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This New Retail Platform Wants to Save Small Brands Hurt by the Pandemic

Neighborhood Goods is in unique position to weather this storm, and it wants to help small businesses along the way.
Inside Neighborhood Goods.

Inside Neighborhood Goods.

As many of us approach our second month of quarantine, it's becoming clear that independent fashion brands will be hit especially hard by the store closures and economic recession brought about by the pandemic. But at least one retailer wants to help them bounce back.

Last Wednesday, Neighborhoods Goods — which operates locations in New York, NY and Plano and Austin, Texas — announced it would be accepting applications for a new initiative called The Commons, a free platform specifically for brands who've been negatively impacted by the pandemic, whether that's because of wholesale cancelations or other revenue disruptions. 

Neighborhood Goods traditionally charges brands a small fee to showcase their products, as well as taking a percentage of sales. The brands selected for The Commons will have theirs showcased online (if it's logistically possible) and in a special section of its stores once they reopen, at no cost.

According to co-founder Matt Alexander, the idea for The Commons came about only a week before it was announced. In thinking about how to reopen on the other side of this, he says he felt "it would be disingenuous to put something together that doesn't acknowledge that a lot of people are losing jobs and a lot of brands are struggling." 

In addition to believing it was "the right thing to do," Alexander felt the initiative made sense from a business perspective, even though he's not expecting to make any money from it: "We've always believed trading in relevance is more important than ever in the retail industry. You're going to want to feel like you're contributing to something meaningful, more than just trying to extract dollars from wallets."

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Neighborhood Goods was born in part out of a desire to provide brands with a less risky, cumbersome and expensive way to dip their toes into physical retail, which even digitally native brands see as a valuable method of exposure and customer acquisition (hence the recent proliferation of pop-ups). Meanwhile, Neighborhood Goods would provide shoppers with top-notch customer service, constantly rotating inventory from cool, under-the-radar brands and even events, making for a fully experiential approach. (Locations are also equipped with kitchens.)

Neighborhood Goods sees itself as the evolution of the traditional department store. "Brands get higher margins from us [than department stores] and a huge amount of data," says Alexander, describing a new product that Neighborhood Goods's brand partners can use to see real-time reporting on sales, demographics and inventory. He also emphasizes the fact that each location is different and caters to its environment, and that brands can tailor their presence within each one.

A week after announcing The Commons, Alexander says they've already received a lot of applications, but they've had just as many brands reach out expressing interest in working with them in the traditional way. "If anything, we have more conviction in our model [now]," he explains.

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Even before the outbreak, retail was in the midst of a reckoning, with brick-and-mortar institutions like Barneys and Opening Ceremony closing their doors (amid a sea of other retail bankruptcies) — leaving many of the small fashion brands who relied on those accounts in the lurch.

Today, many indie designers that relied on wholesale relationships with brick-and-mortar stores find themselves in a similar situation, on a more widespread scale. Even big retailers with e-commerce components like Saks Fifth Avenue are canceling orders, delaying payments, aggressively discounting spring stock and planning for reduced buys in upcoming seasons. Meanwhile, experts are predicting that the pandemic could be what "finishes off" a number of already-struggling department stores. That's all to say that these events are accelerating a conversation that's been happening behind the scenes for years: It might be time to rethink the traditional seasonal wholesale model.

Showfields NYC.

Showfields NYC.

The ongoing shift among many brands towards selling directly to consumers has been one byproduct of this discussion. Others argue for new, better terms between retailers and designers. Retail-as-service platforms like Neighborhood Goods, Showfields, B8ta and Re:store are emerging as another alternative: They all operate a little differently, but the gist is that brands pay a fee and potentially a small commission to have their goods showcased in a store where they can sell as much or as little as they want and pull out at any time; the platform employs sales associates and offers brands access to back-end data.

Many of these VC-backed platforms are relatively young and likely have enough capital to bounce back once they're able to reopen. Showfields raised $9 million last February; B8ta raised $50 million last October. Neighborhood Goods raised $11 million last September, and Alexander said sales in January and February grew over 600% year-over-year. 

Neighborhood Goods, which paused all of its memberships for its brand partners when its stores closed, had ambitious expansion plans before all of this happened. And while it may pursue them in a way that's "more cautious and mindful," Alexander says it still plans to pursue them, noting that he's already gotten "interesting" offers from landlords that likely wouldn't have been possible pre-coronavirus.

Showfields — which has been hosting shoppable livestream events to support its brand partners and artists since closing its New York City location — also plans to go "full steam ahead" with its expansion plans once this is all over, including opening a Miami location, according to CEO and Co-founder Tal Zvi Nathanel. "In the near future, our mission will become more important than ever as brands need to compete for customers' attention; our physical platform has provided an innovative offline solution, and we're excited to continue building our digital platform as an online solution," he tells Fashionista in an email. Showfields has also been hosting "digital roundtables" for its brand partners with experts discussing the issues they're facing right now.

Whether platforms like Showfields and Neighborhood Goods will overtake department stores remains to be seen — and may depend on department stores' willingness to change drastically, if they're even able to stick around long enough to do so — but it's fair to say they're currently in a strong position. Something else worth noting is that when they open back up, they won't be bogged down by loads of excess inventory that they'll be forced to heavily discount, while department stores will.

"In an industry struggling to adapt to the future, this whole crisis is going to accelerate the prevailing winds in the retail industry," argues Alexander. "And we end up being in a relatively good spot on the other side."

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