Under pressure from rising rents, small shops are becoming creative

Emily Schildt opened last March Pop-up grocery store on the corner of Bleecker Street in the West Village, selling artfully packaged condiments, drinks and other products made by small, emerging brands in a pay-to-play business model.

Customers can purchase artisanal hot sauces or zucchini chips from brands such as Peepal people And From Van who pay a fee to be on the shelves. Normally 150 to 200 brands are on display at a time, with some being replaced quarterly.

“If we were to rely solely on product sales, we would have to sell at a much higher volume,” Ms. Schildt said. “That's just impossible when you're talking about a store that consists of completely unknown goods.”

Rents for retail space in New York continued to rise last year, making it harder for independent businesses to survive, according to real estate services company CBRE. A 270-square-foot space in the West Village, an affluent Manhattan neighborhood, was recently on the market for $5,000 a month. But some ambitious entrepreneurs are experimenting with business models such as charging shelf fees or selling at wholesale prices to make ends meet.

“You have to get creative or you have to leave New York,” Ms. Schildt said.

Retail is being reconfigured to meet the values ​​of the new customer, says Thomaï Serdari, who teaches marketing at the NYU Stern School of Business. “Innovation comes from those who, out of necessity, have updated their business models,” she said.

But independent retailers face challenges, including high operating costs and finding a model that works.

“Technology is evolving, our mobile phones are evolving and physical machines are evolving,” says Ani Sanyal, who co-founded the company with his brother Ayan. Calcutta Chai Co., which sells products online and at two retail locations in downtown Manhattan.

Their business sells hot chai, Indian street food such as samosas, seasonal chai soft serve ice cream, along with bags of their chai blends and merchandise. Visitor traffic is stable at both locations, Ani Sanyal says, but the company's e-commerce business accounts for 75 to 80 percent of sales.

Kolkata Chai Co. also sells chai concentrate wholesale to Equinox, Juice Press and Boba Guys. The company has collaborated with brands like Transcendence coffeecollaborated with celebrities like Hasan Minhaj, all of which were posted on their social media feeds.

Using an omnichannel approach – e-commerce, wholesale and in-store – the brothers believe they can expose a wide range of people to their chai and create lifelong customers. “Since chai is a product that has been bastardized 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,” Ani Sanyal said.

Dolce Brooklyn sells gelato and ice cream from a storefront in Brooklyn's Cobble Hill neighborhood, but it's the company's wholesale business, which sells to high-end restaurants, some with two Michelin stars, that makes a profit. “You have to find different revenue channels,” says company owner Pierre Alexandre.

Rachel Krupa's omnichannel approach for her business, the Goods Market, involves assembling and distributing snacks in hotels, coffee shops and corporate pantries. In her minimalist store in SoHo, one of three locations, she sells packaged snacks from 200 brands, mostly emerging producers, such as garlic chili chips made by From mom Teava company in Oakland, California.

The Goods Mart was one of Mama Teav's first accounts when it started two years ago, and today Mama Teav products are available in 420 stores across the United States. “As a small maker, a new brand, we're not going to jump into Whole Foods,” said Christina Teav-Liu, founder of Mama Teav's.

Ms Krupa said she wouldn't be able to showcase brands like Mama Teav if she had landlords who were just trying to make money. Her first landlord, Bret Trenkmann, saw value in her mission and gave her a fair rent in SoHo, as did another landlord, 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 PR firm, Krupa Consulting, which works with packaged food and wellness brands. “You're not going to say, 'Oh my God, I went skating at Rock Center — and I ate at Chili's,'” she said.

Landlords play an important role in the growth and survival of independent businesses, says Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance, a nonprofit advocate for independent businesses. National chains may be a safer financial choice compared to an independent, but leasing to them is short-sighted, Ms. Mitchell says.

And it can be good for landlords to give small business owners a break. “The quality of businesses at street level affects the rents they can get for the upper floors, whether that be offices or residential,” she said.

The United States is undergoing a cultural shift in retail, says Syama Bunten, the founder of Scaling Retail, a San Francisco consulting firm. The direct-to-consumer model, pioneered by companies like Dollar Shave Club and Stitch Fix, was an innovative approach years ago, but has now reached saturation.

The new phase of shopping falls into two main categories: cheap and convenient on Amazon and with a sense of connection in physical stores.

Another way for independent owners to build business is through connection and community, often through in-store events, creating a vibrant street life, foot traffic and a gathering of like-minded people. A bus shelter advertisement can increase 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 become customers,” she said, “but you have a 100 percent chance that your brand will have a much more lasting effect on someone's mind than a traditional advertising piece.”

Despite their success, some small retailers wonder if it's worth it. Many of them have poured their savings into their businesses and raised additional money through institutional and angel investors, not to mention friends and family. They use sustainable business models and constantly post on social media. Yet the costs of renting and creating a space remain a barrier.

“Something has to change,” says Ms. Schildt of Pop Up Grocer, who spent eighteen months looking for the right storefront.

If city officials and landlords don't realize that there are unaffordable costs around rent for independent retailers, “the city is going to lose its color,” says Ani Sanyal of Kolkata Chai Co. to New York.”