Last March, Emily Schildt opened Pop Up Grocer on a corner of Bleecker Street in the West Village, selling artfully packaged condiments, beverages and other products made by small, emerging brands in a pay-to-play business model.
Customers can buy handmade hot sauces or pumpkin chips from brands like Peepal People and Van Van that pay a fee to be on the shelves. There are usually 150 to 200 tokens on display at a time, and some are replaced on a quarterly basis.
“If we depended solely on product sales, we would need to sell at a much higher volume,” Ms. Schildt said. “That’s just impossible when you’re talking about a store made up of completely unknown products.”
Rents for retail space in New York continued to rise last year, according to real estate services firm CBRE, making it harder for independent businesses to survive. A 27-square-foot space in the West Village, an affluent neighborhood in Manhattan, was recently listed for $5,000 a month. But some ambitious entrepreneurs are experimenting with business models such as charging storage fees or selling wholesale to make ends meet.
“Either you have to get creative, or you have to leave New York,” Ms. Schildt said.
Retail is reshaping itself to address the values of the new customer, said Thomaï Serdari, who teaches marketing at the NYU Stern School of Business. “Innovation comes from those who, by necessity, have updated their business models,” he said.
However, independent retailers face challenges such as high operating costs and finding a model that works.
“Technology is evolving, our cell phones are evolving and brick-and-mortars are evolving,” said Ani Sanyal, who with his brother, Ayan, founded Kolkata Chai Co., which sells products online as well as in two stores. retail in midtown Manhattan.
Their company sells hot tea, Indian street food such as samosas, seasonal tea soft serve, along with bags of tea blends and merchandise. Foot traffic is steady at both locations, Ani Sanyal said, but the company’s e-commerce business accounts for 75 to 80 percent of its revenue.
Kolkata Chai Co. also sells wholesale chai concentrate to Equinox, Juice Press and Boba Guys. The company has partnered with brands like Transcendence Coffee, partnered with celebrities like Hasan Minhaj, all of which were posted on social media.
By using a multi-channel approach — e-commerce, wholesale and in-store — the brothers believe they can expose a huge variety of people to their chai and build lifelong customers. “Since chai is a product that has been misrepresented and misrepresented in this country for so long, it was very important for us to be able to have the true experience of our culture,” said Ani Sanyal.
Dolce Brooklyn sells gelato and ice cream out of a storefront in Brooklyn’s Cobble Hill neighborhood, but it’s the company’s wholesale business, selling to high-end restaurants, some with two Michelin stars, that turns a profit. “You have to find different revenue channels,” said company owner Pierre Alexandre.
Rachel Krupa’s multi-channel approach to her company, Goods Mart, includes curating and distributing snacks to hotels, cafeterias and corporate pantries. At her minimalist SoHo store, one of three locations, she sells packaged snacks from 200 brands, mostly from up-and-coming producers, such as chili garlic chips made by Mama Teav’s, a company in Oakland, California.
Goods Mart was one of Mama Teav’s first accounts when it launched two years ago, and today Mama Teav products are available in 420 stores across the United States. “As a small manufacturer, a new brand, we’re not going to jump into Whole Foods right away,” said Christina Teav-Liu, founder of Mama Teav’s.
Ms. Krupa said she wouldn’t be able to give exposure to brands like Mama Teav’s if it had owners who were just trying to make money. Her first owner, Bret Trenkmann, saw value in her mission and gave her a fair rent in SoHo, as did another owner, Tishman Speyer, at her second location in Rockefeller Center.
Consumers, especially tourists, want authentic experiences they can’t get at home, said Ms. Krupa, who also runs a public relations firm, Krupa Consulting, that works with packaged food and wellness brands. “You’re not going to say, ‘Oh my God, I went ice skating at the Rock Center — and I ate at Chili’s,'” he said.
Landlords play an important role in the growth and survival of independent businesses, said Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance, a nonprofit advocacy group for independent businesses. National chains may be a safer financial option than an independent business owner, but renting to them is short-sighted, Ms. Mitchell said.
And a break for small business owners can be good for owners. “The quality of businesses at street level affects the rents they can get for the upper floors, whether it’s office or residential,” he said.
The United States is undergoing a cultural shift in retail markets, said Syama Bunten, founder of Scaling Retail, a consulting firm in San Francisco. The direct-to-consumer model, pioneered by companies like Dollar Shave Club and Stitch Fix, was an innovative approach years ago, but now it’s saturated.
The new phase of shopping falls into two main categories: cheap and easy on Amazon and connected through bricks and mortar.
Another way for independent owners to build a business is through connection and community, often through in-store events, which creates vibrant street life, foot traffic and a gathering of like-minded people. A bus shelter ad can gain brand visibility, Ms Bunten said, but creating events and spaces for customers creates a much stronger emotional connection.
“It may not be that 100 percent of visitors convert into customers,” he said, “but you have a 100 percent chance that your brand will have a much more lasting impact on someone’s mind than a traditional advertising piece.”
Despite finding levels of success, some small retailers wonder if it’s worth it. Many of them have sunk their life savings into their businesses and raised additional capital through institutional investors and angels, not to mention friends and family. They operate sustainable business models and post constantly on social media. However, the cost of leasing and setting up a space remains an obstacle.
“Something has to change,” said Pop Up Grocer’s Ms. Schildt, who spent 18 months searching for the right storefront.
If city officials and landlords don’t realize that there are prohibitive costs around rent for independent retailers, “the city will lose its color,” said Ani Sanyal of Kolkata Chai Co. “It’s going to lose the things that make people want to come to New York.”
