Page 1

INSIDE

Jamie Dimon’s $2 billion ‘oops!’

TOP STORIES

In the Markets Page 6

Brooklyn Brewery taps new leaders PAGE 2

®

VOL. XXVIII, NO. 20

WWW.CRAINSNEWYORK.COM

MAY 14-20, 2012 PRICE: $3.00

Tech startups moving to NYC PAGE 2

Pearson’s test flubs could cost it dearly PAGE 4

Enrollments are up at summer camps SMALL BUSINESS, PAGE 14

Real Estate Report: Third Ave. bargains PAGE 15

BUSINESS LIVES GOTHAM GIGS Helping parents make the grade P. 25 ANNE FISHER Ego stifles innovation P. 25

MOVERS & SHAKERS Bike-share’s chief cyclist gets ready to roll P. 26

GAEL GREENE Beirut import offers bold take on Mideast cuisine P. 27

INDEX NEW YORK, NEW YORK __________________________8 THE INSIDER _______________________________________________10 NEIGHBORHOOD JOURNAL _____________11 VIEWPOINT ___________________________________________________12 FOR THE RECORD ___________________________________19 CLASSIFIEDS ______________________________________________20 HOT JOBS ______________________________________________________25 EXECUTIVE MOVES _________________________________25 THE WEEK AHEAD ___________________________________27

Wave of digital companies from across U.S. sees Big Apple as base for next-stage growth BY MATTHEW FLAMM It took three years and $1 million for the founders of Next Big Sound to build their company out of an incubator lab in Boulder, Colo. But in January, when a second financing round brought in $6.5 million,it was

time to head for the big city. And there wasn’t any question which one. “Our clients are in New York,” said Alex White,chief executive and co-founder of Next Big Sound, which analyzes data for the music industry, and which officially makes Manhattan its home June 1. “It’ll cost us more, but the ability and

speed with which we’re able to de- vate investors, and supported with velop products will be accelerated.” incubator labs and other shared For decades, New York work spaces, some of them has been known as the sponsored by the city.There’s town companies left when also proximity to hometown they needed to expand and industries like media, adverREVENUES for couldn’t afford the higher tising, fashion and finance— software firm Infor, which salaries and rent. But a reall going through digital dismoves its HQ versal is taking place ruptions—and a growing here in June among tech firms: Compapool of engineers, as well as nies are moving here. seasoned entrepreneurs who can They’re drawn by a thriving offer encouragement and advice. See TECH on Page 22 ecosystem fed by money from pri-

$2.8B

Super PACs eyed for mayoral election Biz groups’ millions could upend 2013 race for City Hall BY DANIEL MASSEY Conventional wisdom in city politics holds that the only alternative to the campaign finance system is for a billionaire candidate like Michael Bloomberg to throw tens of millions of dollars into a run. But the phenomenon of super PACs is about to flip that thinking upside down. From Utah to Indiana, these giant funds have spent millions to shape elections. Now they’re poised to come to New York City,where they could shake up the 2013 mayoral race by promoting a business-friendly candidate who might not be able to self-finance. “There will be super PACs,” said New York Republican State Committee Chairman Ed Cox. “It’s impossible not to have them. They’re a part of the process now.” While their arrival may be inevitable, there are plenty of question marks. Strict local disclosure laws mean super PACs here will be

LEXY FUNK OF BROOKLYN INDUSTRIES: Her specialty retail chain makes more goods locally so that new merchandise arrives in weeks rather than months.

FASHION GETS FAST Trend-driven retail industry’s need for speed is changing how apparel outfits do business

See PACS on Page 22

NEWSPAPER

BY ADRIANNE PASQUARELLI Looking to kick its retail operations into higher gear, hipster clothing chain Brooklyn Industries last fall borrowed from the playbook of higher-flying competitors H&M and Zara, known for what the retail world calls “fast fashion,” or ultraquick turnaround of the latest designer styles.

“When you think fast fashion, you think of cheap designs copied from the runway,” said Lexy Funk, chief executive of the 13-unit chain. “We want to innovate with original designs but do it in a fast manner.” To get stylish duds on the selling floor more rapidly, Ms. Funk has shifted some of her chain’s production to New York. In one example, it took just six weeks to design and deliver a line of leather bags to her stores, See FAST FASHION on Page 9

buck ennis

Out-of-town broker hits a local wall


Fast fashion boosts NY retailers Continued from Page 1

rather than the six months it could have taken if the bags had come from Hong Kong. “We’re actively moving more of our sourcing to the U.S.,” she noted. As fast fashion continues to win over shoppers, more specialty retailers like Brooklyn Industries, which traditionally freshened merchandise just a few times a season, find they, too, must speed up their turnaround cycles. And that could create new opportunities for their garment-district suppliers and New York-area vendors whose proximity allows for faster production. Annual revenues for fast-fashion stalwarts Forever 21, Uniqlo, H&M and Zara increased an average of 18% from 2006 to 2010, according to a report called Fashion .NYC.2020, released last month by the city’s Economic Development Corp. Meanwhile, specialty retailers like New York-based Aéropostale and Gap were hard-pressed to keep up, seeing sales rise only 2% on average over the same period, according to the report. Analysts expect the trend to continue in New York as fast-fashion retailers snap up high-profile locations in popular shopping meccas around town, from 34th Street to Fifth Av-

markets at trend forecasting firm Stylesight. “It’s see it now, buy it now, wear it now.” The movement could bring a needed boost to local manufacturers in the garment district and outer boroughs if retailers start turning to them for faster delivery of dresses, handbags and sandals. Big Apple manufacturers are already used to quickly producing limited-run merchandise for a handful of designers, including Nicole Miller and Maria Cornejo. Though prices are high compared with those of overseas producers, rising labor costs in Chi-

na could level the playing field. “There is definitely opportunity for New York,” said Kristy Sundjaja, senior director at the city’s Economic Development Corp.

Saving time Already, by moving some of its production to New York, Brooklyn Industries has cut months out of its turnaround cycle. Last October, the 14-year-old retailer—whose 2012 same-store sales were up 11% as of April—began using factories in Dumbo and midtown Manhattan to manufacture its new line of

women’s leather bags.The tote bags, which cost around $134, are selling well, Ms. Funk said. She’s now trying to shorten the timeline for sportswear as well. “The market is getting a lot faster,” she noted. Specialty shops such as Aéropostale and J.Crew, which declined to comment,typically dedicate about 10% of their merchandise to very trendy wares, according to analysts. But the retailers could be looking to increase that ratio, scrutinizing the merchandise cycles of stores such as H&M in order to get their own products in the door more quickly. “All [specialty retailers] are looking at how they can be faster and who they can partner with to manufacture,” said Nancy Liu, a retail strate-

gist at consulting firm Kurt Salmon. In the meantime, the fast-fashion folks are only getting stronger.Stockholm-based H&M recently reported a 16% rise in March same-store sales. The parent of Japan-based Uniqlo, the aptly named Fast Retailing Co., generated a net profit of $715 million for the six months ended in February. With three massive Manhattan stores, Uniqlo is planning further expansion into U.S. malls. “Uniqlo and Zara are now on Fifth Avenue near Cartier and Louis Vuitton,” noted Ms. Liu. “That speaks to how well they’ve done.” 䡲 LISTEN to a discussion at CrainsNewYork.com/podcasts

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‘It’s see it now, buy it now, wear it now’ enue. “Fast-fashion stores have touched the trendy side of everyone,” said Candace Corlett, president of WSL Strategic Retail, which analyzes shopper behavior. “The message to specialty shops is that they have to have a lot of trendy,too.” The rise of fast fashion has been meteoric. In the late 1990s, H&M was just entering the American shopping scene; it now has 10 stores in Manhattan alone. Especially over the past four years, such retailers have taken off by appealing to recession-weary consumers who are more aware of new looks—thanks to the Internet—but less willing to spend big on an outfit.

Quick turnover Dubbed “fast” for their turnaround speed, these retailers can produce merchandise within 14 days, compared with the 90 days of the competition. Zara, a $10.5 billion retailer that recently opened a Fifth Avenue flagship,brings in new inventory twice a week at each of its 1,800 stores worldwide. Since most of Zara’s goods are produced near its headquarters in La Coruña, Spain, it’s able to keep a tight grip on its supply chain. By contrast, less nimble retailers often produce in China and have less control over timing. “Fast fashion is all about quick turnover,” said Oona McSweeney, vice president of retail and special

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May 14, 2012 | Crain’s New York Business | 9

Fashion gets fast - Crain's New York Business, May 11, 2012  

Trend-driven retail industry's need for speed is changing how apparel outfits do business.

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