Not long ago, I tripped across a simple image of a storefront on the Brick & Wonder activity feed. It was posted by, well, Storefront, a massive marketplace of retail spaces that anyone can rent effortlessly for pop-ups, installations, showrooms, and some surprisingly alternative concepts. We talked to CEO and co-founder Mohamed Haouache to learn about how much effort has gone into creating something so easy to use in a space that is notoriously difficult: retail.
B&W: What is Storefront's origin story?
Mohamed Haouache: I was born and raised in France. I moved to New York to work in hedge funds and then spent a total of ten years on Wall Street working in various roles until I got sick of my life feeling that I was not doing something impactful. I decided to resign one night in order to launch my own project… to jump and take a little bit of risk.
Storefront was built kind of out of an accident. A friend of a friend contacted me one day and asked me to help to find a pop-up shop in Paris. I could not find any spaces that would lease to us despite asking a lot of commercially listed brokers… I looked at online listings and on the equivalent of CraigsList in France. I contacted my brother who’s also a commercial broker but all of them told me that they didn’t have any spaces for such a short duration and for such a low-commission deal.
MH: I asked all of the brokers I spoke to a question which triggered my interest in launching Storefront: 'how often do you get a lot of these kinds of pop-up requests?' They all told me that they were actually getting a decent amount of them but were basically ignoring them. I saw that there was room to launch an AirBnB for retail. I was fascinated by AirBnB. That’s the kind of crazy set of ideas that I wouldn’t have believed was possible 15 years ago. Had they come to me and asked me to invest back when they were a small startup, I would have probably said no which would have been the biggest regret of my life.
BW: What were the early changes that you guys faced as you were building?
MH: Along with the technical challenges you face with a young product, we were a small organization dealing with a very fragmented market. We had to technically walk on one side of the marketplace, the supply side, because listing brokers didn’t believe in the idea of listing their little space on Storefront.
We decided to go after Mom & Pop vacant retail space which was a sweet spot to bypass the middle men. At the same time, for the company’s MVP product, following the advice of The Lean Startup we went very simple. We started a landing page, then with a photo loader, then with a CRM, then finally a marketplace with the fully connected market. It took us four years to arrive at the product-market fit that we have today and it took us 3 ½ years or so to educate the market on how we position our service.
BW: Was that a lot of face to face time? How many of you were working on the door to door?
MH: Oh yes! I was on the street, knocking at the door of retailers and boutiques and asking them if they would like to list their space. It started with two guys, myself and the other co-founder. And then with an intern, and then a junior guy... and then 2 interns and one junior guy!
In order to disrupt the market you need to be the market.
I also did everything possible in order to educate myself and build absolutely no shortcuts. In order to disrupt the market you need to be the market.
BW: Storefront promises a nearly frictionless rental process. How do you monetize the transactions?
MH: Storefront is a traditional marketplace and we actually have a very traditional model. We collect a fee on top of the rental revenue of the listing owner. So for example, if you list a boutique in New York for one or two hundred dollars a day, we charge one to two dollars a day, plus a commission. And it’s perfectly free for the listing owner as we are collecting our fees from the renter.
BW: How do you navigate all the real estate laws?
MH: We are a real estate brokerage. We have license in the U.S., and in every country where we are brokering rentals we follow the local regulations.
BW: We're fascinated by the company’s selling a “three click transaction” in what is usually a drawn out process.
MH: We decided to break the rental cycle of the boutique. What is super disruptive and unique today is that you can find and book a retail space in a few hours or a few minutes depending on the availability of the space and the activity of the listing owner.
What is even more disruptive is that we are slowly but surely creating liquidity in a non-liquid asset class. With a traditional rental agreement, the time it takes to rent and find a space for a long term lease can be one month to 3 months. We have transactions that take place in one day. Our mission statement is to make booking of a retail space as easy as booking a hotel room. Retailers or e-commerce companies can find a space and connect with the listing owner, validate the availability and book the space through our online marketplace. The messaging, the payment, the booking experience is completely aligned with the needs of the retailer and the needs of the listing owner.
What we see as a major change is that retail is no longer about selling product.
BW: You initially went directly to landlords and owners. Did the realtors come around?
MH: Absolutely. Given that it's a B2B platform, we are dealing with a virtuous circle. We don’t have any real risk of being bypassed. There’s a strong adoption of Storefront coming from the Mom & Pop retail spaces, but I would say most of the listings are from traditional real estate brokers. And they are using it on both sides of the marketplace… which is kind of a surprise. They are usually listing a space on behalf of the listing owner, but they are also using storefront when they’re actively looking for space.
BW: You’ve convinced a great deal of people. And now you have 10,000 plus spaces!
MH: I cannot keep even keep track of it! We recently launched South Korea on the market. We want take the same global expansion plan as Uber or AirBnB. The top cities by far when it comes to market adoption are New York, Paris, L.A , London and also Hong Kong.
BW: I’ve noticed that there are some really inexpensive spaces and then some extremely expensive spaces. What are some of the factors that determine the variety of pricing?
MH: The listing owner is in charge of creating the listing and therefore picking a price they believe is economically viable. We have a team who can guide them when they see that they aren't getting enough requests, but the main price variable is traditional and my answer isn’t going to surprise you: “Location, location, location.” There is also the quality of the space, and the third element is seasonality. Renting a space during Paris Fashion Week or during Christmas is much more expensive.
BW: We hear a lot about how retailers have to change or die, but what we don’t hear about as much is what paradigm shifts those will those be? What is Storefront doing to enable retailers to change?
MH: Our company is giving flexibility to retailers, and that’s something that wasn’t so possible before now. Retailers can test a location, test a format, move from an online to an offline format economically, and they are more able to quantify the configuration of a pop-up and the cost of operating this pop-up.
What we see as a major change is that retail is no longer about selling product. This is something that is absolutely disruptive for a lot of traditional retailers.
MH: We’re enabling online retailers to test a physical format. The new retail paradigm is not only about selling the product but getting exposure - the social media signal. Some people in the VC community think of Storefront as partially a media company. Instead of spending money on billboards or TV, some companies consider their pop-up shops to be a channel. Clearly that’s something that I’m happy to accept as a comparison!
BW: Considering that you have a finance background, has there been a learning curve for you personally since retail is a softer, more creative thing to grasp? Does it appeal to you?
MH: I’ve been learning every day! I’m lucky enough to be someone who’s very curious and I read a lot. I already had a retail and fashion sensibility before making the brand. It did not come as a surprise to my friends and family when I told them I would be developing this. And coming from France, you have a fashion touch that only the Italians have... or the Brits. So it was actually something that I was actually very keen on.
BW: The French are born with better style!
MH: We are exposed to better style, that’s all.
BW: Specifically in New York right now, there is so much empty storefront. What‘s going to happen to all this retail space?
MH: It’s a very tricky scenario. A lot of landlords want to adapt to the fact that there might not be any uptick in retail activity when it comes to the rental market. There were historically good cycles of commercial real estate and bad ones. This one is very particular because the traditional retailers or the new e-commerce players don’t have the appetite for a long term commitment.
In New York today I saw some additional vacant spaces in Soho. It's brutal you know - there were two coffee shops where I normally go which were closed. I was really pissed off because I’m a coffee shop guy! I like working in them 1 or 2 hours a day, but these were closed even though they were always full.
It seems to me that there is a mismatch between the type of rent that the NY market is asking and the type of revenues that brands can generate off small spaces. There is an alignment which is absolute between the real estate cycle and the retail cycle. And these are absolutely opposite today. The problem is that you have to make long term lease projections, and, right now, if the lease that is not going to be long term but short term, it changes everything. You’re moving from a low frequency business into a high frequency business… from a high margin to a low margin business. Therefore technology is the only solution to come up with a new way to generate traffic and revenue from these spaces.
Storefront's profile on Brick &Wonder is here.
Lede image shows West Village pop-up for Hodinkee, a leading source for watch fanatics.