bts: andrew neelon

clicks to bricks tips by 1rec

good mornin merry makers 💡🏗️💸🔑📈🤝

welcome to the first-ever behind the stores q&a!

this new series pulls back the curtain on the experts who make retail happen — the ones shaping the stores we shop, the strategies we study, & the playbooks brands should be following.

for our inaugural edition, i couldn’t think of a better guest than andrew neelon.

andew’s built his career leading retail expansion at brands like bonobos, walmart, interior define, elase, & now, as the founder of 1REC. he helps brands make smarter, data-backed decisions about where & how to open stores.

andrew & i met bc we held eerily similar roles at d2c brands, navigating the joys (& chaos) of retail expansion — especially during covid. a mutual friend refers to him as my “work doppelgänger.”

so when we both struck out on our own, we become unofficial co-workers too.

he’s one of the sharpest minds in retail. plus someone i can count on for candid advice, deep retail wisdom, & very solid hot takes.

what’s wildest is that we go wayyyyy back.

like same childhood street in san antonio, tx back.

we didn’t figure it out until much later, but given that we’ve spent our careers deep in real estate, it feels a little on the nose.

so without further ado, let’s dive in!

in today’s letter, you'll learn from andrew:

→ the #1 mistake dtc brands make when opening their first store

→ the costs of opening a retail store that always catch brands off guard

→ why customer shipping addresses are a goldmine for site selection

→ a simple litmus test to tell if your broker actually has your back

but first, a quick shoutout to today’s merry partner, morning brew!

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bts q&a: andrew neelon

Q1: can you share a little bit about you and the work that you do?

I’m a former finance guy that landed in real estate because it was the only job opening at Bonobos – and I really wanted to work there.

Since then, I’ve been leading store expansion teams, advising/consulting to help other brands do it, and building an insights and reviews platform connecting brands with destinations and vendors. 

Q2: how do you know when a brand is ready for its first or next store? what are the key factors?

There are a few things I always have in the back of my head when determining store-readiness: 

  1. Capital: do they have enough cash to fund the buildout, initial working capital, and initial operating losses? What’s their backup plan if the store underperforms? 

  2. Education: do they actually know how long and how much money stores cost to open and operate?

  3. Strategy stability: are they committed to the strategy of investing in the channel? Or will they jump to conclusions in either direction too soon? 

  4. Experience: while they don’t need industry vets, it certainly helps to know at least one person on the team (even only sort of) understands how stores work. And if they don’t, then I’d hope they have the capital to hire someone who does. 

Q3: what advice do you have for brands opening their first ever physical store?

Start educating yourself on the channel at least a year out. 

Stores have more downside than any other channel because you’re signing 3, 5, or 10 year leases, and require huge investment before you even open them. Your probability of success will increase dramatically by investing time and even money into education – or at least Director+ talent to lead the way (you can outsource this too).  

Q4: what's the most common mistake brands make when going from clicks to bricks?

Forgetting to adjust their culture. In the beginning, DTC brands will underinvest in stores because the channel isn’t a huge chunk of revenue, and therefore hasn’t yet “earned” more budget or resources. Building and managing store teams requires a markedly different skillset and culture vs building an e-commerce team. The amount of store employees will soon eclipse corporate, and that realization often hits teams way later than it should. 

Q5: how can brands use data to nail their site selection?

DTC brands have a super power: customer shipping addresses.

Where your e-commerce customers reside is the single most important predictor of success when you pair it with a real estate expert’s knowledge of where that population shops. Use free tools like geocod.io and kepler.gl to visualize your e-commerce data on a map.

Demographics are irrelevant when you already know where your customers live. 

Q6: what should brands look for when choosing a broker & how can they get the most from that partnership?

Someone who is well-networked in the retail real estate industry, is trustworthy, and is scrappy/resourceful.

Unfortunately the brokerage model is built in a way that is “free” for tenants (you don’t pay them), but that’s only possible because they get paid by landlords and when a deal is closed – which means incentives aren’t always aligned.

My litmus test for brokers is how often they’re willing to turn deals down for me vs pushing me to take them. 

Q7: what’s the biggest unexpected cost in opening a new retail store that catches most brands off guard?

Not building in buffers for timelines or budgets.

Stores are hard, and every situation comes with its own surprises. Sometimes the building department is backed up, the landlord goes on vacation, or a hurricane hits.

Stores can take nearly a year from site selection through opening, and requires collaboration from dozens of people and agencies.

Add 10% contingencies to all timelines and budgets
because s*** will always happen. 

Q8: when building an internal team to support retail growth, what roles do you prioritize first & why?

My recommended first hire is always a head of store operations, ideally someone who has been a GM at one point. This person may not understand everything about finding and building a store, but that’s okay – you can outsource most of that.

But you can’t outsource knowledge of internal company standards, navigating internal politics and chaos, and a long tail of other work that no third party’s scope could possibly identify 100%.

Every store opening is like launching a new business 
and you need an operator with grit. 

Q9: what’s your take on brands outsourcing parts of their offline expansion?

I’m a huge proponent, but with the caveat that what you outsource vs bring in house should change over time and with store counts. In the beginning, you really only need one corporate person to lead store expansion and should outsource the rest (real estate, design, construction).

When deciding on the other areas, it comes down to whether you can do it cheaper with a full time hire, and/or the importance of having that role more plugged into the rest of the org. I generally recommend waiting until you get to 5 stores (or opening 5 per year) before investing in full-time headcount in most of the roles. 

Q10. what’s one thing you wish more brands understood about the realities of brick-and-mortar retail?

Stores take time.

Digitally native brands in particular assume that store investments should start producing returns as quickly as digital marketing dollars do. And they just don’t, nor will they ever. Much like institutional investors, brands that invest in stores need to think in terms of years – not days, weeks, or even months.

If you’re chasing a means to bridge the revenue gap in your budget in the current calendar year, you’re doing it for the wrong reasons. 

retail rapid-fire round

  • fave retail store of all time? Twin Pine

  • retail center that gets it right? Westfield Century City in LA

  • can’t live without retail tool? GIS software like Spatial.ai or ESRI

  • retail metric you obsess over? CBSA omnichannel comp growth rate

  • your signature style of merrymaking? KBBQ and K-town karaoke

  • best retail advice you've ever received? Don’t let perfection be the enemy of progress

  • what do you love about working in retail? Literally building something

connect with andrew

if today’s q&a got you thinking differently about retail expansion, you need andrew neelon in your online orbit. he’s the goat.

his company, 1REC, is solving one of retail’s biggest blind spots: real estate transparency. it’s a newly launched platform for retailers, brokers, & landlords to access crowdsourced reviews, expert insights, & free tools that make site selection way less of a guessing game.

🔗 link up here

that wraps up our first issue of behind the stores. i’ve got so many other fascinating guests lined up for you. get excited & please do reply to this email letting me know what you think!

be merry,

MacK