Internet can build audience for brick-and-mortar stores

Before his math skills took him to earth-orbiting satellites and Internet data analysis, Soren Ryherd liked geography and political science.
Those two interests have re-emerged in The Retail Project, a business venture that won one of two inaugural Innovation Fellowships from the Rhode Island Foundation. Intended to revitalize Rhode Island’s vacant retail spaces, The Retail Project will use Ryherd’s expertise in online marketing to launch Internet companies with the ultimate goal of supporting brick-and-mortar stores.
The $100,000,000-per-year fellowship (over three years) will provide the seed money to launch The Retail Project, which hopes to have as many as 40 Internet retailers up and selling in the next three years.

PBN: Describe The Retail Project and how it will work?
RYHERD: The initial idea was to solve the problem of empty storefronts that litter the state, because they are depressing – they make us feel terrible. In order to do this we need to change the market opportunity, because we are just in too small a market for most stores to exist and succeed in up and down economic times.
So, I started to think about how to expand the market. We have been doing Internet marketing for eight years and what we found is that the marketing opportunities on the Internet have nothing to do with the brick-and mortar location or storefront, it’s just this vast market that we are able to tap into through Internet advertising and through the Web. So I started thinking about, if we grew that first, which is much less expensive and less risky than opening a brick-and-mortar store, we could prove the concept and find an audience before we committed to the expense of brick and mortar. But then once we do open the brick and mortar, those jobs are secure.

PBN: What if, even with a successful online store, there isn’t demand for a brick-and-mortar store? Will you open one anyway? RYHERD: This is why you don’t see this happening all over the place and why Amazon isn’t opening brick-and-mortar stores. This requires social commitment to the places we live. The point of this project is to get to those brick-and-mortar stores because the point of the project is to create desirable neighborhoods. That social mission is critical to this project. I think those stores will be successful in their neighborhoods. I think we will be looking at pairing a fit between the online stores to the neighborhoods where they make sense. One of the ideas is a crossroads between boating and food. That is a fantastic type of store to have in Newport or South County. But now if it opened, it would only be open for three to four months out of the year, whereas, if we are going for a global audience, we can be open year-round.

PBN: What is the mechanism for flipping from the Web to storefronts?
RYHERD: We will be growing the retail concepts from scratch, although over time I believe it will be really critical as part of the community to consult with existing Rhode Island businesses to help them do the same thing. The process of getting a store to profitability online is really a data-driven process and that is what we do at Working Planet every day, which is why I am so confident that we will achieve success. The stores will launch in late summer. Depending on what funding we might get beyond the fellowship, we might see six stores launch before the end of the year, maybe nine next year, 27 the year after that. But it is going to take awhile before they get to the point where we can build the brick and mortar. I don’t expect the first brick and mortar store to be rolled out before the end of 2013.
But before that it will be really interesting to be talking to all the other people who are involved in retail development. … I think there are a lot of people who are very interested … that this is the key that hasn’t been there in all of those real estate development projects.

PBN: Will you have time for this project while still running Working Planet?
RYHERD: The key to The Retail Project is it is not just me. We will be hiring entrepreneur managers to nurture these new stores. We will be contracting for e-commerce development. I am not taking any of the funding from the fellowship – it is all going into the things the project needs to spend money on. I will definitely have an oversight role and will be mentoring people within the project and guiding the vision of where it is going.

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PBN: The fellowship has an initial three-year horizon. Where do you see The Retail Project in three years?
RYHERD: In three years I think The Retail Project will be hitting its stride and, if we can find a little bit of additional funding, by that point we will probably have launched 35 to 40 stores and be on pace to be launching about 40 a year. I think that we will have our first brick and mortars up and running at that point and that the concept will be really proven and will almost be to the point where it will be self-sustaining. … About 20 percent of all profits will go back into the store-creation fund to launch additional stores.
After year four or five it becomes completely self-sustaining. Based on Working Planet’s experience working with companies in their online marketing, I expect approximately 80 percent will reach profitability with their online store and, of those, I expect 50 percent to hit the volume to
be able to support moving into a brick and mortar. Over the next decade, that could mean hundreds of new brick-and-mortar stores being rolled out across the state. •INTERVIEW
Soren Ryherd
POSITION: President and co-founder of Working Planet Group Marketing Inc.
BACKGROUND: A self-described “math geek” who studied satellite-imaging analysis in graduate school, Ryherd turned his number-crunching skills to the marketing world and founded Working Planet in 2003. The Providence firm uses quantitative analysis to evaluate online advertising and recommend the most effective campaigns for client companies. Ryherd is now in the process of founding The Retail Project, a platform for launching Internet retail startups.
EDUCATION: Bachelor’s in urban planning and political science from Western Washington University in 1986; master’s in geography/ remote sensing from Boston University in 1992
FIRST JOB: Working the counter at Kentucky Fried Chicken during high school
RESIDENCE: Providence
AGE: 49

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