Ahead of speaking at PSFK's Future of Retail 2019 Conference on January 16, Fifth Wall partner Natalie Bruss shares insight from the firm's unique vantage point as the connective tissue between real estate companies and digitally native vertical brands

Traditional retailers aren’t failing because people are buying less—in fact, they’re buying more from more brands and in new ways, but only if they feel they connect with a brand through authentic experiences, says Natalie Bruss, partner at venture capital firm Fifth Wall, which connects the world's largest owners and operators of real estate like Macerich with the entrepreneurs and innovators redefining how the world interacts with its physical environment.

Before taking the stage at PSFK's Future of Retail 2019 Conference on January 16, Natalie spoke to PSFK to share insights from Fifth Wall’s unique perspective, given its position between real estate companies and digitally native vertical brands, into how technology is intersecting with retail real estate to enable true omnichannel shopping, engaging customers by keeping them at the epicenter of the retail experience.

PSFK: Could you describe any trends that you see taking place in the built world, and that you're leveraging or responding to in the work that you do?

Natalie Bruss: No industry today is being impacted more at the intersection of technology and the built world than retail. At Fifth Wall, it’s our POV that retail headlines mask a more complex (and exciting) reality: The industry is experiencing a dramatic transformation that requires putting the consumer at the center of multiple channels.

We hear about the digitally-native to omnichannel evolution a lot, and that’s not news, but it’s more important than ever to focus on how that manifests. On one side, you have teams of incredibly innovative entrepreneurs who are leveraging digital tools to understand their customers much more innately. On the other, you have an evolving group of best-in-class retail real estate owners who are looking to drive passionate consumers into increasingly reimagined spaces.

At Fifth Wall, our mission is to be the connective tissue between the Built World’s largest retail owners and operators with pioneering, digitally native entrepreneurs moving into omnichannel business models. We help to connect the dots by facilitating new partnerships that can empower a digitally native brand to thrive in its first physical space, or help more traditional companies realize the power of retail tech.

Traditional retailers aren’t failing because people are buying less; in fact, they’re buying more from more brands and in new ways. But only if they feel they connect with a brand through authentic experiences. Now, consumers want brands that are accessible—not in terms of affordability, but in terms of their connection with the consumer.

In many cases we’re seeing this “miniaturization” of brands and a fragmentation of once-established brand equities, particularly in wellness—instead of going to an all-purpose spa to get pampered, I will go to Heyday for a facial, Olive & June for a design-forward manicure, and Drybar for the perfect blowout that I trust will be equally fabulous in Santa Monica or Tribeca. These brands not only reflect the dynamic disruption of beauty and wellness, but also the renaissance of retail.

How did you find your way to Fifth Wall? Can you describe the work that you do?

My background was not focused in real estate: It was in trend forecasting and making connections between the digital and consumer/entertainment spheres. But I found myself gravitating to projects that leveraged technology to enhance the physical spaces where we spend 90% of our time (for example—figuring out how to leverage a unique tech stack to provide a five-star luxury hotel with unparalleled customer service, thinking about co-working spaces and communities as a distribution platform to unspool the next business bestseller, using geofencing and digital scavenger hunts to launch a broadway show at a historic theater.

When I started digging in to the Fifth Wall universe, I learned that innovation in the Built World presents a staggeringly large opportunity. Despite being the world’s largest industry and largest asset class, real estate has been a late adopter of technology. Fifth Wall saw this as a massive void in the VC ecosystem, with real estate representing the largest industry in the U.S. at 13% of the U.S. economy, yet widely-known to be one of the chronically under-technologized industries. That’s true even impressionistically: If you walk into a building and use a physical sign-in log, it doesn’t look or feel much different than it did walking into that building before the dawn of the Internet. And empirically, real estate is one of the lowest spenders on IT versus all other major U.S. industries.

What potential does new technology hold to transform retail experiences?

We believe we’re in a supercycle of innovation in the real estate industry, including retail, as new technologies are dramatically improving how assets are designed, built, managed, bought, sold, financed and everything in between. New technologies can make our environment more energy efficient, more flexible, more accessible, more secure, more connected, better utilized and healthier.

For retail specifically, at Fifth Wall we provide not only the access but also two incredibly seasoned veterans (my colleagues Dan Wenhold and Kevin Campos) who have backgrounds split between investing and the trenches of digitally native commerce to help navigate site selection, lease structuring and beyond to operations, inventory and design / build.

Describe what you think is the ideal role and place for technology within physical spaces, and particularly within retail spaces. What should it help accomplish? How should it ideally transform the consumer's experience? What should it not do?

Technology should make the in-store experience more magical and less tedious.

Take Heyday, for example: Getting a facial is a fundamentally physical, face-to-face experience, but they are consistently figuring out cool ways for technology to enhance and enable it (everything from seamless online booking to incorporating data and trends from the over 200,000 facial treatments they’ve performed since launch) to inform and better their techniques and products.

A brand’s online presence is also important in establishing and maintaining a relationship with consumers, but it shouldn’t be the only thing that brands depend on. Digitally-native brands like Warby Parker, Allbirds, Glossier, Everlane and others have been smart about creating a unique and authentic consumer brand through their digital presence, but we’ve seen them explode as they pivot back to the Built World to reach, engage and grow their followings—scalably and profitably. Technology is an important tool in who these brands are, but in order to succeed, it cannot be the only tool they lean on.

You have worked with numerous leading clients, one of whom is Macerich, the third largest mall owner in the U.S. Could you speak about this experience, and what you enabled Macerich to build and improve for its consumers' experience?

With legacy retailers like JCPenney, Sears and others shutting their doors, malls have the opportunity to become curators of the next generation of brands, as well as the “town squares” for Gen Z and beyond. Since consumers still crave those in-person experiences and connections, malls are embracing things like VR arcades or co-working spaces and are seeing success with them.

In addition to being focused on driving financial returns, we’re also helping Macerich and our other retail LP’s to find great, innovative partners for their spaces. Traditionally, big box retailers have been the anchors for malls. Now malls can innovate with those spaces, but they also have to change the way that things have traditionally been done. For example, some brands will want a shorter-term lease to start, or will want to change the way that a space is used or looks, so malls will have to figure out different ways to work with retailers and brands—it’s not one-size-fits-all any more. Our work helps connect retail owners with brands that are innovating in these spaces and bringing a true experience for consumers, even if they’re doing things a little bit differently in terms of a lease.

Another Macerich project we’re enormously excited about is its partnership with Industrious, a premium coworking company geared towards meeting and exceeding the needs of Fortune 500 tenants while acting as a great partner for landlords. Fifth Wall co-led Industrious’ Series C last year with the initial thinking that they would be incredible partners for our strategic LP’s who own/operate commercial office buildings—that was certainly true, but in conversations discussing the brand with our entire base of strategic LP’s, my colleagues Roelof Opperman and K.C. Cleary helped us to identify an additional amazing use case: taking over former big-box-store space in Class A Retail.

Macerich and Industrious announced this formal partnership a few months ago (see concept photos from the first build in Scottsdale) which will integrate flexible workspaces to Macerich malls around the country (the alliance makes Macerich the first major mall owner to introduce co-working on its properties.) From LOI to final agreement, Fifth Wall has remained actively engaged with the Industrious and Macerich teams to see this groundbreaking partnership through to the finish. We believe this is a watershed moment in retail real estate and is indicative of the type of work we can do with our Strategic LPs like Macerich and our portfolio companies.

What do you hope to share at PSFK's Future of Retail Conference next month?

I have been a massive PSFK fan for years, and an admirer of the power of PSFK’s research and reports to spark out-of-the-box thinking in my own work, so I’m excited to have this come full circle. I’m also excited to join other attendees in these conversations during what continues to be a transformative time in the retail and built world industries.

I hope to bring insight from Fifth Wall’s unique vantage point, given our relationships with real estate companies and digitally-native vertical brands, as well as how real estate companies can best partner with new-age retailers and experiential brands to continue providing a customer experience that makes consumers feel connected to these spaces.

In anticipation of the conference, I’ve also included some of Fifth Wall’s 2019 predictions for retail below as a preview, which we’re excited to continue discussing at the conference:

Trending Verticals

We’re slated to see more productized healthcare. In fact, 89% of healthcare leaders expect telehealth to transform U.S. healthcare.

Boutique wellness is trending, with brands offering ease and accessibility. For example, 98% of Heyday customers book online.

Digitally-enabled businesses continue to grow at quick rates: Sweetgreen’s online ordering revenue is increasing 80% year-over-year.

General Retail Trend

Brands will offer holistic health concepts with physical locations offering both physical activity and diet solutions under the same umbrella.

We’ll continue to see payment plan options offered at point of sale to make large-ticket luxury, non-essential items more affordable.

Seamless shopping experiences are being created with technology that allows for the elimination of the cashier and cash register.

New categories for digitally native vertical brands

  • Products for the elderly
  • LGBTQ brands
  • Multicultural products

What's in store for the future of Fifth Wall? How do you see retail spaces continuing to transform in the future, and define the next generation of tech-infused physical retail experience?

Fifth Wall is truly at the crossroad between industries that will be continuing to make incredible changes in the years to come, and Fifth Wall intends to continue as a driving force in those changes. In addition to our overall focus on Built World technology, retail is seeing momentum, growth and opportunity that requires a focused level of support. Retail is at a critical moment in time, and we’re putting resources there and working with our partners to advance the field. Meanwhile, we remain committed to Fifth Wall’s overarching mission of accelerating innovation in all aspects of the Built World.

Fifth Wall

Come see Natalie speak alongside nine other retail and consumer experience pioneers at PSFK's Future of Retail 2019 Conference on Wednesday, January 16. Tickets available now!