Office-sharing startup WeWork has serious plans to expand into retail, which could include adding short-term leases for retail firms or incorporating retail stores into its co-working spaces as an amenity for its users, The Real Deal reports.
The company has branched into several different areas of business already. For instance, it has created a gym in New York, acquired the coding school Flatiron School and announced plans to establish an elementary school, according to The Real Deal. A WeWork spokesperson declined to comment to Retail Dive on the report specifically or on the idea of the company expanding into retail in general.
The report comes just weeks after the startup bought Lord & Taylor's iconic Fifth Avenue property for $850 million. The Hudson's Bay Co.-owned department store is operating in the space through next year's holiday season, after which WeWork plans to build its New York headquarters there, leaving some 150,000 square feet for a downsized Lord & Taylor on the property.
That ambitious, well-funded 21st century startup WeWork might be keen on expanding into retail — physical retail no less — is among the best kind of rumors the beleaguered industry has hosted in a while. CEO and co-founder Adam Neumann himself has suggested that there's a place for retail in the company's operations.
"As a business with an emphasis on human connections in physical spaces, we will continue to create jobs within this city while simultaneously re-energizing the traditional retail experience," he said last month in a statement about the company's Lord & Taylor acquisition.
In a way, his vision of retail is a return to the heyday of department stores, when they were housed in well-designed, even beautiful structures in the heart of cities. "The trend of urbanization is something we must all recognize and understand," Neumann also said. "People from every walk of life are seeking spaces in big cities that allow for human connections. There is no reason why retail space should not be part of that movement."
The deal with Hudson's Bay also illustrates the predicament many department stores find themselves in as the sector contracts. The retailer this year has come under pressure from activist investors, who see billions of dollars to be made in selling the retailer's vast real estate holdings — steadily expanded in North America and Europe in recent years. CEO Jerry Storch unexpectedly stepped down last month in a move that many observers say means that the company's internal tug-of-war has fallen in favor of its real estate. And yet, it did not quiet the company's loudest activist, who saw it as a consolidation of power by Richard Baker, governor and executive chairman of Hudson's Bay.
It's a remarkable imbroglio for a company that in the early months of the year seemed poised to gobble up Macy's — America's largest department store — and later, upscale department store Neiman Marcus, which also owns Bergdorf Goodman.
"They've gone from being the hunter a year ago, looking to acquire Macy's or Neiman Marcus, to being the hunted," Mark Cohen, director of retail studies at Columbia University's Graduate School of Business, told Retail Dive. "This isn't a retail company — it's a real estate company. There's no happiness today at HBC — there's nothing normal about somebody leaving at this time of year."
But it could be a boon to Lord & Taylor, which recently opened a storefront on the marketplace of "always low prices" stalwart Walmart, a move that didn't make sense to all observers. "I'd love to see a poll done of Walmart users and how many of them have ever been in an Lord & Taylor," Lee Peterson, executive vice president of brand strategy and design at design firm WD Partners, told Retail Dive of that tie-up. "I get the fact that Walmart is trying to keep up with Amazon on the PR front, but this was a boo-boo. It just feels brand-wrong, for both parties."
The WeWork partnership is a different story, however, infused as it is with style and a decidedly up-to-date approach to legacy businesses.