For most of last year, traditional retail was the bruised punch line of an obvious joke. Malls were deserted. Bankruptcies made headlines. Major outlets were slashing prices and writing their own obituaries.
Given that apocalyptic backdrop, the decision by online titan 1stdibs—a game-changing force in the interior design world—to open a 45,000-square-foot gallery in New York’s Chelsea neighborhood in February is surprising and a little brazen. And that might be why it will work.
“At our core, we’re an e-commerce company, but we also know the inherent benefit— particularly in the design industry—that comes with the physical experience,” says company CEO David Rosenblatt. “Feeling the texture of a textile, sitting in a chair, holding the heft of a decorative object—these can be important considerations to designers and consumers.”
Touch (or the lack thereof ) is the inescapable paradox of 1stdibs. A platform that averages 5 million site visits per month and a gross merchandise volume of roughly $250 million in 2018 (up from $200 million in 2017), 1stdibs offers high-end art, design, and home furnishings from global dealers. The site has more than 4,000 screened sellers from 28 countries and, at press time, 860,000 listings.
So why make a major play for brick-and-mortar now? After more than a decade online, digital brands like 1stdibs have learned a few things. It appears that growing a luxury business requires a special type of coddling, and it has to be done on the consumer’s terms. That means a strong presence both online and in-person. 1stdibs formerly had a trade-only showroom at 200 Lexington Avenue in Manhattan, but the new 1stdibs Gallery is a different enterprise in size and scope—most notably, it’s open to the public. Located in the Terminal Stores building, on 11th Avenue, the space has more than 50 vendors, along with event spaces and reserved areas for client meetings. The exhibitors represent a mix of antique/ vintage sellers as well as contemporary makers, including Aero, Charles Burnand, Karina Gentinetta, Craig Van Den Brulle, and Nate Berkus.
As for whether or not a 45,000-square- foot space is how people want to shop for design, it’s too early to tell. But Oliver Chen, who tracks retail and luxury as managing director and senior equity research analyst at Cowen and Co.’s Equity Research department, says a combination of digital and physical stores is the future of retail. “If your business is digitally native there reaches a point when you need to go physical,” he says. “A physical store allows you to acquire new customers, and as online acquisition costs go up, this is important.”
A strong digital brand doesn’t guarantee a successful storefront. “It’s difficult to run a store,” says Chen. “You have to consider staffing, training, and you need to link inventory online and offline. It’s important how you structure your rental agreement; how much rent expense is fixed versus variable, and site selection is critical. You need to maximize the kinds of traffic that makes sense for your company.”
There may be some risk involved in such a large-scale store in a high-rent district, but Rosenblatt has already transformed the company since joining in 2012, and he says it’s ripe for change again. When he joined, the site (founded in 2001 by former real estate agent Michael Bruno) operated like a listing service, charging dealers a set monthly fee and a per-item listing fee. If you wanted a Bauhaus writing desk or an 18th-century marble mantel, you needed the right search terms and a well-trained eye. But it also purveys a certain seductive quality.
“The genius of 1stdibs is that there is a story,” says Chicago-based designer Tom Stringer. “These objects are displayed with their history—who the creator was, how they came to be, whether they’re contemporary, traditional, vintage, or antique objects. It is not like buying the very same thing on eBay.”
Building on the momentum that brought together interior designers and global dealers (many high-profile names), the company raised a combined $102 million from Benchmark, Spark Capital, and Index Ventures in 2012. The following year, Rosenblatt transitioned the site from its original, Craigslist-like roots into a robust e-commerce platform. “1stdibs still acted as the middleman when I joined—customers were able to discover products through 1stdibs, but were unable to buy online,” says Rosenblatt. Since adding a “buy” button, “the average price of a sale through 1stdibs has increased by 40 percent, $2,000 to $2,790,” he says. “Before the buy button, we would get maybe a few of these large orders a year. Today we get 15 purchases over $10,000 on a daily basis.”
In 2016 the company diversified its mix and introduced a New & Custom category, featuring more than 2,000 makers and independent brands selling roughly 60,000 newly created works. It is the fastest-growing category on the site, says Rosenblatt, representing over 15 percent of furnishing sales.
In the end, building a luxury experience requires delivering what customers want and how they want to buy it—and that includes, first and foremost, options.