E-Tailers Helped Get Retail Districts Through The Pandemic And Now Eye Further Expansion

The coronavirus pandemic depressed the sales of many already-suffering retail brands, leading to more bankruptcies and shutdowns, but online sellers that opened their own brick-and-mortar stores seem to have come through unscathed. That has provided an important lift to boutique shopping districts that attracted clusters of these e-tailers, or digitally native brands, showing a possible way forward for other districts still suffering from high vacancy rates.

The densest concentration of digitally native brands in Chicago can be found on a short stretch of Armitage Avenue in the Lincoln Park neighborhood. Since 2013, at least 15 online sellers have established themselves on the two blocks between Halsted Street and Sheffield Avenue, just east of the Chicago Transit Authority’s elevated train station, according to a new survey by Stone Real Estate.     

All of the Armitage e-tailers established before the pandemic were able to keep selling even during the shutdowns, eventually reopened and continue operating today, according to Stone Real Estate senior associate William Winter. Two more opened this year, helping send the retail district’s vacancy rate nearly to zero.

“Digitally native brands were better positioned to withstand the pandemic, especially in the early days when the brick-and-mortar stores were closed,” Winter said. “And right now, the Armitage district is as strong as ever, and in terms of e-tail, it’s also as strong as ever.”

Store operators agree.

Lee Moffie helped start the online menswear firm State and Liberty in 2015 in Ann Arbor, Michigan, and opened at 840 West Armitage Ave. in 2018. It now has 18 brick-and-mortar stores across the U.S. and Canada.

“We are doing better than our pre-pandemic numbers,” he said. “In fact, we’re experiencing one of our best growth rates in the six years we’ve been in business.”

“This past year has underscored the importance and vitality of our retail stores,” Parachute Home founder and CEO Ariel Kaye said. “We quickly introduced many new services during the pandemic — [buy online, pick up in store], ship from store, in-store appointments and customer outreach to keep shoppers informed on new product launches. Our stores drive brand awareness and overall site traffic across the board.”

Kaye started the Los Angeles-based online home essentials brand Parachute in 2014 and opened a store at 837 West Armitage Ave. in 2019.  

The vacancy rate for these several blocks on Armitage sank from 7.2% in 2020 to 2.9% this week, according to Winter. Rental rates have also steadily increased, from around $60 to $70 per SF three years ago to more than $80 now. The roughly 141K SF retail district also retained a mix of national and local e-tailers, with digitally native brands occupying 23.7% of the space, up from 22% in 2020.

“This shows it’s good to have both an online presence as well as a physical store presence,” Winter added.

Brick-and-mortar outlets have also become integral to State and Liberty’s business model, according to Moffie. Its clothing seems to appeal most to young professionals, roughly between the ages of 24 and 40. And like most digitally native brands, its stores tend to be in areas like Armitage Avenue in Lincoln Park — picturesque districts populated by affluent young residents and small boutiques, places that attract window shoppers who want to take a stroll and, perhaps, stop for a drink or a bite to eat.

“It’s a tightknit community, but it’s also a destination for others,” Moffie said. “And having a cluster of digitally native brands plays a big part in making people want to go to the area, hang out and shop, so it’s a great customer acquisition vehicle for us.”  

In addition to bringing casual shoppers in off the street, brick-and-mortar outlets have another advantage. Buyers looking at high-priced items often prefer to get off their computers and into an actual store, somewhere they can touch the goods and make sure they fit. As a result, State and Liberty sees higher average sales on Armitage Avenue and its other stores than it does online.

“When you see a $550 suit online, you think, ‘This is a big investment,’” Moffie said.

Bonobos, an online men’s clothing seller, was the first digitally native brand to settle on Armitage Avenue, opening a 900 SF shop at 845 West Armitage Ave. in 2013. The district was still mired in post-recession doldrums, and the vacancy rate stood at 17%, according to a Stone Real Estate survey.

But soon the floodgates opened, and e-tailers such as online grocer Foxtrot and Warby Parker, an online retailer of prescription glasses and sunglasses, followed in Bonobos' wake, helping send the vacancy rate down to 11.5% by 2018. E-tailers Lively and others debuted on Armitage in 2019. That year, vacancy sank to 8.8%.

In 2021, two new digitally native brands opened their doors. Clothing brand UpWest opened at 924 West Armitage Ave., and NAADAM, a cashmere retailer, opened at 838 West Armitage Ave., a space formerly occupied by electronic trading platform TD Ameritrade.

Winter said the resilience shown by e-tailers throughout the pandemic shows they could be a rich source of tenants for other boutique retail districts, including Damen Avenue in the Bucktown neighborhood and Southport Avenue in Lakeview. In 2020, digitally native brands occupied 1.3% and 7.4%, respectively, of the space in those areas. And although the two-block-long district on Southport between Roscoe Street and Addison Street was more than 95% occupied after reaching 100% in 2019, the Damen district, two blocks between North Avenue and the Bloomingdale Trail, has struggled for years with high turnover and empty storefronts.

Soaring rents for Bucktown spaces followed by a hammering by the pandemic helped shutter neighborhood retailers like Psycho Baby, Tangerine and Clothes Minded, according to Winter. Between 2018 and 2020, the vacancy rate nearly tripled, going from 11.3% to 29.3%.   

Stone Real Estate will soon conduct another survey of the Southport and Damen shopping districts, he added. But e-tailers are already expanding beyond their Armitage Avenue hub. Warby Parker, for example, opened this year a new outlet in Bucktown at 1611 North Damen Ave., its sixth Chicago location, including others in the Gold Coast, the Southport district, downtown and the West Loop.

State and Liberty’s Moffie said that although the company will probably focus first on opening new outlets in major cities where it has no presence, it is also eyeing other spots in Chicago, primarily districts that, like Armitage, attract affluent neighborhood residents, as well as casual visitors to local restaurants or other amenities. That includes the Magnificent Mile, which suffered numerous store closures even before the pandemic and lost several others this year, including Macy’s last March, leaving a 170K SF hole in Water Tower Place.

“It seems like our next viable option,” Moffie said.  

But other shopping districts also beckon. Moffie said that he also likes the West Loop, especially the Fulton Market neighborhood. The arrival there of Google, McDonald’s and many other corporations, along with an already-famous Restaurant Row along Randolph Street, has transformed it from the city’s historic meatpacking district into a high-tech office center.

“It’s really crammed with our type of customer,” Moffie said.