Why We Invested in Showfields
We are excited to finally announce we lead a $9m seed round into Showfields, “The Most Interesting Store in the World.”
Showfields first location is 11 Bond Street in the heart of NoHo in New York City, where close to 40 amazing brands have their first meaningful brick and mortar presence.
While a consumer who walks through Showfields might appreciate the unique shopping experience and discover new brands and products, many people have asked us why this is a “VC Deal” and what was our thesis behind the investment.
Like with any investment, it really starts out with the massive market opportunity:
The US retail market is $6 Trillion. Taking out automotive (cars and parts), you are left with slightly over $4.5 Trillion dollars.
- If you further divide the market up, you see that approximately $2.5 Trillion is part of what we call “immediate retail”. This includes gas stations, convenience stores, grocery stores, as well as food and beverage services. While this category is and will continue to undergo dramatic changes over the next decade, the most valuable piece of this “asset class” is its immediacy. New business models, as well as new logistic infrastructures will continue to chip away at existing players — but for the foreseeable future when I want a snack, I am buying it at a convenience store rather than waiting for Amazon PrimeNow.
- The other $2 Trillion is “traditional retail”, which includes department stores, specialty stores, sporting and electronic goods etc. This “traditional retail” is the area of retail that is most exposed and vulnerable to ecommerce.
- US E-commerce is currently ~$450 Billion and is still in its very first innings. E-commerce has been displacing traditional retail for reasons including pricing, convenience, fulfillment and delivery make it an all-around better value prop.
We believe the next wave to displace traditional retail is “experiential retail” — a better way for consumers to discover and build a relationship with a brand through in person experiences.
And within this emerging “experiential retail” category, we felt (and still feel) Showfields has nailed the experience and has quickly emerged as a leader in this space. Why? (you ask)
- There is a global renaissance of direct to consumer digital brands . The brand, which is the sum of the story they tell and the connections they create with people, is the foundation of their success. It is no coincidence that digital brands who do reach the size where they have the ability to “go physical” the common way (Warby Parker, Casper, etc) see a lift in sales of over 30%. For the vast majority of brands (those that have not yet reached Warby Parker scale) to engage in physical retail, the barriers must be extremely low, while still enabling them to tell their story and deepen their connection with their followers. Since day one, Showfields has planted its flag that opening a store should be as easy as creating a website.
- A physical location can no longer be landlord or tenant centric - but rather ought to be “consumer centric”. Every product decision (physical or digital) at Showfields asks the same question — is the Showfields platform going to be interesting, different and iterative enough for consumers to not only come the first time, but return over and over again. Just as people “accidentally” discover new brands online through friends posts and compelling ads, consumers come to Showfields to “stumble upon” new brands and products as well as come to shop for the brands they know and love from their instagram feeds.
- It is not about “retail space” - that is a commodity. Rather, Showfields is about creating the full infrastructure necessary to access the “physical experiential retail” channel. It is a combination of real estate, design, staffing, foot traffic, analytics and more.
Finally, we believe that the network effects of Showfields at scale are incredibly strong. In many ways Showfields creates a “reverse market network” enhancing and binding together a network of brands that already exist online. You can see this on an individual store basis where each brand empowers every other brand in Showfields through mutual foot traffic pull — an experience that no single brand could have created on their own. But we can already envision this across a networks of Showfields in the US and abroad, where the value to each individual brand grows as the network scales.
It’s been incredible watching Showfields come to life — Tal, Amir, Katie, Yossi and Haviv and the entire team have executed on their vision and Showfields first floor is already open to the public in under one year. We are excited for the grand launch in March and all the buzz Showfields new approach to retail has already created. With over 10,000 emerging brands created annually, we at Hanaco believe Showfields best enables any brand and consumer to build a direct and physical relationship.