Butter’s comeback bread for dairyman NYC condo prices jump, but rents lag

ABHA BHATTARAI

The discount shoe purveyor DSW says it wants to give its customers what they want, which is how the chain has arrived at this: Shoe rentals.

The retailer announced earlier this month that it is considering adding a rental service, as well as shoe repair and storage facilities, to some of its 511 shoe-and-accessories stores. The experiments are part of a broader effort by DSW, which stands for Designer Shoe Warehouse, to get more customers into its stores.

“Today’s customer craves more than just a transaction, they want an experience,” Michele Love, the company’s chief operating officer, said in a statement.

Retailers around the country are racing to add services that might keep customers coming back to their physical locations, where people are more likely to make impulse purchases — and spend BRENDAN COFFEY

Americans have renewed their love affair with butter, slathering it on corn, plopping pats in their coffee and even using it to mix cocktails.

The U.S. Department of Agriculture projected that 2017 consumption will rise 10 percent from a year earlier, hitting 940,000 metric tons, the highest in half a century. The nation will devour more than 2 billion pounds of butter this year, more than 6.1 pounds per person, and the resurgence has helped make Dallas Wuethrich a billionaire. His Grassland Dairy Products Inc., founded in 1904 by his grandfather John, who churned it by hand, now produces about one-third of the nation’s butter.

“I have a tendency to say ‘Hold it right there, we’re not that wealthy because it’s all in the business,”’ said his son Trevor Wuethrich, 43, president of the Greenwood, Wis.based company. “We took our salaries, and if we did better than our salaries we stuck it more — than online. Nordstrom recently opened its first merchandise-free store, staffed with stylists, tailors, manicurists and bartenders. Apple, meanwhile, is outfitting its stores with outdoor plazas and indoor boardrooms in hopes that shoppers will linger.

At DSW, executives say the idea is to create a one-stop shop where customers can buy everyday footwear, stash items that are out of season — and yes, rent shoes.

“This is something we’ve had a lot of customers ask us for, particularly with specialoccasion shoes,” said Christina Cheng, a spokesman for DSW. “When it comes to prom or a wedding or a special event, people are usually looking for a very specific shoe in a particular color, that matches a particular dress, that they probably won’t ever wear it again.”

But, Cheng added, shoe rental — which the company will begin testing in coming right back into the business.”

Dallas Wuethrich, 71, has a $2.2 billion fortune, according to the Bloomberg Billionaires Index. He declined to comment on his net worth.

He joined the company in 1967 after attending the University of Wisconsin-River Falls for three years, according to a 1974 profile of Grassland in the

newspaper, when the firm was making 50,000 to 60,000 pounds of butter daily, about 1/30th of its production today.

Wuethrich eventually merged the family’s distribution and manufacturing businesses, and gobbled up other butter-makers along the way. In 2005, Grassland purchased West Point Dairy Products LLC, which controlled about 10 percent of U.S. production at the time. Last year, he added specialty butter-maker Alcam and its 1.5 percent market share. About one-third of Grassland butter is sold under its brands, while the rest is about evenly split between private label and bulk shipments months — also raises a number of logistical questions: How will stores know which styles and sizes to keep on hand? How will they clean them between uses? And how do you determine the cost-per-wear of a bedazzled stiletto?

Industry experts also raised concerns about the program. Sure, it may be commonplace to rent shoes at the bowling alley or skating rink, but are people willing to wear someone else’s opentoed, high heels to a wedding? Some are unconvinced.

“It’s good to think outside the shoe box, but this is taking the shared economy to a new extreme,” said Milton Pedraza, chief executive of the Luxury Institute, a New York-based retail consultancy. “Shoes are such a personal item — you’ve got to worry about fit, style, so many things — that I don’t think it’s necessarily something people want to share with strangers.”

And, he added, what happens to large bakeries.

Grassland gets 5 million pounds of milk daily from more than 850 dairy producers, according to the company, which has introduced rBST-free butters for consumers who oppose the use of bovine growth hormones in herds, as well as a butter made from cows fed a nonGMO diet.

The company’s growth has outpaced the burgeoning demand for butter, which is still far from its peak of more than 18 pounds per capita in the early 20th century. Revenue surged 46 percent over five years to $1.74 billion in 2016, according to annual sales estimates by

The Bloomberg index values the business by comparing it with publicly traded dairy companies Saputo Inc., Parmalat SpA, Glanbia Plc and Fromageries Bel SA.

Butter’s rising popularity follows a decades-long consumption decline that began during World War II, when supply shortages prompted the use of margarine and if a suede shoe gets caught in the rain? Or a glittered heel pops off into a ditch? Or a particularly large foot stretches out a loafer?

“I don’t see shoe-sharing is going to be either in high demand or highly profitable,” Pedraza said.

There are, however, a number of other apparel and accessories rental models that have worked: Rent the Runway has created a $100 million business offering dresses, gowns and jewelry for short-term wear. Bag, Borrow and Steal has found similar success — and millions in venture capital funding — by renting out designer handbags. Other start-ups allow you to rent watches, earrings, necklaces, even custom wigs.

The larger challenge for DSW, analysts said, is getting customers to buy and return items at its stores. Online shopping has become a particular problem for shoe retailers, which often struggle with high return rates. It’s oils as substitutes, according to the USDA. By the 1980s, Americans fearful of diets high in fat used about 4 pounds of butter a year on average, compared with 11 pounds of margarine. That began to change after the Food and Drug Administration determined that partially hydrogenated oils found in margarine were a health hazard. In 2005, for the first time in a half century, average U.S. butter consumption eclipsed margarine.

“Butter tastes a whole lot better,” said Marion Nestle, a professor of nutrition, food studies and public health at New York University. “But it is still loaded with saturated fat, which raises heart disease risk in comparison to less saturated fats, and has 100 calories per tablespoon. If ever there were a call for moderation, butter would be high on the list.”

For now, Americans continue to pile on the pats. become commonplace, analysts said, for some people to order eight pairs of shoes in different styles and sizes, and keep just one. Fulfilling those large orders, then processing returns and covering shipping costs can add up to an expensive problem.

“Getting traffic to their stores is really the most critical component,” said Steven Marotta, a footwear analyst for CL King & Associates. “And having a very large footprint around the country, which DSW does, has been a real advantage.”

The more reasons a customer has to walk into a DSW store, the more likely they’ll walk out with a pair of new shoes. And that, executives said, is ultimately why they’re experimenting with shoe rental, repairs and storage.

“An example would be, you come in today, it’s raining and you want to pull your rain boots out of storage,” Roger L. Rawlins, chief executive of DSW, said at a retail conference OSHRAT CARMIEL

Manhattan condo buyers who rent out their apartments are getting little more yield than they would with government debt.

Newly purchased condos that were listed for lease in the second quarter earned their owners a median return of 2.5 percent, according to an analysis released last week by property-listings website StreetEasy. It’s been stuck at that level since the end of last year, the lowest in data going back to 2010. The median yield on relatively risk-free 10-year Treasury notes was 2.25 percent in the second quarter.

“This is the lowest point we’ve seen in history,” Grant Long, a senior economist at StreetEasy, said in an interview. “It’s a steady downward trend.”

A construction boom and the perceived strength of New York real estate has been luring investors looking for a safe place to park their cash and generate income. Between January 2010 and June of this year, more than 8,000 condo units were sold and then listed for rent within 180 days of the closing, StreetEasy said.

The investment thesis had promise in 2011, when rental yields peaked at 3.9 percent in the third quarter. But as developers added ever-pricier units to the skyline and the supply of rentals swelled, income prospects for those who buy and lease out condos have been diminishing fast.

Buying a condo “certainly appears to be a less-attractive investment than it was in the wake of the financial crisis,” Long said. “Sales prices have gone up enormously since then, and they’ve gone up more than rents have.”

In 2011, the median purchase price of condo units last month. “When you pull them out of storage, we also offer you an opportunity to buy rain boots that just arrived so that you aren’t using necessarily the ones you’ve had in storage for two or three years.”

DSW is also looking for new ways to turn its existing stores into mini-warehouses. It is often cheaper and easier, Cheng said, to ship a shoe from a nearby store than from the company’s fulfillment center in Columbus, Ohio.

The company is also reconfiguring its shops to add taller, deeper shelves that can store up to 30 percent more inventory, and it recent merged computer systems so online orders, store purchases and inventory catalogues are in one place.

“Today’s retailer needs to be able to do it all,” Marotta said. “Ship to store, ship from store, ship store to store. Anybody who can’t offer that is at a disadvantage.” that became rentals during the third quarter was $899,000, StreetEasy said. In the second quarter of this year, investors who bought condos to lease out paid almost double that amount — a median of $1.7 million.

Investors could still reap big gains from price appreciation and the eventual sales of their units, but they’re going to come harder for those who purchase on the high end, Long said.

“With a glut of supply at the top of the market, the outlook for price appreciation on a Manhattan luxury condo these days is dim, particularly for investors interested in a quick profit,” he said. “Lessexpensive units are a moreattractive bet.”

StreetEasy’s analysis looks at a condo’s sale price, and the subsequent asking rent the owner sought for it — minus monthly property taxes and common charges, Long said. It also assumes the 1 percent “mansion” tax levied on properties that sold for $1 million or higher.

The study doesn’t account for closing costs, mortgage expenses or any charges associated with hiring a property manager, all of which could further dent the monthly income that an owner pockets from the investment.

Among the properties surveyed was a studio apartment on East 88th Street that was purchased for $690,000 on May 2, and listed for rent later that month. The asking rent — after a price reduction — was $2,550. Assuming a tenant took that price, the condo owner stands to collect $1,414 a month after paying common charges of $501 and property taxes of $635. The result: a net annual income of $16,968, or about 2.5 percent of the total purchase price.