A new retail brand, launched with a novel idea, a determined founder, and a fun online presence can go pretty far these days. But what happens when it wants to go beyond digital channels and establish a physical, solid presence? For that step, great product ideas and social media savvy are unlikely to be sufficient; the retailer needs expertise in location scouting, permitting requirements, contracting for renovations, negotiating leases, and hiring and managing sales staff, at a minimum.

That’s a lot for a single, small, start-up retailer. But there are a lot of these retailers, suggesting a niche that a savvy service provider could fill. And so, meet Leap. Based in New York, the firm promises retail clients that it will find them a great location, suggest ideas for designing and laying out the store, and even staff their stores with its cadres of retail employees. Furthermore, Leap offers its clients the option to rely on its data analytics software and checkout systems, meaning that they can leverage cutting-edge, convenient technology options that likely would be out of their individual price range.

Beyond these active forms of support, Leap also will front a new retail operator the funds to open a store. In New York City, where most of its clients work, the costs to open a storefront can be $150,000, and in many cases, that’s on the low side. Historically, brands might have put all their working capital into opening the store, leaving them without enough resources to fill it with sufficient inventory and well-trained staffers. By providing this initial capital, Leap makes it possible for the clients to keep investing in their own critical capabilities and maintain enough inventory on hand to ensure that the launch is successful.

In return for these extensive, expert forms of assistance, Leap takes a substantial fee. Because its clients use its checkout software, it gains the first access to sales revenues. From these monies, it first subtracts the operating expenses (e.g., rent, insurance, paychecks for staff), with a 10 percent surcharge. Then it takes its separate fee, which can range from 5 to 20 percent of total sales. Then the retail brand receives the remainder, as its income.

Leap is confident it earns its keep. Even with all these fees, working with Leap is less expensive than opening a store independently for many clients. Furthermore, by leveraging the economies of scope offered by the service-wide use of various resources, including data analytics, the retail clients gain access to more sophisticated insights and abilities than they would likely develop on their own. Finally, the hassle costs that Leap eliminates can be extreme. None of its retail clients ever have to worry about finding, hiring, and training employees—an effort that demands substantial time and attention for most retail operations.

The common source of the employees, layout design, and checkout software also might pose a risk though. These distinctive brands reached the point of success where they could even consider opening a storefront because they offered something unique and different. But if all new retailers become simply variations on a Leap theme, they might lose their individual appeal.

Discussion Question:

1. Is it a good choice for the Louvre to create its own ecommerce site?
2. What other nontraditional retailers similarly might enter the market in response to COVID-19 restrictions?

Source: Anne Kadet, “It’s Expensive to Open Stores in NYC. Help Is Here,” The Wall Street Journal, June 22, 2021