Issue #22: Fifth Ave Gets a Revamp

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At the last startup I worked at, we had an office at 56th and Fifth Avenue, just a couple blocks below the entrance to Central Park. During my three years at this company, I spent a lot of time in and around Fifth Avenue. In fact, during my first year, most days I would walk up and down it in my daily commute. In terms of retail, Fifth Avenue might be one of the most iconic places in the world. Fifth Avenue is responsible for 313,000 jobs, while generating $44.1 billion in total wages and $111.5 billion in total economic output each year. For many legacy retailers, it is of their viewpoint you have to have a presence there. Up there with Champs-Elysees in Paris, Bond Street in London, and Rodeo Drive in Los Angeles, everyone from Chanel to Apple to Bergdorf Goodman has a location on Fifth Avenue. In addition to the traditional shopping which draws buyers and browsers, Fifth Avenue goes all out for the holidays, with both the retailers and streets covering themselves in decorations. During the holidays, roughly 23,000 people each hour visit Fifth Avenue.

However, this overall excitement comes with year-round crowded streets and sidewalks, leading to a poor customer experience. Right now, 70% of the people on Fifth Avenue are pedestrians, but less than half the space is devoted to them. With that in mind, this week, Mayor Adams announced a major update to Fifth Avenue. The plan is to double walkable sidewalk space, add hundreds of new trees and planters, install new seating, build new activation space, boost tax revenue, and increase visitors to Fifth Avenue. This project will also reduce the number of lanes on the road from 5 to 3. Overall, the goal is to spur retail and make the area more pedestrian-friendly

I think this is a really smart idea. Fifth Avenue is one of the hubs of shopping, commerce, and retail in NYC. By adding this new road layout, it will help further cement that option. Despite the success, there are still many empty retail fronts, and hopefully help fill them. The other thought I have is that this change may allow for outdoor dining, which would help allow more restaurants to be able to be profitable on the street. My final thought, I wonder what it would be like if they got rid of the ability to drive from the Apple Store on 59th to the bottom of Bryant Park on 40th. Would that see an additional economic lift at all? How much of a benefit would that be?

Taco Bell Launches Name Your Price Feature

How much are you willing to spend for your meal? Taco Bell just launched on new, gamified feature on their mobile app, where you can select a dollar amount between $5 and $25 as well as if you want it to be vegetarian, and the app will create a list of recommended items to bundle together. Customers can refresh the items, keep some, and remove some, whatever the customers want. I really like this feature because it helps you easily find items, boosts the conversion rate, and increases AOV. It certainly has gotten them a lot of buzz in the media as well as with customers. I think at its core it is a good feature, especially if customers are searching for value. However, I wonder if they will also add it to the in store kiosk experience too. If a Taco Bell store has a kiosk, this feature could easily be added. Additionally, it will be interesting to see who copies the feature. I could easily see this type of “name your price” feature becoming mainstream across commerce, especially if it does boost conversion and AOV.

Last Large Format Kmart Closes

Since its founding in 1962, Kmart has been a leading department and grocery store across the United States. At its peak, Kmart had over 2,000 stores and was the second-largest retailer in the United States, behind Sears. However, similar to Sears, Kmart failed to adapt to the 21st century/eCommerce, and its large square footage stores meant it could not move very nimbly. In 2002, Kmart filed for bankruptcy and had to get rid of some of its senior leadership due to a financial scandal. From there, it was all downhill with store closures, poor sales, and a lack of profitability. After years of this decline, all that remained were 6 stores: a large store in Bridgehampton, a small store in Miami, 3 stores in the Virgin Islands, and one in Guam.

As of this week, however, it was announced the Bridgehampton store is closing, meaning there are no full-size Kmart’s left in the mainland United States. Reading through some of the articles on the closing, it is fascinating to see the mix of nostalgia and poor business practices that led to the demise. From a retail perspective, it is sad to see another once-anchor retailer close, but thus is the cycle of business. It will be interesting to see who continues to rise and fill the open space. One parting thought from McKinsey: the retailers who are successful are always shifting and while many struggle continuously, some are able to make the rise to the top performers.

KiwiCo Surpasses $1B In Lifetime Revenue

Over the years, many subscription boxes have popped up offering to send you a curated box of stuff each month. That stuff could be clothes, whiskey, or even children’s toys in the case of KiwiCo. Founded by Sandra Oh Lin, a mom looking for creative and educational playtime, KiwiCo has gone on to raise $10M, ship over 50 million crates, achieve $1B in lifetime revenue, and be one of the last remaining stuff in a box companies that are actually successful (seemingly profitable too). What are some of the keys to their success?

• Not raising an insane amount of money

• Providing a quality, unique product

• Focusing on funding its own growth

• Providing a product that is consumed regularly

• Omnichannel

Additionally, this summer, KiwiCo went omnichannel, adding Barnes & Noble and Target to its existing D2C business. What I love about the retail launch, in addition to a D2C brand launching retail, is that the strategy is very targeted based on the store. Here is a breakdown of the strategy by store:

• Target - selling six products geared toward kids ages three to nine at price points ranging from $20 - $35 including one of the best sellers, Froggie Dissection lab

• Barnes & Noble - a more gifting-focused approach, with 5 items covering infants to tweens and higher price point products up to $60

I believe brick and mortar is where a majority of its future growth will come. I think more eCommerce brands should use this playbook of adding retail in a very targeted manner to the store’s shoppers as a way to differentiate.

• Summary: PreciTaste is an AI-driven tool to using computer vision to support restaurants back of house management by supporting ops details at a station, prep, and planning level

• My take: Ops is arguably the hardest part of a restaurant because you are dealing with such sensitive perishable inputs and any tool that can help you optimize that process is going to be super helpful

• Founder(s): Ingo Stork and Laura Stork

• Amount raised & investors: $24M from Monogram Capital Partners, Enlightened Hospitality Investments, Melitas Ventures, and Cleveland Avenue

• Notable Clients: Honeygrow, Chipotle, DIG

• Interested? Book a demo here

Additional Links:

1. Smackin Sunflower Seeds founder shares the importance of velocity in retail stores and tips on how to get velocity from the launch (read more here)

2. Chipotle invests in AI supply chain platform, Lumachain (read more here)

3. Ghost, a B2B retail inventory marketplace that helps retailers move excess inventory, raised a $40M Series C from L Catterton (read more here)

4. McKinsey shares their lessons on how retailers can create value in a very competitive industry (read more here)

5. Buybuy Baby is shutting down its 11 stores and is focusing on eCommerce only (read more here)

6. Lidl, the discount grocer, is redoing its brand and spending big on a brand activation to win value-focused shoppers (read more here)

7. Amazon is testing out a 3,800-square-foot small-format store with grocery top-ups, coffee, and grab-and-go meals next to its Whole Foods in Chicago

   • My take: Sounds quite similar to the small format Whole Foods launched in the UES covered in Issue #19

8. Brassica, a six-unit Mediterranean fast-casual restaurant, received funding from Chipotle’s Cultivate Next venture fund (read more here)

9. CVS replaces its CEO with the president of its pharmacy benefit management unit (read more here)

10. Procter & Gamble, the maker of Downy, Gain, Tide, Febreze, Dawn, and more, is not planning on reducing prices in the current value-driven environment (read more here)

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