Did a Publisher Just Build the Future of Retail?
What New York magazine opening a brick-and-mortar store tells us about the new media business model
Probably like many men in long-term relationships, I spent Christmas Eve hopelessly meandering through U.S. retailers, trying to find a solidly adequate gift for my fiance. Maxed out on giving jewelry or vacations that I secretly wanted to go on, my travels brought me to the storefronts of Soho in New York City, brimming with the real-life presences of beloved digital brands such as Allbirds, Warby Parker, and Untuckit.
Amid the usual holiday glitz and glamour, there were really only two interesting ideas: Amazon 4-star, and a holiday pop-up by the Strategist, the commerce arm of New York magazine. Both stores are unique in that they are merchandised entirely based on product reviews written on the internet. Each beckoned to me by promising to solve the paradox of choice that cripples my feeble attempts at consumerism.
As a hopeless shopper, the idea of a store telling me what to buy is my personal American dream. I can (somewhat) easily run 10+ miles, yet five minutes after walking into a mall, my feet are always in searing pain. If forced to choose between the fifth level of Dante’s Inferno and the bedding aisle at Kohl’s, send me into the fire.
I was struck by how much Amazon’s store looks like retail’s past and the Strategist’s pop-up looks like retail’s future.
But after visiting both shops, I was struck by how much Amazon’s store looks like retail’s past while the Strategist’s pop-up looks like retail’s future. (Full disclosure, I am an exec at Narrativ, a technology partner of the Strategist though we had no involvement in the brick and mortar store.) Amazon 4-star works fine as, essentially, a refined T.J.Maxx, offering a cornucopia of products united by their popularity among Amazon shoppers. But despite drawing from the wisdom of the crowd, the store fails to capture the serendipity and treasure hunt mystique that has made Marshall’s and T.J.Maxx a triumphant enigma amid the retail apocalypse. Most damningly, the store doesn’t really inspire you to buy anything you aren’t explicitly looking for, essentially taking Amazon’s Achilles heel and bringing it to the physical form. I left Amazon 4-star with only a copy of Codenames, a board game I’ve explicitly known I wanted to purchase for months.
At first glance, the I Found It at the Strategist shop makes even less sense. The store is unabashedly minimalist, stocking probably one-third of the items most retailers would display in a similar space. The selection of products feels random, with the main unifying factor being that everything felt a bit too hip for my blood.
But as I took a lap around the store and read the product displays, I felt this weird curiosity come over me. I felt cultured, almost as if I were in a museum dedicated to commerce. For the first time in my life, I actually enjoyed discovering items and finally understood how shopping became the great American pastime. Ultimately, I left the Strategist pop-up with something called Bro Mask, a product I’d never heard of until I read the article next to it that convinced me I’ve been neglecting my poor face for all of its sad 26 years on Earth.
But as I wondered how someone just got me to spend $30 on black goo, larger questions lingered in my mind. Why is a magazine company doing this? And is it just crazy enough to work?
While this is basically media’s first direct foray into opening a retail store, publisher websites like the Strategist that try to help you find the “best” are everywhere. Nearly every legacy media company from the New York Times (Wirecutter) to Gannett (Reviewed) has a commerce arm, either built organically or through acquisition. Though they’ve flown under the radar, the pricetags on commerce publications have been substantial, most notably the $110 million sale of Best Reviews to Tribune Co.
The appeal for media companies is simple — doubling down on commerce opens a significant revenue stream free from digital media’s original sin. Commerce publishers work on an affiliate model, taking a percentage of each sale influenced by their articles. Overall, commerce content is rapidly becoming a lynchpin in how successful media companies monetize, replacing evaporating ad campaign dollars with recurring, evergreen revenue.
When we dig deeper into the core consumer challenge that these publishers are solving, it is easy to understand how there is enough consumer demand to support this proliferation. Whether I’m online or in a physical store, I don’t want to look at 50 dress shirts and decide which one will look best on my dad bod. I want Tan France’s apprentice to slap one shirt in my hand, lie to my face by telling me I look gorgeous, and send me on my way.
For more discerning shoppers, publications like Wirecutter, Best Reviews, and the Strategist dig into the nitty-gritty of gadgets, gizmos, and gel manicures. These outlets put a staggering amount of research into their stories, often disagree with one another, and occasionally have the audacity to knock the products they are ostensibly promoting. (I would love to have been a fly on the poop while this guy spent more than 30 hours reviewing toilet plungers.)
In online retail, website visitors who explicitly engage with product recommendations generate 280 percent higher revenue per visit than the average shopper. Basically, the entire goal of an e-commerce website is to show you more relevant, contextual recommendations, and the websites that do that well, win. Thus, it is no surprise that a website made entirely of recommendations can directly drive sales.
But while the rise of commerce has been the lone speck of good news in an otherwise bleak year for media, why try to replicate this in the cutthroat world of physical retail?
For digital-native brands, the main purpose of physical stores isn’t really to sell things … but in data collected per square foot.
In the instant Silicon Valley cult classic “The End of the Beginning,” Benedict Evans, a general partner of a16z, declared that “rent is the new customer acquisition cost.” As the cost of ephemeral ad units on Google, Facebook, Instagram, and the like has skyrocketed, it has become cost-effective for once pure-play e-commerce startups to use brick-and-mortar retail as an advertising channel to bring customers to their digital properties. As publishers attempt to seriously grow seven- and eight-figure commerce businesses, they’ll need to borrow from the Warby Parker playbook and make overtures to customers in the real world.
For digital-native brands, the main purpose of physical stores isn’t really to sell things. As posited by Zoe Leavitt at CB Insights, many of the new kids on the block in e-commerce are evaluating their physical stores not so much on the basis of in-store sales but in data collected per square foot. The Strategist is taking precious resources and investing in Soho real estate (almost certainly at a modest loss) to collect data to power its online recommendations and to boost brand equity. Looking at macro trends in retail, there is ample reason to believe that the value of its brand will be worth a hell of a lot in the years ahead.
Due to nostalgic press obsession about the decline of brick-and-mortar locations, it is easy to forget that only 10 percent of the $5 trillion that U.S. consumers spend in retail occurs on a website or app. Overall, the first two decades of e-commerce have amounted to roughly a $500 billion industry that is great at helping shoppers purchase exactly what they are looking for online. Amazon easily won the first chapter of this story, but it wasn’t alone. From PayPal to Shopify, an entire generation of multibillion-dollar companies was spawned by the challenge of cracking the basic logistics of e-commerce.
As convenience, reliability, and logistics become commoditized, the next $500 billion in value will be created by retailers who move commerce from transactional to experiential, inspiring consumers to discover products they didn’t know existed. In a nutshell, the next two decades of e-commerce will be a $1 trillion business built around answering the question “What should I buy?”
One of the key pillars of answering that query will be amassing and strategically leveraging a massive library of content about products. We’re already seeing inklings of this trend as the hottest companies in retail are content powerhouses. Glossier, the $100M darling of the direct-to-consumer movement, started as a beauty blog. Away, the suitcase company that by 2030 will be a top-five U.S. airline or hotel brand (you heard it here first), publishes a full-length magazine. Casper is on the second iteration of a “bespoke quarterly print magazine” and spends millions of dollars on content to convince you that its soft square rectangle is superior to other seemingly identical soft square rectangles.
But here’s the problem with retail’s newfound obsession with content. In the parlance of Silicon Valley, it’s not scalable. In plain English, it takes a really long time to write a decent editorial, even for something as simple as a product description. While the notion of retailers becoming media companies makes for a pithy tweet, the reality is that J.Crew won’t become GQ anytime soon.
For a brand like Casper, Away, or Glossier that sells limited product SKUs, managing content is somewhat manageable. Yet even with massive internal resources at its disposal, Casper’s desperation to win the content game is so profound that the company’s CEO was personally spending hours every week emailing bloggers groveling for affiliate links. By comparison, creating content for every product sold at Target or Macy’s would be a Sisyphean endeavor. By the time a copywriter could write about the unique suction power of a given vacuum, the merchandising team will have stocked three more.
This is where the opportunity for publishers like the Strategist gets really, really intriguing. By definition, the Strategist is a media entity whose fundamental raison d’etre is writing content about what to buy. Most of the company’s staff is tasked with the singular mission of finding the best stuff on the internet and writing reviews to make it come to life. Safe to say, the Strategist is quite a bit better at creating content about products than most retailers will ever be.
Right now, content from the Strategist reaches roughly 70 million annual visitors and influences tens of millions of dollars in sales. But the inherent opportunity that exists in this library of content is far bigger than the number of visitors the Strategist can drive to its website. Platforms have won the internet, making over-reliance on driving traffic to a standalone digital property a fool’s errand. But as evidenced by its decision to open a physical store, the Strategist views itself as more of a brand than an online publication. With this ethos, the publisher may choose to distribute its content more freely off of its website, opening a big-time opportunity.
Few have imagined that within a decade, discovering what to buy online may not even slightly resemble our current notion of a search engine. And publishers will be essential to making this happen.
How would this distribution of content tangibly transform retail? The first area ripe for disruption is onsite product search. Currently, search on a retail website is essentially limited to products, brands, and keywords and is phenomenally underwhelming. Type “gifts for my nephew” or “lipstick Megan Markle wore at her wedding” into most retail search bars, and you’ll get no result. With the average user running two or more searches pre-session on a retail website at a conversion rate of less than one percent, this is an area begging to be improved. If retailers could access all of the content written about their products by publishers, each of these queries could be supported and not just with static product images.
Furthermore, infusing publisher content into retail search could help contextualize products in a way that currently only an in-store sales rep can. As Amazon and Google spar for dominance of product search, few have imagined that within a decade, discovering what to buy online may not even slightly resemble our current notion of a search engine. And publishers will be essential to making this happen.
So what does this all mean for the future of New York magazine? While a 50-year-old media brand isn’t suddenly going to rescue journalism by opening a brick-and-mortar store, the publisher is building an interesting blueprint for a sustainable business model. New York magazine is moving behind a paywall, may well have a unionized staff in 2019, puts on the culinary event of the year, and has a rapidly growing commercial business that is boldly experimenting at the margin. Overall, New York magazine is becoming the perfect microcosm of a media entity built to survive the next decade and beyond.
The magazine currently making headlines for exposing that half the internet is fake is building a model that is fundamentally real.