Interview: Neighborhood Goods Is Building A Different Kind Of Department Store For Millennials
Prioritizing community and storytelling over markdowns and sales per square foot, Neighborhood Goods has set out to disrupt retail in Plano, Texas
Neighborhood Goods‘ 14,000 square foot space is a retail concept that feels at once both familiar and completely new. Like a traditional department store, Neighborhood Goods is responsible for the staffing and design of the space, stocked with products from third-party brands. Unlike traditional stores, however, the brands on display will regularly change, giving visitors a reason to come back again. Among brands stocked at the time of the store's launch are direct-to-consumer players like The Inside, Allswell and Primary, with spaces from other retailers including Stadium Goods and Draper James.
Its first location, located in Plano, Texas, opens this November, with future locations to follow in Texas and potentially beyond. PSFK spoke to founder Matt Alexander about his attempts to breathe new life into retail, adding elements of community, storytelling and convenience along the way.
PSFK: What trends are you focusing on in retail, and how do you feel that those trends apply to Neighborhood Goods?
Matt Alexander: For us, this unorthodox idea of creating a physical retail space is less focused upon having the entirety of the relationship be predicated upon transactions and having it be much more focused upon human interaction, sociability and community.
We are trying to have this very friendly, inviting and human room rather than having something that would be very traditional in the sense that it's about extracting dollars in wallets, and instead focusing upon giving people a really good reason to come back to the space, having the magnetism for this room be something that goes far beyond buying products.
We're selling all sorts of different interesting up-and-coming brands here. Some of them are exclusive. It's the first time some of these brands have even been into retail.
What is the connection with bringing these ecommerce brands that haven't had the opportunity to go into physical retail yet to Neighborhood Goods?
For the vast majority of brands we're coming across, one of their primary goals is getting into physical retail. You look at brands in the direct-to-consumer world, and they all seem to have these fundamental problems at the moment where customer acquisition online is getting more and more expensive, while lifetime customers are decreasing due to competition in the market.
What seems to be a good solution for that is getting into physical retail insofar as you can create something that has a much lower customer acquisition cost. The appeal of physical retail is very strong for a lot of thoughtful, up‑and‑coming digitally invasive brands. The reality of physical retail is it's still problematic. All these younger companies, they may be extremely well capitalized, but they're still probably not in position to sign a 10‑year lease.
The typical economics of thinking about retail as a sales per square foot equation does not apply where for a lot of these brands, they've been testing pop‑ups and all sorts of different ideas. They see it more of a marketing channel. The metrics of it almost resemble more of an online publication than they do a physical retail concept.
What's been useful for us is that we're speaking that same language first and foremost, and then obviously around that the economics of working with us are much more efficient and easy, you're not signing this dense legal documentation.
We handle staffing. We're developing the architectural structure, and more than anything we have a very strong opinion. We have a very firm perspective as to what a positive retail design looks like and a contemporary retail design looks like and how that can flow across different product categories all in the same room. We're trying to be very thoughtful as to how we can create this more modern and vibrant experience. There's clear and present demand for brands to do something a little more interesting in the retail space.
Are you looking more for temporary vendors or permanent, or a mix of both?
Most brands are with us somewhere between six to nine months. I think the shortest we have is a brand with us for about two months. We have some brands with us for as long as 12 months, which is the cap.
We've been very fortunate since we announced ourselves back in May to be subject to a lot of demand from brands, and that's anything from the direct consumer crowd that I've been talking about all the way up to major international names as well that are waning to do more interesting things with our world.
It might be that we launch with 30 brands, and then six months later it might be that we have 10 brands that want more space that we believe in. 12 months after that it might be that we have another 40 in the room again or whatever it is. We get to be very playful with that, and that's the fun of it. It will always be changing, and then as we expand around the country and the world, we're going to have a different mix of brands in each location.
Is there going to be an online or ecommerce presence?
I think one of the critical things for us is we're not really delineating between ecommerce and physical commerce. It's all flowed through the same system for us. You might be transacting inside the room completely self‑guided through our iOS app, or you might be in New York across the country or what have you.
The goal for us is we would get out of the way of the customer. If you wanted to come in and have a show‑roomy experience where you buy something, but you don't necessarily want to carry it home, we can ship it to you. If you want to order for in‑store pickup that's fine as well. If you want to order for on‑demand delivery within a few hours, you can do that as well. If you want to order from the comfort of your home and have it brought to you, that's fine too.
The main thing we're delivering through the website is a lot of editorial. Telling stories about the brands all working with the partners, how we built the company, different projects we care about, all these different events and personalities coming into our world, developing a podcast, all these different things.
Then iOS app at a distance is great for the boutique, editorially driven ecommerce. As you get closer it allows for the in‑store pickup, RSVP‑ing for events, things like that. As you come into the room three new buttons appear in that UI that allow for you to text with staff or request for people to come to you wherever you are in the room to learn contextual information about the brand as you walk around the room.
If you're standing next to Draper James and don't know the story behind the brand, we'll be able to deliver it to you right there based on where you are. Then equally you also have self‑guided checkout, so you could hypothetically be sitting in our restaurant and decide you want a bag from Draper James, it can be brought across the room to you.
The web and the iOS are all integral elements of it but they can serve that in-store experience just as much as they can be a great ecommerce experience for people across the country.
Who is your target customer?
Probably somewhat unsurprisingly our target demo that we're developing advertising for is women and men age 26‑to‑42, upwardly mobile, in major metropolitan markets across the U.S.—the lucrative Millennial group.
Then there are two fun elements we get to play with. One's relatively simple in so far as all the brands are very proud and excited to be working with us. They will be promoting what they're doing with Neighborhood Goods to their customers in the general vicinity. Then secondarily to that we're capturing a huge amount of data in the room. What that means is that it allows for us to be incredibly personalized and specific with how we're talking to people.
People have never really been able to do that with physical retail beyond just basic transactional information about what was in those orders, but with us, because we're capturing a huge amount of additional data from general behavioral insights to foot traffic to all these different elements, we can be we very specific with what we're doing.
I suspect that if you have a much older couple out shopping at one of the shops at Legacy West for a first opening, they see people walking around with these really colorful coffee cups and bags from our space. They get curious and decide to come in. The value proposition coming of a nice cocktail or a cup of coffee or whatever it is, sitting down, and having people come to you and treat you in a more hospitality driven way.
Then equally, I think there's also going to be a lot of demand from teenagers and students who want a cool place to go hang out where you can go work and you can go spend time.
When a consumer walks into Neighborhood Goods, what is the main thing they're going to feel is different from walking into a traditional department store?
I'll start with how we're similar. We provide our own staff. Obviously, department stores, sometimes you're talking to someone who works on behalf of a brand and you don't realize it, but more often than not you're dealing with their employees. We do that too.
We also control all of the design in the room and have a strong opinion there, as I've already shared. I think you see increasingly with very different department stores playing with different concepts where they're bringing in pop‑ups and some younger and more interesting brands as well as some very high‑end brands.
I think they often surrender quite a bit of control right there, but still if you walk into a Nordstrom it's largely their aesthetic in the room. It's very much the same as us. We are not the first people to introduce a restaurant concept into a store or concept, and we're following along there. That's the end of it.
You see a lot of retailers now, and they think that there's a solution for these retail experiences or they seem to think that a lot of their solutions reside in putting screens everywhere, smart mirrors and all sorts of these other ideas. I think it fundamentally glosses over a lot of the main issues in their spaces.
We’re afforded a few unique elements. First, we're not buying at wholesale. It's basically a consignment relationship with brands. We don't have the compulsion or requirement to be hosting sales all the time. We also don't have to have really cumbersome relationships with brands based upon seasonal restocking of product. Instead it's a much more flexible and agile and responsive way of working together.
In that sense we don't have to have our relationship with the customer be a sale sign on the door. We can focus instead on hosting events. We can focus on treating the room as a marketing channel. For a lot of these brands the goal of being in physical retail has very little to do with sales.
I think there is something very traditional about Neighborhood Goods—it's about going into a store relevant to your interests that's different in each location, that's localized, that's trustworthy, that's thoughtfully designed.
It's much more about making the technology optional to the experience or invisible to you so that we're still being informed by what's happening in that room and we're still learning a lot, but we're not doing it in a way that is unpleasant for the end user.
How does food and beverage tie into the Neighborhood Goods experience?
One of the main things that we recognize in the industry is that retail can be extremely pretentious and alienating for the average person, and we really set out to try to create something that would be much more welcoming and friendly and that would be much more comfortable.
That's why we allow for you to text the staff or have things brought to you because you may have questions that would otherwise make you feel self‑conscious in the traditional world that you wouldn't want to ask. This is your opportunity to be able to ask those questions and interact with the room on your own terms.
The food is very much a core component of that where we wanted to create an area of the room specifically that would have lower ceiling and different lighting and a generally different ambiance around the things. So that if you came in and were overwhelmed by the sheer volume of the different brands and the colors and all the different stuff in the room as a really different area right in the middle that you can go and sit down, have a cup of coffee, have a drink—whatever is you want.
Primary, the kids' brand we're working with at launch, cobranded our kids' menu. It turns into something really fun for us to use if you think exclusively of our space as a social experience. Beyond that, some of the actual cuisine, we worked with a group called Front Burner and helped develop it. They're one of the top multiunit restaurant operators in the country.
What retail technologies will exist within the space that will distinguish Neighborhood Goods and enhance the consumer experience?
I would point towards a very unique approach to how we're staffing it to being a very important element. Equally I would point very much towards really unique and really playful approach to the architecture and design of our fixtures. We have a 23‑foot‑tall ceiling, and the fixtures go all the way up.
I can't say we introduced it, but we certainly introduced it in our world, paid product placement where we're bringing in brands like Simple Human and Framebridge and Otherland who are going to be very integrated into the room.
I think in terms of very practical reasons people are going to come back for different events. They're going to come back to see new, different things at the restaurant. They're going to come back for a live recording of a podcast with one of their favorite entrepreneurs.
Are there any future plans to expand the locations beyond Texas?
We haven't announced anything yet, but what I will tell you is we've been very surprised in a very positive way by the amount of demand and excitement we've seen for the idea, both from brands and the consumer world, and also in particular from investors and the real estate community. We are certainly going to be in a very aggressive expansive mode.
You have an in‑house podcast and publication. Can you explain the importance of this content to your particular form of commerce?
If you think about buying products, the products in your life that you care about, whether that's apparel or technology or furniture, whatever it is, the things that you're most proud of they're usually the ones that have the best story.
I think that's why a lot of direct consumer brands are finding so much success right now is that they've all come up with really clear value propositions for customers.
You think about Warby Parker, they've gone into the spectacles industry, and suddenly by focusing on the craftsmanship and design and price point and the actual design of the things in a very specific way has captured a huge amount of positive sentiment from consumers. I think what's missing in the department store world is that no one's caught up to that.
I think with what we're trying to do is trying to be much more human, much more honest and more authentic—although I hesitate to use the word—and to do something that feels right to us. Hopefully that helps us articulate ourselves a little bit better for our customer.
Neighborhood Goods is just one retailer giving the traditional brick-and-mortar store a makeover for the experience-obsessed millennial. For more examples of similar inspiring retailers catering to consumer demand for more customized retail experiences, see PSFK's reports and newsletters.