NEW YORK — Sandow, which acquired Fred Segal in 2012, has an ambitious game plan for the legendary retailer.
This story first appeared in the May 27, 2014 issue of WWD. Subscribe Today.
The company, which is headed by Adam Sandow, chairman and chief executive officer, has partnered with equity investor Evolution Media Partners and hired Paul Blum as ceo of Fred Segal to move the iconic California retailer into a directly owned model from a licensing one.
The partners envision a major reinvention of the luxury shopping experience under the Fred Segal brand, which will combine fashion with dining, entertainment, cultural events and health and wellness programs in footprints of up to 50,000 square feet. They are targeting up to 10 next-generation Fred Segal lifestyle centers in the U.S. and abroad over the next five to seven years.
Sandow admitted to WWD that he originally acquired Fred Segal as a pure licensing play.
“We thought there was this incredible piece of intellectual property that had remained authentic and true and had all of this incredible history. What happened is we had a tremendous response. There were more people wanting the license than we could handle or we felt comfortable giving,” said Sandow.
He started to create deals and quickly realized the brand was much bigger than a licensing business. “I started to feel honestly like I was going to make a mistake if I just went down the road of building a licensing business. I felt the brand deserved more, and I felt there was more we could do with it,” he said. Since acquiring the brand, he has forged three major licensing deals: An anchor location at Tom Bradley International Terminal at Los Angeles International Airport and deals with SLS Las Vegas Hotel & Casino and Mark Styler in Japan.
Sandow is a privately held company with such media properties as Interior Design, Luxe Interiors + Design, Worth, NewBeauty, as well as global materials consultancy Material ConneXion and creative management agency Culture + Commerce. Sandow owns 100 percent of the company and has never had any partners. This is the first time he’s entertained private equity coming into the business, which is for the sole purpose of the Fred Segal expansion.
Evolution is a venture between Evolution Media Capital, an entertainment media and sports merchant bank formed in partnership with Creative Artists Agency; TPG Growth, the middle-market and growth equity investment platform of global investment firm TPG, and Participant Media, the global entertainment company founded by Jeff Skoll in 2004. Terms of Evolution’s investment in Sandow weren’t disclosed. CAA will provide expertise to Fred Segal in such areas as licensing, branding, digital strategy and content creation.
After having meetings with Evolution, TPG and CAA, Sandow said: “I saw what partners could do to give Fred Segal a platform that this brand deserves.” Once the deal came together, Sandow said: “There was only one thing left to do — find a ceo who could take this business and run with it.” The search was conducted by Matthew Berglass, president of Berglass + Associates.
Blum, who was previously ceo of Juicy Couture, David Yurman and Kenneth Cole Productions, has been charged with reinventing the retail business for Fred Segal. He is based in Fred Segal’s New York headquarters at 1271 Avenue of the Americas.
After leaving Juicy, Blum said he wanted something different and wasn’t looking for a conventional fashion job.
“We’re all seeing the consumer is thinking differently about shopping. What should malls looks like and what should the shopping experience be? I was looking to do something new and fresh, and I met Adam, and he was talking about the business in a unique way. We had a lot of the same philosophies of changing the paradigm of the way the retail experience works,” he said.
Blum, who has equity in the deal, said he’s interested in creating something new because the consumer has changed and is shopping differently. “Media, technology and globalization have permanently changed the consumer. How they want to experience retail is very different. To approach it in the normal way is insanity,” he said.
With the Evolution investment, Sandow plans to finance lifestyle centers that can range from 10,000 square feet to 50,000 square feet, which will interweave hip and up-and-coming fashion brands, dining, cultural, wellness and fitness experiences all under the Fred Segal umbrella.
“We see in Fred Segal a special opportunity for a lifestyle brand that has already established itself as one of luxury, fashion and the always imaginative California spirit,” said Rick Hess, co-managing partner of EMC.
According to Blum, the online and social media experience has to be reinfused into retail from the start to make it interesting, stimulating and relevant to consumers.
“What’s most important is the social aspects of it. People want interaction. I believe the new definition of luxury is a combination of unique experiences and social interaction in an environment that’s pleasing from a design perspective. It will be a luxury to sit in a beautiful place, be able to shop, dine and be able to experience cultural events,” he said.
“We all live differently today. If you look at so many retail spaces, they’re designed for the way we lived 20 years ago. This is an opportunity to design spaces that are appropriate for what the new consumer wants today,” added Blum. The idea is to incorporate “high levels of service and high levels of customization,” he said.
The concept sounds reminiscent of the original Fred Segal, which made a name for itself by operating shop-in-shop boutiques that combined hip merchandise ranging from jeans and T-shirts to designer shoes and bags, as well as a salon, yoga studio and restaurants under its recognizable red, white and blue stripes and ivy-colored walls.
“What we’re doing with all these projects is bringing together and curating fashion ideas, dining ideas, that’s what Fred Segal was. If you walked into a Fred Segal in 1985, there was a great restaurant, a great exercise and yoga studio. A lot of these lifestyle concepts came out of there. That’s what attracted me to this whole project,” said Blum. “Fred Segal was such an innovator, and the Fred Segal business was such an innovative concept. The world is looking for those kind of things.”
Like the original Fred Segal — which defined California cool — Blum sees the lifestyle center “as an incubator of design talent,” and the company plans to help launch new brands globally. Blum intends to hire a small team of merchants and marketing people — in both New York and L.A. — to scout the market and make fashion discoveries.
Sandow does not own or operate the existing Fred Segal stores on Melrose Avenue in West Hollywood and Santa Monica. Those buildings are each owned by separate entities and the stores within them are run by individual tenants, such as Ron Herman, under the Fred Segal banner.
The building that has housed Fred Segal at 500 Broadway in Santa Monica, which was home to Ron Robinson (which remains in Melrose), Fred Segal Finery and Umami Burger at Fred Segal, was sold in May 2012 to DK Broadway LLC. Due to DK Broadway’s redevelopment plans for the site, tenants were notified earlier this month that their leases have not been renewed. This doesn’t have any impact on the Fred Segal location at 420 Broadway, nor the Fred Segal Melrose location, said a Sandow spokeswoman.
Blum foresees opening the first lifestyle center within the year. He said it won’t be a cookie-cutter business, and each center will be individually designed. He said there will be some leased departments. He also plans to design a new Web site.
Blum couldn’t divulge where the first location will be but said the concept will be expanded internationally. “We believe we have the infrastructure, the talent and the intention to really re-create retail. There are very few limitations,” said Blum.
Sandow said the established licensing deals will continue, and he will also entertain new ones.
In October, Fred Segal opened a 2,200-square-foot location at the new international terminal at LAX. Sandow also developed seven exclusive Fred Segal stores within the new SLS Las Vegas Hotel & Casino, opening in August. The Fred Segal Collective — the only stores to be located in the resort — will cover 10,000 square feet of retail space and will feature such products as women’s and men’s apparel, jeans, shoes, jewelry and lifestyle/gifts. Fred Segal also signed a long-term partnership with Mark Styler Co. Ltd. to introduce Fred Segal in Japan. The Tokyo flagship, which will span 10,000 square feet, will open in 2015. It will be designed like Fred Segal in Los Angeles, with numerous shop-in-shops.