With the coronavirus pandemic leading to increased online shopping and record U.S. store closings this year, many assume that spells doom for brick-and-mortar retail. But not so fast.
Läderach, a major Swiss chocolate retailer, is one example betting against the naysayers.
On Thursday, the brand known for its fresh artisanal chocolate and piles of chocolate bark, opened its largest global flagship on Fifth Avenue in New York’s Midtown Manhattan. A one-story, rotating cocoa-bean sculpture featuring real chocolate graced the 2,500-square-foot store, more than double to triple its typical store size. The store also will feature live chocolate production demos and classes.
The location marks Läderach’s third in the U.S. after opening its first on Lexington Avenue in New York’s Midtown East a year ago. Its second in New Jersey’s American Dream mall recently opened over the Black Friday weekend in November. The flagship also marks the company’s 100th worldwide after it opened 12 new stores in six countries this year, the fastest pace since the family-run business entered the brick-and-mortar retail business in 2004 and began operating stores under its own name in 2013, CEO Johannes Läderach said in an interview. The company also plans to open a store in Washington, D.C. early next year.
“We really see a demand for physical chocolate experience,” said the 34-year-old CEO, whose grandfather founded the business in 1962. “The experience has to do with all the senses…Premium chocolate purchase is so impulse driven. People still want the physical stores. It’s very important.”
A case in point: Even with the lack of global tourists and office commuters in New York, its Lexington Avenue shop has recovered to 75% of its prior sales following government-mandated closings earlier this year, he said.
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“As soon as restrictions have been lifted, people want to come back,” Läderach said. “People who go are buying more.”
Läderach’s bet on physical stores comes at a time when the pandemic has exacted a heavy toll. More than 40 major retailers have declared bankruptcy and a record 11,000-plus stores have been announced for closing in the U.S. this year, according to commercial real estate data firm CoStar Group
In another sign of expected physical-store demand, Läderach said even though U.S. online orders have surged amid lockdowns to become half of the country’s total sales, he expects that percentage to drop to under one-fifth of the U.S. total. Combined, its total U.S business sales have increased from last year.
National Confectioners Association said in August premium chocolate led industrywide demand as consumers have been buying more candy and chocolate to “boost moods and lighten perspectives” against “the uncertain times.” U.S. premium chocolate sales between March 15 and August 9 jumped nearly 13%, more than triple the 3.8% increase in overall candy and chocolate sales, according to the trade group.
“People want to treat and indulge themselves,” Läderach said, adding its fresh chocolate lasting just weeks also appeals to younger customers seeking a healthy lifestyle. The company also attracted younger consumers through new products such as chocolate popcorn, he said.
Despite suffering “big losses” between March and July because of Covid-19 lockdowns and despite having to pay more than double the regular air freight to fly its fresh Switzerland-made chocolate to the U.S weekly, Läderach expects bottom line to break even in the new fiscal year that began in August. He declined to specify the size of the business.
He expects to eventually open as many as 35 stores in the U.S. and said the country “might soon” overtake Germany to become its second largest market, only after the brand’s home country. He still bets on new stores in cities and “prime locations.” Like many other retailers, he also is renegotiating rent where possible and is looking at growing opportunities to capitalize on the decline in lease rates in markets like New York.
We “think long term,” he said. “I’m confident as soon as traffic picks up, we’ll do very well.”
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