An empire state of mind

The next time you’re in Manhattan, take a stroll up Fifth Avenue and note the change. Walk past the windows of Fossil, Build-A-Bear Workshop, Guess—humdrum chains you can find in any mall in America. Cross north at 49th Street, though, and suddenly it happens: you’ve passed over into retail wonderland. On one side is the legendary Saks Fifth Avenue, St. John, Fendi; on the other, Botticelli, Prada, Bergdorf Goodman—temples of high fashion, lined up one after the other.

New Yorkers know the distinction well: they call these two retail strips “Lower Fifth” and “Upper Fifth”—two zones, divided by 49th Street, sharing one avenue but existing worlds apart. The corner of Fifth and 49th is the precise intersection where high fashion meets fast fashion, where quality meets quantity, where shopping worlds collide. So it’s no coincidence that this is the corner where Aritzia LP, the Vancouver-based women’s clothing retailer, recently opened the doors of its biggest store yet.

The two-storey, 13,000-square-foot flagship inside the famed Rockefeller Center showcases a mix of street- and officewear aimed at stylish women aged 15 to 34. The meticulously stocked boutique is an attempt to mesmerize even the most jaded New York shopper: verdant murals of fruits and nymph-like creatures and rich wood panelling provides an organic backdrop for the clothing while halogen lights beaming from every direction, even the floor, reflect off a central glass staircase. And all of it dwarfed under the canopy of a fantastical 30-foot-tall mushroom forest carved from cherrywood. The decor, according to the retailer, “revolves around a metaphysical theme inspired by natural phenomena.”

But don’t let the groovy psychedelia fool you. This Fifth Avenue boutique is Aritzia’s stake in the ground marking its ambition to become a world-class retailer. “We like to think we always target the best of the best locations,” Aritzia founder and CEO Brian Hill says. By opening at the corner of upper and lower Fifth, Aritzia has literally and figuratively positioned itself as a destination for a growing segment of the U.S. buying public: aspirational shoppers. They are the style-savvy set who can’t quite afford a closet full of luxury garments but aren’t satisfied with the disposable fare available at the global mega-chains like H&M or Zara.

“Aritzia is the bridge between upscale boutique shopping and fast fashion,” says David Ian Gray, a retail expert and founder of Vancouver-based DIG360 Consulting Ltd.

But the U.S. expansion also puts the Vancouver retailer up against some stiff competition. Other bridge labels, including Theory, Sandro and the Kooples, are also aggressively expanding across the U.S., seeking to grab a share of the same market.

Aritzia, financially backed by Boston-based investment house Berkshire Partners LLC, is trying to keep up. Its Fifth Avenue store is the chain’s 12th U.S. location, following openings in Seattle, Chicago, Dallas and San Francisco.

“The U.S. business has been healthy, so we’re planning on continuing opening stores,” says Hill. “But we’re selective in our real estate.” The plan is to “fill in” the northern half of the country with more stores, adding three to four locations a year. Aritzia’s current American locations operate mostly in isolation, notes Gray, so upping saturation is key: “The more they can start to fill in a regional geography, so as to start and gain some critical mass, the better.”

This Fifth Avenue outpost is the most important signal yet of Aritzia’s American intentions: to be a key way station for women on their sartorial journey from H&M to Hermes. The enchanted mushroom forest might mark the way to wonderland. Or it might just be a bad trip.

From the beginning, Aritzia has pitched its customers on quality. Its tunics, for instance, are almost always silk—not polyester—and pea coats are made with thick wool-and-cashmere blends. That’s intentional, according to Gray, who describes a shifting ethos among North American consumers. “The idea of value is now being linked to more durable pieces,” he says.

Since opening its first boutique in Vancouver in 1984, Aritzia has grown to 54 stores across North America with more than 2,000 employees. The company has a team of about 30 designers who work on 10 in-house labels, including Wilfred, geared more toward professionals, and TNA, aimed at a sportier teenage market. About 80% of Aritzia’s merchandise is made up of these in-house labels; the 20% the company doesn’t make are mostly popular denim brands like J Brand, Citizens of Humanity and 7 For All Mankind.

“When we first opened 28 years ago, the majority of the business was done carrying other people’s brands,” says Hill. But featuring mostly in-house brands allowed Aritzia to respond to trends faster, and also provides greater margins. So far, this hybrid strategy has paid off for Hill, a third-generation retailer. His grandfather, John Hill, opened the Hill’s of Kerrisdale department store in Vancouver in 1914, which is still in business today. The idea for Aritzia was born when Hill noticed the contemporary women’s apparel was doing above-average sales at Kerrisdale. After graduating with an economics degree from Queen’s University in 1982, Hill opened the first Aritzia store to target that market more specifically.

“I’ve been in business a long time. I certainly think you have to go with your gut. That said, your gut has formed its opinion based on more tangible facts and figures,” he says.

The facts and figures look good. The most recent batch of data from the American Apparel & Footwear Association suggests a large swath of U.S. consumers is opting for quality over quantity: in 2011, Americans spent 4.9% more on apparel, while the number of items purchased dropped 5.3%.

Megan Evans, a New York–based image consultant, shops at Aritzia for some of her clients and would recommend the store partly because of its value proposition. “It’s a nice middle-of-the-road store,” she says. “It’s not J. Crew or Banana Republic—it’s a step up from that—but it’s not high-end like Barneys. It’s that in-between store that can work for a lot of people.”

Mass market appeal is exactly what Aritzia and its backers are after. Berkshire Partners reportedly bought a majority stake in the company in 2005 for an estimated US$87 million. At the time, Aritzia had projected sales of $100 million for 2006 following “several years of double-digit growth.”

Aritzia’s current limiting factor appears to be the chain’s advertising—more specifically, its lack thereof. “We don’t do any U.S. advertising of any consequence,” Hill says. For 28 years, Aritzia has instead focused on word-of-mouth and prime storefront locations to reach its shoppers. That strategy has worked well for the company’s slow-and-steady growth in Canada. But Gray isn’t convinced it will be enough in the cutthroat U.S. market.

“There’s a time, when you are just starting out, that works okay,” says Gray. “But you’ve got a lot of dollars on the table now.” Stunning retail locations and inventory are not always enough. “You’ve got to convey that message to shoppers. They need to be a little more open to marketing. It can be done in a brand appropriate way,” he says, pointing to Lululemon, which mostly places its print advertising in fitness magazines to grab the true yogis.

Hill appears to pride himself on his track record for zero ad spend. “I think what’s happened over the years is the whole advertising, marketing, PR…everything has become quite blurred, particularly with the Internet,” he says. Kristi Soomer, a retail consultant with PwC, says retailers can succeed without traditional advertising, even in new markets, because social media has quickened the brand-building process. Her research shows that 59% of U.S. consumers follow, discover and give feedback on brands and retailers using social media.

While it doesn’t buy traditional ads, Aritzia has embraced a modern public-relations push, courting style bloggers, building a vigorous, chatty social-media following, and outfitting Hollywood starlets like Rachel Bilson, Jessica Alba, Scarlett Johansson, Reese Witherspoon and Kristen Stewart. Aritzia took full advantage of the Twilight saga filming in its home city of Vancouver by inviting the cast to shop at its store and later posting pictures on Twitter. Before that, Aritzia cleverly suited up Canadian Bachelorette Jillian Harris in its “Whistler” hoodie, an unauthorized reference to the 2010 Vancouver Olympics.

Hill’s reluctance to “sell out” with mainstream advertising is understandable. It’s taken years for Aritzia to establish its niche in Canada. The brand has resisted the chain mentality in order to position itself as a boutique. It’s evident in the way delicate dresses are paired with rugged canvas jackets, the way artsy coffee table books are thrown in among the stacks of sweaters. You can even hear it in the in-store music choices, usually well-known songs remixed by obscure artists—another way to embrace pop while trying to maintain an indie edge.

Aritzia, however, is clearly a chain. The store in Edmonton’s Kingsway Mall smells just as sweet and earthy as the store at Masonville Place in London, Ont. The same blazers line the walls in Short Hills, N.J., and Toronto. And there’s nothing wrong with that—consistency has been the secret sauce of every successful clothing chain. Aritzia’s winning formula is that it’s ultra-hip and super-accessible at the same time. It’s for the shopper who aspires to be a boutique shopper but isn’t going to hunt down the latest hip independent shop.

The real problem is that Aritzia is being missed by the very American shoppers it’s trying to attract. Take the Fifth Avenue store: directly next door is Ann Taylor, which you can spot from a half-mile away. Aritzia’s tiny black signage in cursive font is literally overshadowed. And who could miss Ann Taylor’s recent ad campaign, featuring actress Kate Hudson, plastered across North America?

The Fifth Avenue store is, of course, itself a form of advertising. It’s “one of the most prime billboards you can have on the planet,” says Gray. But with rents on upper Fifth averaging US$3,000 per square foot, “you want to be selling enough that you are at least offsetting a good chunk of that rent.”

“We don’t look at it as just purely an advertising thing,” Hill says, though he declined to comment on whether he expects the store to be profitable this year. The American customer “has responded very well, and that has given us the confidence to continue to open stores.”

Roughly 800 kilometres northwest of the Fifth Avenue flagship, Aritzia’s Bloor Street store in Toronto is sandwiched between Aldo and BCBG Max Azria. Not far down the street are luxury retailers Holt Renfrew, Cole Haan and Chanel. It’s early on a Friday evening, and roughly two dozen women, mostly in their 20s, navigate the racks. Erin Jones, 33, is among them.

“The price points are too high, but the quality is good,” she says. She left the store with four new tops. With the typical blouse costing in the neighbourhood of $100, it’s clear Aritzia is not trying to be the next H&M. It is, however, trying to wrestle away a select few of the mega-chain’s customers. “One of our successes in the past has been staying focused on manageable opportunities and not running in too many directions at the same time,” Hill says.

New York is a make-it-or-break-it proposition for Aritzia. If you can make it here, as the song goes, you can make it anywhere: New Yorkers are tastemakers, and success in the Big Apple will fuel appetites in other U.S. markets. In Alice’s Adventures in Wonderland, a piece of giant mushroom causes Alice’s neck to grow. Aritzia is clearly hoping—with the aid of its Fifth Avenue fungal fantasia—that it can repeat the trick.

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