Trading Spaces

You’ve seen the news. Physical retail is fighting a losing battle as the consumer continues to shift online.

Many major department stores and mass retailers—Macy’s, Kohl’s, Sears, Walmart, Target, others—have collectively shuttered hundreds of stores over the last couple of years to mitigate losses from underperforming locations and address declining comps as e-commerce continues to experience high growth, and rightfully so. Online sales are forecasted to grow at least 9 percent per year through 2020, reaching $523 billion by then. By the end of 2016, e-commerce accounted for 8 percent of all retail sales, and e-commerce grew 14.3 percent in the fourth quarter over 2015 when total retail sales grew 3.9 percent.

This trend is expected to continue.

So, if you’re a brick and mortar player, how do you respond? Amidst disheartening press releases announcing store closure after store closure in this completely changed retail game, we wanted to highlight a unique solution forged by two Michigan-based players. These stores operate seasonal businesses with year-round leases. You could call it some much needed positive retail juju.

D&D, a bicycle shop, and Sun & Snow, a snow sport outfitter, drive the majority of their revenue on opposite ends of the calendar. In fact, Sun & Snow went so far as to completely shut its store down for six months during the off-season. Husband and wife co-owners Rob and Heidi Parent thought, “Why not find another business that peaks during our off-peak months?” It all started with an email and it wasn’t long before Heidi and D&D founder Don Moore were able to strike up a deal.

The initial terms were straightforward: Operate two businesses within a single storefront on a six-month seasonal rotation. The benefit: Slash operating expenses in half. As plans for Parents’ and Moore’s joint venture continued to develop, they realized that each rotation could take on an 80-20 merchandising split, ensuring a limited assortment of D&D’s products were available during off-peak months, and vice-versa for Sun & Snow. The “20 split” was to be merchandised in an upper mezzanine level of the store that would be maintained and monitored by the other store’s staff, ensuring off season truly meant off season from an expense standpoint.

Sure, other retailers have taken a shop-in-shop approach to control costs. Starbucks has operated co-locations within Target and select grocery stores for years while retailers from Macy’s to JC Penney have hosted other retailers who set up within the bigger store and pay a portion of rent. But what is truly unique about D&D and Sun & Snow’s arrangement is that it’s not actually a store-within-a-store, as each store remains truly distinct, albeit on opposite ends of the calendar.

D&D and Sun & Snow’s partnership has been so successful that the two businesses plan to open additional shared locations throughout the Detroit and Ann Arbor metro areas. In addition to realized expense savings, benefits include six months off which enable each business to focus on hand-picking inventory, employee training and generally preparing for the intensity that comes with a compressed sales season. Based on their success, the owners now consult with other specialty retailers on the shared model approach and have tried to connect businesses such as theirs that attract a similar customer who would be open to cross-promotion, i.e. a winter skier who bikes in the summertime.

It is heartening to see physical retailers taking measures to sustain their storefronts and ensure that customer service and experiential elements can continue to be delivered to the consumer in-store.  As articulated by D&D owner Don Moore, “Keep the brick and mortar aspects of this industry alive and well so that customers have a place to get service in our internet age.”

Other specialty retailers, particularly those with seasonal sales peaks, would do well to emulate this unique, sensible time-swapping concept. Now that’s a trend we’d like to see continue.