stores like Toys R Us, a well-loved mascot just isn’t enough.

Adaptations: How Seattle’s small shops are keeping up with changing times

Momo
Chinatown–International District, 600 S Jackson St.
Opened 10 years ago by husband and wife Tom Kleifgen and Lei Ann Shiramizu (she also serves on Mayor Jenny Durkan’s Small Business Advisory Council), most products—men’s and women’s clothing, quirky curios, home decor and local jewelry—at this boutique can’t be found online. The store has a blog and a boutique “support group” on Facebook, hosts events and focuses on customer service. “E-commerce is something we dream of doing, but in reality…we don’t have time to do that as a different job, on top of this job,” says Shiramizu.

Oiselle
University Village, 2632 NE University Village St.
Sally Bergesen founded this women’s athletic wear company as an online-only store in 2007 but found fostering a sense of community difficult online, hence her move into a brick-and-mortar space three years ago. The shop hosts weekly runs, regular events and offers a data-driven curation of quality running apparel. “You just can’t beat that experience of talking to people in person or seeing a product in person and trying it on,” she says. 

Drygoods Design
Pioneer Square, 301 Occidental Ave. S
This fabric store and studio started online in 2011, before outgrowing brick-and-mortar locations in Ballard and moving to Pioneer Square in 2014. Now the store/studio incorporates adult classes, kids’ camps, sewing clubs, guest workshops and a strong sense of community while selling fabrics, yarn, tools, cards, books and gifts. “You can’t just do one thing,” notes owner Keli Faw, who says the new retail model demands multiple revenue channels.

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