Rented Books and Custom Pants: Clever Newbies Buck Retail's Downturn

It hasn't been the best of times in retail recently. So, most big retailers have been pulling back and tending to their knitting, and even successful chains have been closing down stores. But amid all the chain-store carnage, a few merchants are trying to attract shoppers with new concepts, from textbook rentals to made-to-order pants.

Not coincidentally, many of the newcomers are operating online, where the barriers to entry are fewer than in the brick-and-mortar world: no storefronts, no fixtures, no trucks moving merchandise from warehouse to store.

Sponsored Links

"You can innovate much more easily if you don't have hard capital assets," says Sherif Mityas, partner in the retail practice at consultant A.T. Kearney.

But whether online or in-store, these new retailers are mostly niche players, trying to make an impact on a small scale and taking some chances in a difficult environment, he says.

"It's a tough market," says Mityas. "It's not for the weak of heart."

Here are a few such retail newcomers to keep an eye on:

Alice:

Like the Brady Bunch housekeeper, this website keeps the pantry stocked with consumer packaged goods from detergent to diapers marketed by national manufacturers such as Procter & Gamble (PG). Members create a shopping list of items, and the site does the comparison-shopping, applies manufacturers' coupons to the purchases and reminds shoppers to reorder when they're likely to be running low. The year-old website also offers free shipping with no minimum purchase and 30-day returns.

Bonobos:

This men's clothing website was started in 2007 by two Stanford University roommates after one of them couldn't find pants that fit and started making his own. It launched by selling pants in a wide variety of fits and colors, with funky detailing such as an offbeat lining that showed in the back pockets. It has since expanded to other items of men's clothing, served up with attitude ("Even if your pants are better fitting, something has to hold them up" is the headline on the belts section). It also focuses on customer service from the crew of "Ninjas" who'll take back "any pant, any time, any reason."

Chegg:

The name comes from "chicken" and "egg," but the website doesn't try to answer which came first. The three-year-old online store rents textbooks from a catalog of over 4.2 million titles, with a no-questions-asked 30-day guarantee. So, if you drop the class early, you can get your money back. Chegg claims it can save students an average of $500 a year on textbooks. Customers rent books by the quarter, semester or year, then ship them back free at the end of the term. Chegg plants a tree for each rental, and claims to have passed the 2 million tree mark in January.

Eataly:

This Italian food hall on steroids -- backed by a group of four-star restaurateurs including Food Network star Mario Batali -- opened in New York just before Labor Day. It has been packed ever since with locals and tourists gawking at endless aisles of pasta and olive oils or lining up for the espresso bar, gelateria or cafes inside. A beer hall is expected to open later in the fall. It's the first stateside outlet of a small Italian chain of superstores catering to foodies who like to know just how extra virgin their olive oil is and how long their balsamic vinegar was aged. It's also only the second location outside Italy. (The first was in Tokyo.)

Gilt Groupe:

Sample sales aren't what they used to be, as any fashionista will tell you. And many have now migrated online. Gilt boasts that it can offer discounts up to 70% off designer duds, but the invitation-only sales last just 36 hours and are open only to members. The site, which launched in 2007 with women's fashion, now also sells men's and children's clothes, housewares, luxury travel packages and local services. It claims 3 million members and projects $400 million to $500 million sales this year. That has had led to talk of a stock offering, though management denies it.

Groupon:

Yes, it got stung by a con artist last month, but until then, this two-year old group-discount site was getting props for originality. It put a twist on group deals by taking them online: A vendor offers a deal on a service (a photography session was the bait in last month's scam) to members in a certain city or zip code. If enough members want the deal, it goes live, the members' credit cards are charged and they get a link to print a coupon for that service. (All charges were refunded in the photo shoot scam). In New York recently, a $139 one-month gym membership was offered for $35, and laser hair-removal treatments worth almost $1,800 were selling for $99.

Lululemon Athletica:

Not quite a "new" company, this Canadian athletic apparel retailer opened its first store in Vancouver 10 years ago. But it only recently began to expand in the U.S., after private-equity investors led by Advent Capital bought a stake in 2005 and the company went public in 2007. As you would expect for a retailer that got its start with women's yoga wear, Lululemon Athletica (LULU) has a crunchy corporate philosophy that encourages stores to become active in their communities and sponsor local events. And it gives managers the right to decide about the look of their stores to give each a local vibe. It must be working: Sales for stores open a year were up 33% during the first half of the year, and the company plans to open another 20 to 25 stores in 2011, on top of the 130 it now has in North America and Australia.

Uniqlo:

Like Eataly, this Japanese clothing store is a foreign import that packs in locals and tourists in New York. It sells a rainbow of cashmere sweaters, leggings, graphic Ts and other basics at budget prices. And like Lululemon, it's not technically a new concept, since Uniqlo (a contraction of "unique clothing") has been the Gap of Japan for decades, but it's a newbie to U.S. shores. After a failed try at the U.S. market at the turn of the millennium, parent Fast Retailing (FRCOF) switched gears from malls to focus on major cities. It tried again in the Soho neighborhood in late 2006 and got a hit. That store is now its top location. Now, a massive Fifth Avenue store is in the works near Rockefeller Center. No word yet on what other U.S. cities will follow.