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Can Fred Segal Reclaim Its Southern-California Cool?

The iconic retailer is aiming to win back its cachet with a new West Hollywood location. But is it too late?
A rendering of the new Fred Segal store in West Hollywood | Source: Courtesy
By
  • Lauren Sherman

LOS ANGELES, United States — The deal is done. After months of speculation and a flirtation with a development across town, Fred Segal has signed a lease on a new flagship, promising to bring with it the green ivy-covered exterior wall for which the legendary Los Angeles retailer is so well known.

Slated to open its doors in the fall of 2017, the 40,000-square-foot space will be located in the $300-million-plus Sunset La Cienega project and include 22,000 square feet of retail, as well as a gym, salon, wine shop, florist and an indoor-outdoor restaurant. The mixed-use development, backed by Los Angeles-based real estate investors CIM Group, will occupy two blocks of Sunset Boulevard in the heart of West Hollywood, walking distance from eternally popular social haunts including the Sunset Tower Hotel and the Chateau Marmont. There will also be two eight-story condominium buildings, a boutique hotel and plenty of retail and dining.

Along with its iconic ivy wall, the new Fred Segal will feature over a dozen permanent shop-in-shops, as well as temporary shop-in-shop concepts that will turn over on a regular basis. In addition to these leased spaces, the retailer will dedicate significant square footage to selling its namesake collection of denim and basics, launched this month, as well as exclusive products from select wholesale partners. And while Fred Segal has yet to announce the brands that will operate the shop-in-shops, the store has revealed that restaurateur Bill Chait, the former managing partner of culinary hotspots including Bestia, Otium, Petty Cash and Republique, will develop the in-store dining concept.

The announcement comes just as Fred Segal brings on a new chief executive, Allison Samek, who spent the last 11 years in operations at Ron Herman (which has occupied space within Fred Segal’s Melrose Avenue location for 40 years). “Having worked in the Fred Segal environment up close for so many years, I know the brand has tremendous strength and resonates with people in LA and beyond,” Samek said in a statement to BoF announcing her appointment. “I am thrilled to have the opportunity to expand the Fred Segal experience, by both honouring its past and by taking it into the future. We believe that Fred Segal Sunset will become the next iconic LA destination, as Fred Segal stores have always been.”

Experiential shop-in-shop environments, food, salon, fitness and lifestyle; a lot of things that people stage now have always happened naturally at Fred Segal.

For Samek, it’s an ambitious project that will, in many ways, determine the fate of Fred Segal, a Los Angeles retailer whose cultural capital has long outshone its financial performance. Long before paparazzi were parked outside its Melrose Avenue location, the store was known for its ahead-of-the-curve denim mix, attracting the likes of the Beatles, Elvis and the Jackson Five when it first opened its doors in the early 1960s and into the 1970s. The store was credited with popularising what the Los Angeles Times called “the LA look”: low-slung denim worn with Danskin leotards or fitted t-shirts.

That tradition carried on when Herman, Segal’s nephew, opened his own namesake store within the walls of Fred Segal in 1976. It was then that Fred Segal first established its status as an innovative platform for a diverse array of shop-in-shops and other experiential elements. While Herman occupied part of the Melrose Avenue location with cool-kid denim and Michael Stars tees, Ron Robinson, a retailer known for its unique gift selection, leased space as well. “The interesting thing about Fred Segal is that he really allowed the merchants within the store to become their own businesses,” says John Frierson, Fred Segal’s president. “Multi-brand retailers were born at Fred Segal. Experiential shop-in-shop environments, food, salon, fitness and lifestyle; a lot of things that people stage now have always happened naturally there.”

Mr Segal himself hasn’t been involved in the retail business for 40 years. But for most of that time, he owned the rights to his name and the real estate housing the stores and was active on the periphery. In some ways, he is one of the most famous landlords in the world. But while Robinson, Herman and many of the dozens of others that operated shops in Segal’s now-closed Santa Monica outpost were well-known in their own right, it was the Fred Segal name that was frequently name checked in books, (Brett Easton Ellis’ “Less Than Zero,” “White Oleander”), television (“Entourage,” “The L Word”), film (“Clueless,” “Legally Blonde”) and in the pages of US Weekly. New York had Barneys and Bergdorf Goodman, but Los Angeles had Fred Segal, where the name tacked up outside was as significant as the clothes for sale. “Celebrities and personalities of all kinds have always been comfortable going to Fred Segal,” adds Frierson. “It’s a place they didn’t mind being seen and being photographed.”

Yet if Fred Segal’s business model and its tenants’ approach to merchandising felt fresh in 1976, many have since cottoned on to their methods. Shop-in-shops, expertly curated denim bars and outdoor cafes — no longer novelties — have become commodified. And that's to say nothing of the disruptive power of the internet, which presents challenges (and opportunities) for all retailers. As of late, the store has become better known as a popular backdrop for Instagram outfit shoots than for the celebrities who still frequent it. Tenants — especially at the Santa Monica outpost, which was set up like a mini-mall — were leaving one by one, either by shutting down altogether or selling their businesses (as the owners of Fred Segal Feet sold to the Dallas-based shoe store Gregory's in 2011). Something, it seemed, would have to give.

Celebrities and personalities of all kinds have always been comfortable going to Fred Segal. It's a place they didn't mind being seen and being photographed.

In 2012, the Segal family met Adam Sandow, who offered them a way out. Sandow is a media mogul with a penchant for properties built around a specific category of luxury consumerism that happens to be interesting to the masses.

His company owns titles like Worth — the lifestyle-finance magazine geared towards high-net-worth individuals — Luxe Interiors + Design and NewBeauty, which zeroes in on beauty “enhancers,” like laser treatments and plastic surgery. Sandow also operates the talent management agency Culture + Commerce, which represents the likes of Yves Behar, Matthew Rolston and Philippe Starck.

Sandow befriended the Segal family when NewBeauty rented a temporary space in Fred Segal’s Santa Monica store. “It was a two-year pop-up, so I was able to witness the power of the [Fred Segal] brand first hand,” he says. “I was in shock that such a powerful brand, such an iconic brand, hadn’t done much. Something in my gut, knowing nothing about retail, told me to buy it.”

It took Sandow 18 months of negotiations to buy the rights to the intellectual property behind Fred Segal. (He did not purchase the physical retail stores.) Sandow saw it as a licensing play and took on no outside capital to broker the deal. “At that moment, I thought that we would partner with different [companies] around the world to create partnerships,” he says. And that was the plan until Sandow met with the licensing leg of Hollywood agency CAA. “We knew that we could build something terrific with licensing, but the more I saw the power of the brand, the more I realised that this had to be more than just that.” Sandow raised an undisclosed amount of capital from Evolution Media Partners — a joint venture between CAA and private equity firm TPG Growth — in order to develop Fred Segal’s retail presence, along with a product line, internally.

In May 2014, Sandow hired retail veteran and former Juicy Couture chief executive Paul Blum to lead the charge. Blum was tasked with building on the bite-size retail concept that had opened at Los Angeles International Airport in 2013 and he ushered in a series of seven retail stores that opened throughout Las Vegas’ SLS hotel in September 2014. The LAX outpost remains open today, but the seven spaces in Las Vegas shuttered after just one year. Representatives for Fred Segal declined to comment on why the SLS project shuttered, saying only that it was meant to be a year-long collaboration to coincide with the launch of the hotel, which in turn faced serious financial turmoil, losing $35 million in the first quarter of 2015 alone.

Retail today is such a difficult space, and we want to create a different kind of experience.

Plum also laid the groundwork for stores in Tokyo, which opened in partnership with MFSJ Co, Ltd — a subsidiary of Moroto Holdings Co — in the city's Daikanyama and Yokohama neighbourhoods in 2016. (A third Japan location, in Kobe, is slated for 2017.) But just as quickly as Blum arrived, he departed the company, joining the L Brands-owned Henri Bendel as its chief executive in February 2016. Instead of hiring another retailer to replace Blum, CAA licensing veteran Frierson took on a more active role, taking a managing director title.

In some ways, the installation of Frierson and the hiring of Genetic Denim founder Shaun Hurley as president and creative director of the newly launched denim and basics line, Fred, reflects the less traditional nature of the business Sandow is trying to build. But it could also be seen as investors wanting to have a stronger hold on a venture still trying to find its footing. Samek, on the other hand, brings traditional retailer expertise to the table.

“Paul [Blum] was a fantastic help, we learned a lot with him here,” Sandow says. “Retail today is such a difficult space, and we want to create a different kind of experience.” By that, Sandow means making shop-in-shops the main driver of the store instead of accents. A “curated group of experiences,” he calls them. While most American department stores largely focus on a traditional wholesale model, buying and reselling merchandise to customers, Fred Segal’s wholesale partners — many of which will design exclusive items for the store — will instead complement the core shop-in-shops.

These shop-in-shops will trade on a specific fusion of experiential retail and celebrity culture. Sandow and Evolution Media Partners can easily tap CAA’s talent roster — and ever-growing list of celebrities who also have product lines — to stage in-store experiences. (They can also link up with Sandow’s own roster of special-interest publications.)

To be sure, contextual content can energise a retail space and help to attract foot traffic. “The reason that I opened that pop-up shop way back when was that I wanted to build a studio to create video content,” Sandow explains. “It’s just not real if we create it in a studio, it’s a phony setup. So I thought, ‘Why not buy a beauty store and create it from the floor up?’ Mixing commerce and content; I think that what we’re building on Sunset is going to take that to a completely different level.”

Sandow says the rotating roster of pop-ups — or “pop-ins,” as he likes to call them — will create a more dynamic in-store experience alongside the permanent shop-in-shops and Fred Segal-branded merchandise. What’s more, “By forcing [brands] into very small footprints, it forces curation,” he says. “When you intersperse that with other lifestyle opportunities — and arguably the best restaurateur in LA — you actually get a destination.”

But whether Sandow’s special sauce will be enough to make an impact is unclear. “Building a successful lifestyle brand is really difficult, so beginning with well known IP like Fred Segal is a great head start,” says retail adviser and investor Ari Bloom. “That by no means guarantees success, however, so the company is going to have to deliver products and experiences that are inspiring and truly differentiated. Gone are the days where success comes from slapping a famous name on unremarkable products.”

Earlier in 2016, another chapter was closed on the Fred Segal story when holding company 8100 Melrose Associates — which is operated by the Brown family, whose patriarch Bud Brown bought the Melrose Ave. property from Segal in 2000 — sold it to Canadian investors CormackHill for $43 million. (The Vancouver-based firm is a joint venture between Aritzia chief executive Brian Hill and Herschel Supply Co. founders Lyndon and Jamie Cormack.) Today, the Fred Segal moniker remains on that building and still attracts visitors because of it, although there is currently a legal battle underway regarding whether or not CormackHill has the rights to keep the sign up. But either way, will the Sunset La Cienega store ever hold the same appeal?

“Retail has just gotten so boring and homogeneous that consumers don’t care,” Sandow says. “There’s no reason to shop. Everyone knows this already and everyone is trying to figure it out.”

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