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Are You Crazy to Open a Brick-and-Mortar Shop?

Why would a designer decide to open a brick-and-mortar design shop selling product, given the nonstop chatter of a retail apocalypse? Is an online operation less complicated, or does e-commerce just present a different set of challenges? AD PRO asked four designers who currently have, or have had, shops of the brick-and-mortar or online variety to weigh in on their experiences, so you can make an informed decision.

“I am tactile. And I also strongly feel that design is about discovery,” designer Sarah Hamlin Hastings, owner of Fritz Porter Design Collective in Charleston, South Carolina, explains about the benefit of a brick-and-mortar versus an online-only shop. “The internet is great if you know what you are looking for. But what about the sense of discovery when perusing a quirky little antique shop or running your hands over a sumptuous new mohair or finding a woodworker who makes beautifully designed pieces in his garage workshop? That is the curated shopping experience I wanted to create.”

After moving to Charleston in 2010 only to discover a lack of nearby design resources, Hastings decided to launch her own hybrid business—a curated retail store, a textile showroom, and an interior design business—which opened in 2015. And while she felt the personal and financial risk of opening a successful brick-and-mortar store was higher than an online-only business (as far as investing in inventory, overhead costs, and dealing with slim profit margins when working with independent artisan vendors), she found great gratification in seeking out interesting pieces and being able to tell artisans’ stories and promote their craft.

Fritz Porter
Fritz Porter, Sarah Hamlin Hastings’s Charleston shop.

Julia Lynn

Similarly, interior designer Paloma Contreras, co-owner of Houston-based Paloma & Co., launched the brick-and-mortar concept store this year with business partner Devon Liedtke (the store also has a strong online component). The aim was to “showcase unique items that tell a story—whether they are antiques or found objects, original art from emerging American artists, or handmade pieces by artisans from around the globe.”

“It is really nice to be able to showcase our style and point of view without any type of filter,” Contreras says. “We don’t want to offer things that are available at a dozen stores in town or hundreds of stores online. For us, the most important thing has been finding things to offer our customers that are not only signature to our style, but also have an interesting story to tell.”

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In the same vein as Hastings and Contreras, interior designer and author Kirsten Grove of Boise, Idaho–based We Three Design Studio and design blog Simply Grove, says, “When you’re a designer, you’re a natural curator. Having a shop of your own allows you to curate items that you really do believe in and find beautiful. It’s an easy partnership when done right and in the right market.”

Devon Liedtke and Paloma Contreras
Devon Liedtke and Paloma Contreras’s Houston shop, Paloma & Co.

Kerry Kirk

However, for Grove the challenges of running her own design shop ultimately took their toll on her design business, and she folded it in 2018 after just one year in operation. “I had always wanted to own my own shop that sold furniture and home goods. It was one of those things that I had to get out of my system,” she admits. “But there were a few tricky aspects, one being that Boise is a really hard place to have a successful home retail shop. It was hard to gain regular customers who weren’t just looking for sale items.”

In general Grove sees pluses and minuses to both brick-and-mortar and online shops. “A brick-and-mortar space allows your clients and customers to see and feel things in person, while having an online shop gets rid of the unexpected overhead costs,” she explains. “But a huge drawback for an online shop is shipping costs and angry customers who have received something damaged or an incorrect order.” But she adds, “If you’re able to create a team that only focuses on your shop, it’s totally doable!”

Michelle Adams, the former Domino magazine editor who ran online shop The Maryn for two and a half years, during which time she hosted four pop-ups, found that it’s a misconception to believe that an e-commerce business doesn’t require as many overhead costs. Her expenses turned out to be too high to make her business viable.

“Opening a shop represented the ultimate creative outlet for me, as it required editing the market for the coolest products, creating a brand identity, and developing the lifestyle imagery to support it,” Adams says. However, the cost of running a design shop included expenses that one might not think of up front, including employing a full team to help with order fulfillment, the website, customer service, accounting, photography, and so on. Then there were also warehouse costs, high-interest business loan payments, press outreach, marketing fees, and insurance. Additionally, Adams curated her product selections from artisans around the globe to keep her assortment fresh and unique. “But importing comes with a lot of hidden costs that eat away profit margins,” she says. Another financial burden was her inability as a small business owner to compete with the free shipping offered by larger e-commerce sites.

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The Maryn
Product from The Maryn, Michelle Adams’s online shop, which ceased operations this spring. Adams is former editor in chief of Domino and cofounder of Lonny.

Marta X. Perez

Once the financial challenges became too great, Adams decided to close up shop. Based on what she learned, she advises, “Be realistic about what you’re comfortable spending, and absolutely stick to it. I made the mistake of thinking that investing a little more here and there would help my shop get over a hump, but in the end it only put me into debt.”

Likewise, Grove urges, “Before you do anything, run your numbers and be very honest with yourself. If you don’t create a cushion for the first three months, things can get tricky.” Yet, she adds, “An online shop can be time-sucking but worth the work. And a brick-and-mortar can become a beautiful extension of your brand.”

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More sellers than buyers for luxury homes

Michael J. Berens

Monday, May 13, 2019

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More sellers than buyers for luxury homes

Sales of luxury homes have been falling since the beginning of the year. In most areas of the country, the number of luxury homes for sale has increased while selling prices have declined. Among higher-end properties, demand has especially dropped off as tax changes and fluctuations in the stock market have made luxury home purchases less desirable.

Many luxury homes were put up for sale following the tax reform changes that took effect as of Jan. 1 this year. Although the wealthiest households receive substantial tax breaks under the new law, those living in states with high state and local income, property, sales, and other taxes ended up paying more taxes this year because of new limits to state and local tax (SALT) deductions.

Interviews conducted by wealth investment advisors the Spectrum Group found households with incomes between $500,000 and $749,000 and those between $750,000 and $1,000,000 felt the greatest impact on their personal financial situation.

Among those hardest hit were residents of California, Connecticut, Illinois, New Jersey and New York — states with a substantial number of high-end luxury homes. Spectrum says there is now a wave of investors moving from high-tax states such as New York, New Jersey and Illinois to low or no-tax states, such as Florida, Washington and Nevada.

That exodus is reflected in the changes in the luxury home market in recent months. Web-based real estate brokerage Redfin reports that luxury home sales declined for the second quarter in a row during the first quarter of this year.

The average sales price for luxury homes nationwide fell by 1.6%, compared to the same time last year — the first annual decline in three years. Moreover, sales of homes priced at $2 million or more plummeted by 16% to their lowest point in nearly a decade.

In its Luxury Market Report for April 2019, the Institute for Luxury Home Marketing states that it is a buyer’s market for luxury homes at present. The number of listings between February and March was up by more than 2,000.

On average, homes are selling for below list price. However, the report indicates there are signs the market may be beginning to normalize. The median sales price was up $25,000 in March compared to February, at $1,425,000. Some 1,800 more luxury homes sold in March than in February, and homes were on the market 16 days less than in the previous month.

Part of the reason for the uptick in sales is the high demand for housing in some highly affluent metropolitan areas.

Even though California is one of the SALT states, it is still very much a seller’s market for homes priced at $1 million or more in tech-intensive centers like San Francisco, Silicon Valley and Sacramento. Other high-demand metro areas include Seattle; Arlington-Alexandria in Virginia; Los Angeles and nearby San Fernando Valley cities; and Denver and Boulder.

Those states with no state income tax that attract wealthy relocated households also have experienced higher-than-average sales of luxury homes. In Florida, for example, homes priced at $2 million or more have sold briskly in cities such as Coral Gables, Fort Lauderdale and Boca Raton, according to local real estate website The Real Deal. Luxury homes sales in Miami have jumped 161% since a year ago. Other areas experiencing higher sales include Charleston, Boise, and Nashville.

All this shifting about will impact interior designers differently in different areas. Taking the longer view, with the luxury prices beginning to stabilize and the economy barreling along with no signs of slowing down any time soon, the market is likely to perform much better in the second quarter, leading to demand for designer services in the second half of the year.

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About the Author

Michael J. Berens

Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at mjberensresearch@gmail.com.

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