Undefeated’s Peng Cheng on Opening a Store in New York City and Expanding Its Gym Business
Undefeated now has a brick-and-mortar presence in New York City.
Last Friday, the Los Angeles-based sportswear brand and retailer opened its first store in the Big Apple, located at 75 Kenmare St.
For its debut, Undefeated opted for an elevated store design, complete with Venetian-plastered walls, stainless steel shelves and hang bars, stone-finished floors and a glass wall featuring its famed tally mark logo.
The arrival in New York is special for Undefeated co-founders James Bond and Eddie Cruz, both of whom have ties to the East Coast. (Bond and Cruz are from Philadelphia and Bronx, N.Y., respectively.) The store opening is also meaningful for Peng Cheng, owner of another West Coast retail standout, Bait, who became co-owner, COO and CFO of Undefeated in October 2015.
During a walkthrough of the new location, Cheng talked spoke with FN about Undefeated’s expansion strategy, which includes branching out beyond retail and building its standing in the sports arena.
“We’re building gyms around the world,” Cheng said. “We opened one already [in Downtown Los Angeles in 2018] that we actually doubled in size. We took over the unit next to us, and we’re building that out now. We are going to have gyms in China, in Japan and other countries as well where we have retail stores.”
However, store openings remain a major focus as well. Undefeated now has 23 retail locations stores in the U.S., China and Japan, with more on the horizon. Here, Cheng talks about the company’s New York play and where it’s headed next.
What does New York City offer Undefeated?
“My other partners, they came from the East Coast, and we’ve always wanted to be here. This has always been our No. 1 market for our online business. It’s a key door for us and it will allow us to expand, including building gyms. We’ve always known for our ties to sports, it has inspired our aesthetics. That’s where we’re heading, to continue to build Undefeated to be a sportswear brand. We sponsoring football teams in the U.K., [Birmingham City FC], and doing some other things to establish us as a sportswear brand and to double down on that strategy.”
What made this specific location desirable?
“Every store, we’ve never gone to places that already have built-in traffic. Even though there are stores around us, we’ve been told this side of the street has never really been popping. It’s a new building. It’s one of the few locations that we looked at [that had] the right street presence, it’s in the right market and it’s enough of a destination space for people who want to shop footwear. This is a good fit for us. There aren’t a lot of other retailers around us, at least not by proximity.”
Will New York City eventually have a gym, too?
“Yes, we would like to. We just have to find the right opportunity.”
What is your broader brick-and-mortar expansion strategy?
“We have stores in Japan, we have China and we’re focusing on those two markets. We’re also opening up new doors in Southeast Asia. We’d like to get into Europe; we’ve had some conversations. But we don’t want to do the licensing model or the distribution model, which is what a lot of people are doing. We want to manage our stores. That’s why, in Japan, we took back our distribution. We closed up doors because we didn’t believe in those locations, so now we’re running it ourselves. When you work with a distributor, a licensee, it’s a royalty-based business. It’s impossible and unrealistic to ask the partner to build the brand and have the image and message you want because, at the end of the day, they don’t have any real ownership of the business. We had a really good business in Japan, but over the pandemic, we decided it was time for us to do it ourselves globally.”
Are there plans to expand further in the U.S.?
“Yes, but the market here is very saturated, so we’re carefully picking where we want to go. That’s why I mentioned the gym side. Some of the focus would be there. We’re going into the sportswear business. We’re already kind of there, but now we’re taking it more seriously and telling the world that we consider ourselves a sportswear brand. There are a lot of street brands, and we are that too, but in the street category we have our own DNA and a pretty clear sportswear image.”
When will your next store debut?
“We’re opening doors in China, on average, every six weeks. In China, we worked before with a licensee. We took that back and we’re now doing everything ourselves. We have standalone stores, we have three or four stores with basketball courts, we have stores in malls. We want to grow the business because we believe in what we do. When there’s a recession or downturn in the marketplace, we try to capitalize on it. Right now, we’re onboarding a lot of new regional partners so we can open up stores with their help. We feel like when the market bounces back, we’ll be ready instead of waiting for the market to come back and try to build stores.”
How much does the Undefeated apparel brand represent in the overall business?
“It’s definitely more than half the units sold. Year by year it’s different because, in the footwear business, it depends on the allocation we get from the brands. That’s why we’re trying to focus on it, because we can control that part. We can’t control what our partners come out with. We can control our projects. For the most part, our apparel numbers have doubled for a couple of years now. But also, we’ve opened up more doors. It helps when there’s a footprint of stores, so we’re not relying on one region, one community. But we’re also very careful about building our presence in the community. That’s the big difference. When you go to an Undefeated store versus another store — and I hope we can do that in New York — but a lot of other shops, when there’s no drop there’s no one in the store. For the most part, we have people who come in, hang out, check out the new stuff. They’re not looking at us as the store that just has good drops. They also trust us as a retailer. That’s how we started, that’s always been the difference.”
What is your take on the broader sneaker marketplace right now? How would you assess its health?
“The market, not just for sneakers but all collectibles, is going through a reset. I wouldn’t say a ‘recession,’ because people are still buying, but no one needs 20 pairs of shoes a year. The last couple of years has been so good for everybody, and I don’t know the exact number, but I feel like everyone doubled their production over the last five or six years, but the population didn’t double. I don’t see the downturn or the slowdown of the business as a negative. It’s more about resetting the market. We’ve always focused on non-hype business with the brand. We never make super-limited quantities of anything because we want people who love the brand to wear it. That is the long-term strategy for us. We don’t need our apparel to triple the price. We need people to wear it, we want people to wear it.”