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Time Out Explores the Future of Customer Experience with Experience:NYC Small Business Festival

As New York City enters the fourth and final stage of the state’s reopening plan on Monday, indoor dining has yet to appear on the agenda.  For Time Out, that means their 24,000 square foot market, located in the heart of DUMBO, remains shuttered.  The New York location is the third installation of the concept space following markets in Lisbon and Miami; the space features 21 different eateries, 3 bars, a video installation wall and a demo cooking area. The company’s mission: showcase the best of New York City’s local cuisine all in one place.

The media company has since had to pivot in how it engages with its customers as the market has remained closed to accommodate safe social distancing, but their commitment to highlighting New York’s local businesses has not waned.  As a part of their ongoing Love Local Campaign, Time Out partnered with Instagram to host Experience:NYC, a two day festival highlighting small business from across all five boroughs.  The event was entirely virtual, taking place exclusively over Instagram live.  Here, 16 different small businesses with specialties ranging from candlemaking to Japanese mixology had one hour to showcase their wares to Time Out New York’s over 490,000 Instagram followers.

For CeCe’s Closet, a sister owned clothing brand that seeks to celebrate the beauty of West African prints, that experience provided a virtual fashion show in advance of the release of their newest collection.  The models walked through the bright, open air venue offering a final pose directly in front of the camera, while the host provided information about the garments’ construction, among other whimsical commentary. To close the show, the brand encouraged interaction from attendees, asking everyone to vote on their favorite look or send a reaction in the form of an emoji leveraging the comments feature built into Instagram live.  Finally, the brand promoted their own social channels for those interested in more content.

Models take a final walk on the runway during Cece’s Closet’s virtual fashion show

Sarah Paji Yoo, founder and CEO of Blueland, an eco-conscious cleaning product company, set up her broadcast from her Manhattan apartment.  After pinning a comment to let newcomers to the livestream know about the event’s description, she began to demonstrate different cleaning products in her kitchen, all while explaining her company’s mission to provide quality cleaning products with no plastic waste.  The demonstration took on the likes of a casual conversation, as viewers asked questions throughout, again utilizing the comments feature, as Yoo simultaneously shared her story and product recommendations with attendees.

Sarah Paji Yoo, founder and CEO of Blueland demonstrated different cleaning products from her NYC home

As the country gradually reopens with social distancing measures becoming the norm, the traditional customer experience, oftentimes rooted in crowded venues and shared spaces, is in jeopardy.  Many customers still remain apprehensive to return to in person shopping and digital tools such as Instagram and Zoom are continuously building out features to further support robust online interaction between event hosts and attendees, giving virtual events increasing promise. With customer safety top of mind, retailers will undoubtedly have to get creative in leveraging digital tools to connect and engage with their consumers, ultimately to prove that a meaningful and a digital customer experience are not mutually exclusive.

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FAST: Future Proofing The Retail Food Industry

Understandably, the retail food industry has been consumed with responding to current events. With a global pandemic rocking the market, we have seen an unprecedented impact on the retail industry in general and the food industry in particular.

For years, I have focused on the chart below that measures “share of stomach”, the percentage of sales on food at home (generally retail food) and food away from home (generally foodservice). Not surprisingly, we have seen a long and steady march towards consuming more food away from home. Around 2011, the two lines diverged with food away from home pulling away from the pack. Busy lifestyles have led to the growth of foodservice and more convenient ways to consume food. Of course, supermarkets have gotten into the act, adding restaurant style food, leading to the growth of grocerant style formats from Whole Foods to Wegmans. With a minor blip during the last recession, this trend has held remarkably constant.

Figure 1: Jefferies USA April 2020

And then we had a pandemic. Restaurants shut down, most states issued shelter in place orders and improbably, we had a resurgence in food at home because, hey, it was the only option. Americans began cooking again, and there has been a surge in center store products like baking goods, fresh products (meat and produce) and canned foods. All of a sudden, our kitchens and our supermarkets were on trend.

For a period of time, this chart will likely remain inverted and there are estimates by the investment banker Jefferies that this trend could continue over the next 18 months. Health concerns, governmental regulations, and a recession could all come together to keep restaurant industry revenues suppressed with some estimates suggesting that 5-15% of restaurants will close due to the pandemic.

Seemingly great news for supermarkets but conditions are getting tougher there as well: restrictions have hampered supermarkets ability to sell prepared foods and bakery products, an important component of their sales mix and margins and e-commerce continues to rise, often at the expense of profitability.

Figure 2: Jefferies USA April 2020

FAST: The Development Of The E-Store

As a result, both restaurants and food retailers will need to reinvent themselves and start thinking about the future. I collaborated with Natalie Shmulik, who is CEO of Chicago-based The Hatchery, a food and beverage incubator. As Natalie suggests, “while the food community is severely challenged, it is also an opportunity for innovation and reinvention”.

FAST is an acronym that helps describe and explain what future-proofing the food business might look like:

Figure 3: The E-store as demonstrated by the FAST acronym

Every industry is going to be thinking about future-proofing their business concepts, especially those who have physical spaces. This is a unique opportunity for architects and designers to start carefully thinking about how every square foot is used and why.

Natalie introduces the concept of the “E -Store” to demonstrate the principles of FAST. This new classification will force an immense amount of rethinking and innovation. She also correctly notes that while “the food industry is uniquely positioned, other brick and mortars will be taking note. Other industries will begin exploring how to transform their space utilizing E-store protocols and we are likely going to see more beauty shops, fitness centers etc… including food products and transforming into holistic marketplaces”.

The E-store mindset will shift how we build, design and use food spaces now and in future. Every company will be thinking about how they can continue to function if and when essential business restrictions are enforced again in the future, or, if consumer patterns continue to shift and adopt to new behaviors.

What are some examples of companies who are adopting FAST principles?:

Flexible

A major lesson of the pandemic is the need to be able to change your business model quickly. Whatever we think we know about the future, it will inevitably change. Being able to flex, quickly, is paramount.

Farmers Fridge. Chicago-based Farmers Fridge was already an innovator, bringing consumers healthy and fresh food through high tech vending machines at major traffic areas like airports and office buildings. Practically overnight, as demand in traditional venues slowed dramatically, the company shifted to catering (they’ve done a remarkable job of servicing health care workers in hospitals) and home delivery.

Figure 4: Farmers Fridge pivoted from airports and office buildings to hospitals and home delivery

Alinea Group. This heavily Michelin-starred restaurant chain (Alinea, Next, Roister) had a problem—with dining rooms closed and a restaurant concept that relies heavily on a high touch, high service experience. One of the founders is a pioneer in restaurant technology (Tock Reservations) and was able to shift to a To Go experience early in the pandemic. Remarkably, they are serving significantly more customers (10-20x the number of customers previously) at prices that are a fraction of the dine-in experience.

Figure 5: Alinea preps for takeout orders

Agnostic

It should go without saying that being channel agnostic is a must have requirement for the future. For restaurants, this means lessening the reliance on any one channel (in-store dining, pick-up, delivery) and being able to build a flexible platform for consumer demand. For supermarkets, handling the surge in e-commerce requires a different type of fulfillment model than simply shopping in the aisles.

Raley’s. The Sacramento based grocery chain converted a closed unit to a “dark” store dedicated to e-commerce fulfillment. As e-commerce demand has risen 3-5x during the pandemic, in-store picking may no longer be the most viable solution to handle demand. Several other grocery retailers are employing robotic technology (micro-fulfillment centers) or adopting stores to become fulfillment centers. Amazon’s much anticipated first full grocery store in Woodland Hills has become a dark store as well.

Canlis. The Seattle institution went from a fine dining restaurant to creating a makeshift drive-thru, a bagel stand, and delivery of family meals. The homepage of their website says it all… In early March, we shut down our dining room. Fine dining is not what Seattle needs right now. Instead, we’re bringing the food to you. We’ve got this, Seattle.

Prairie.  In San Francisco, Prairie converted their restaurant into a general store.

What will be interesting is how much of this continues when normalcy returns. It is quite likely that many of these business options will remain viable in the future—less in-store seating and more ways to pick up and deliver.

Safe & Sustainable. One of the unfortunate consequences of the pandemic is that there are seemingly conflicting positions. Grocery stores stopped allowing customers to bring in their own bags and loose product is now being packaged. This seems to work counter to the long growing trend of sustainability.

The Wally Shop. This online grocer features bulk products shipped in reusable packaging which the consumer sends back when they are done.

Forager. Forager connects farmers with retailers to facilitate buying local. One of the saddest aspects of the pandemic is the slowdown in demand in restaurants which has led to significant food waste. This service establishes local connections between farmers and retailers, driving more food sustainability and keeping food dollars within the community.

The Dorian. This San Francisco restaurant uses compostable takeout containers in paper bags without utensils (unless requested) to reduce plastic use and repurposes unused fruit and fruit rinds and dehydrates them to use as garnishes for cocktails. With delivery and pick-up continuing to grow, retailers are going to need to rethink their approach to being both safe and sustainable.

Technology Focused

Technology will be the great enabler to power all of the trends above. Companies will need to find new ways to profitably serve customers and allow for flexibility, channel diversification and safe and sustainable practices. This likely means new ways to ensure safety and new ways and partnerships to facilitate the future.

Robots that check aisles for out of stocks, unattended pick-up stations (lockers of all sorts), and micro-fulfillment centers to drive better picking and better technology to facilitate pick-up and delivery are going to become the norms. As will new standards for safety and security. Expect salad bars to go away (for now) and for our samples to be packaged.

Magnolia Bakery.  A “cleanse portal” where customers stand under a UV light before entering the store has been installed at Magnolia Bakery.

Starbucks. Starbucks is rethinking its real estate strategy. Less in-store seating and more pick-up only locations facilitated by new technology. They have also partnered with Uber Eats to offer delivery.

Figure 6: Pick-up is prominently featured at Starbucks

The future of food will look very different than it does today. Being FAST will be the only way to future proof the business.

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Retailers Are Moving Fast

With jobless claims spiking to 3.3 M last week and more states moving to “Stay at Home”, Covid-19 continues to wreak havoc across the U.S.   Many retailers have displayed agility and innovation to quickly implement new tactics to keep business going as well as contribute to the broader community response.  As a follow-up to our list last week, today we bring you the top positive actions we’ve observed from our industry to serve both customers and employees:

  1. Pitching in – retailers and brands like Gap, Neiman Marcus, Jo-Ann Stores, Canada Goose and many others, are shifting capabilities to help the front lines of health care workers by making masks and other protective apparel such as scrubs and gowns. CD One Price cleaners is providing free laundry services for first responders and health care workers and Starbucks will provide free coffee for this group through May 3.
  2. Upscaling our videoconferences – West Elm, Behr paints and others are offering free virtual backgrounds for Zoom conference calls – helping us all to look more professional while working from home.
  3. New channels to serve the customer – companies are rapidly pivoting to serve customers at home. Farmer’s Fridge provides fresh and healthy food to consumers through automated vending machines located in convenient locations throughout major markets in the U.S.  Over the weekend Farmers Fridge implemented a home delivery program to provide products to customers unable to get to a vending machine due to shelter in place requirements.
  4. Profit sharing with staff – our most popular Instagram post this month featured the take-out meals offered by Chicago’s Michelin 3-Star restaurant, Alinea. The wildly popular program has allowed the restaurant to hire back staff with the intention of sharing profits evenly among them with ownership forgoing salary.
  5. Virtual events – from Chipotle to Nike, retailers and brands are providing activities to enhance engagement with isolated customers. Chipotle is offering daily Zoom calls to hangout with celebrities.  Nike is offering free membership in the premium level of Nike Training Club.  This app offers virtual workouts for strength training, cardio, and yoga and is aligned with the “Play Inside and Play for the World” ad campaign. Michael’s Stores has a Face Book live craft event weekly for shoppers using curbside pickup.
  6. Stocking up…on cash – retailers are closely scrutinizing cash requirements to ensure they can fund on-going operations through this uncertain period. Many large retailers accessed credit facilities in the last week to borrow including L. Brands, JCPenney and Ascena.
  7. Helping with customer payments – auto companies like Hyundai, are covering up to 6 months of lease payments for customers that have lost their jobs due to Covid. Companies such as Mariano’s (Kroger) and Door Dash are waiving pickup or delivery fees.
  8. Accepting new payment types – to make it as easy as possible to pay, retailers are expanding on-line and mobile payment options. Starbucks will be accepting Bakkt cryptocurrency on the mobile app.
  9. Offering premium solutions for high end customers – luxury sales are projected to decline significantly in the coming months. Companies in this segment are focusing on their top customers with personalized offerings and exclusive events.  The Dorsett hotel chain is offering 14-day and 27-day Quarantine packages at their luxury hotels that include medical care and food delivery.
  10. Cross retailer co-operation – this trend, noted last week in Europe, is now here in the U.S. where companies are working together to address key challenges like workforce stability. Albertson’s announced a partnership with 17 other companies where they will hire furloughed workers to fill part-time roles in busy Albertson’s stores and distribution facilities.

We believe this is just the beginning. Creativity and innovation will be the hallmarks of companies who can successfully navigate this crisis.

Please send any tactics that should have a spot on our list to info@mdretail.com.

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Amazon Go Gets Going

There have been two major developments with Amazon Go in the past few weeks. First, they opened a “jumbo” sized store (at least for a Go) in Seattle. And, they just announced that they would make the technology available to other retailers and just named their first partner, OTG, an airport focused hospitality group.

The Amazon Go Grocery store opened in the Capitol Hill District of Seattle at the end of February. Unfortunately, Seattle happens to be the current epicenter for Covid-19 so there has been little attention after the opening splash. Why is this store significant?

  • At roughly 10,000 square feet, it is about five times the current footprint for other Amazon Go’s. While not supermarket sized (US markets are roughlt 3-4X larger), it is closer in size to an Aldi or Trader Joe’s. One of the big questions about the technology is whether it can scale up in size and handle a larger footprint. This store certainly represents a giant leap in potentially proving this out.
  • The mix has been expanded. While the original Go’s are essentially convenience stores with grab and go items and a limited selection of groceries, the new store is far more expansive in offer, particularly with the addition of fresh meat and produce. The complications here for tracking also get a lot more difficult. Can they track an organic avocado ($1.49/each) vs. a regular avocado (.49/each)—they sell both or be able to distinguish how many bananas (sold for .19 each) are in a bunch? There are also loose bakery items for sale which could potentially tax the system.
  • Other than that, the same system as for the other Go’s is in place—customers swipe their Go app and enter the store and exit by walking out.

If this is scalable, it potentially offers much broader usage for the technology, which is also available for other retailers to license. The Just Walk Out technology will show up at select CIBO Express Gourmet Markets, with the first set to open at Teminal C at Newark Liberty airport.

This is an interesting place to test this, since OTG has been a leader in creating a seamless experience. Terminal C is fully equipped with self-ordering kiosks for restaurants and self checkouts in the stores. Just Walk Out technology seems to be a natural and logical progression. The one change to the program will be that customers can use a credit card to enable the technology versus a dedicated app. This should make adoption faster and more intuitive, as Rick Blatstein CEO said, “We know time is critical for our guests and we are always looking to use best-in-class technology to create frictionless airport experiences, and really give them their time back. We are working with Amazon to leverage their proven Just Walk Out technology in our CIBO stores – so for us it’s all about offering travelers whatever they want in the easiest and quickest way possible.”

I’ve written a few times about Amazon Go and count myself as a fan. As I’ve discussed, once you get used to not having to wait at checkout, it changes your mindset. This is not dissimilar to TSA precheck or using a toll pass on the expressway. Once you have it, you will never want to go back.

Questions still remain about the scalability and cost of the technology, its accuracy (go scour YouTube to find people working hard to game the system) and ultimately, the societal ramifications of the elimination of clerk oriented jobs customer receptivty to a people free environment. For now, it’s clear that the technology (through Amazon, Standard Cognition and others) will continue to change retail as we know it.

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Retail Innovations 2020

Since 2005, we have published the Global Retail Trends & Innovations Report in collaboration with Ebeltoft Group, a consortium of international retail consultancies of which we are a founding member. In this year’s report, Retail Innovations 2020, we explore stores and concepts on the cutting edge of global retailing through detailed case studies representing the leading ideas and innovations across 18 countries. This year’s case studies speak to four key themes driving rapid change in retail that we will be highlighting cases for and commenting on in the coming weeks:

  1. Omni-integration. Retailers serving mobile shoppers in any channel is less of a trend than a must-have capability. And now, innovators are taking omni-integration to the next level:  Onofre, a CVS affiliate in Brazil, operates an automated fulfillment center allowing online orders to be delivered anywhere in Sao Paulo within 90 minutes. Their remodeled flagship store has added self-checkout and tablet-checkout capabilities as well as a robotic restocking system. Building omni-channel capabilities is especially important in developing countries, where much of this decade’s mobile internet user growth will occur. Onofore is already a leader in this field, with nearly half their orders coming through the online channel.  In developed countries, where smartphone usage is already ubiquitous, leaders are pushing the omni-channel envelope even further. One such example is the Bershka apparel store in Cremona, Italy, where customers can scan any piece of clothing via smartphone app, have it quickly brought to a fitting room (from the stockroom, streamlining operations), and check out directly from their phones. Bershka’s fitting rooms are equipped with smart-mirrors that can display a product’s details, suggest outfit options, and display additional clothes the customer may like.
  2. Extreme Convenience. Retailers use technology to remove friction along a customer’s path-to-purchase. Some retailers have enabled increased convenience by removing store personnel from the equation: Bingbox in China, Zaitt in Latin America, and Lifvs in Sweden have created app-based, small-format, staffless convenience stores, removing bottlenecks in the form of queues or checkout kiosks while reaching a wider customer-base. Other innovators are focused on cracking the last mile of delivery supply-chains, such as the Kroger-Nuro collaboration that delivers groceries via self-driving car, Wing (Alphabet’s drone-delivery initiative), and Starship Technologies who delivers goods within a 4-mile radius using 6-wheeled robots. The examples above demonstrate that if you can streamline the customer journey using technological solutions, you can also streamline your internal operations, eventually boosting your bottom line.
  3. Extreme Experience. In the age of ecommerce, retailers are creating destination experiences for shoppers more than ever before.  Some brands focus on prestige, like Galleries Lafayette where luxury brands are organized by fashion theme rather than by designer or the Woolrich flagship, which is as much a museum for the brand’s rich history as it is a store. Others focus on activities and community, such as the Lululemon flagship in Chicago which offers food, events, meditation classes, and group fitness classes that reinforce the brand’s health-focused brand image.  Another example is the Hi Panda flagship in Japan where the entire store hosts an interactive AR game experience.
  4. Sustainability. Retailers are aligning their business model with consumers’ increasing desire to spend their money with companies that share their values.  Many new concepts emerged globally that are built around sustainability.  Empty Shop is a concept where the shelves are initially empty, and patrons donate used clothing to fill them.  The cruelty-free cosmetics brand Lush featured a London pop-up staffed by homeless from the community and devoted to educating people on the dangers of single-use plastics. And even legacy players are getting involved: for example, the 90-year-old grocer Lidl recently opened a store in Turin powered by 100% renewable energy, with urban gardens open to the public, and spaces to host social activism workshops. As Senior Partner Neil Stern put it, the 2020s will be the decade where “greentailing becomes mainstream…really, finally.”

These cases illustrate that we really are at the beginning of a new normal in retail.  To learn more, please download the full Global Retail Trends & Innovations report here.

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Where Retail Is Headed: What Can We Expect In The Roaring 20’s?

Greg Foran, the former CEO of Walmart U.S. said that “Retail Will Change More in the Next Five Years Than It Has in the Past 50 Years”. If he is even remotely correct, expect to see a rapidly shifting retail landscape as we enter a new decade on top of what has been a tumultuous prior ten years.

As the Holiday season of 2019 winds to an end, I am going to use this time to look back and to look ahead. The 2010’s were a transformative decade for retail. While Retailmageddon didn’t exactly come to pass, we saw a significant slowdown in physical brick and mortar retail growth and an unprecedented number of retail store closures.

In our decade recap blog, we spoke of five key trends that shaped the decade: 1. A full decade of unimpeded retail sales growth. 2. The rise of e-commerce and Amazon.com. 3. The collapse of the middle and the rise of value driven retail. 4. Private equity’s outsized role on retail economics. 5. The power and influence of the consumer through social media and connectedness.

I asked our team to weigh in on what they thought the next ten years will look like. So here goes:

  1. Extreme retailing will define winners and losers. We have defined extreme retailing as the following:
    • Extreme Value. Retailers who deliver outstanding value to the customer will continue to gain share. Value can be defined as low prices (of course), accomplished through private label and augmented by a treasure hunt experience.
    • Extreme Convenience. Retailers who remove pain points from the customer looking for and ultimately buying and using products.
    • Extreme Experience. Retailers who energize the experience through great displays, provide reasons for customers to show up, change often and amplify product categories.
    • Extreme Engagement. Retailers who establish direct relationships with their consumers and encourage the ability to customize and personalize products, promotions and the overall experience.

Walmart has been investing in online grocery delivery by expanding grocery pickup and delivery services to make Walmart the easiest place for value-driven customers to shop.

I can argue that the trends below will simply become more efficient ways to accomplish the above.

  1. Technology will lead the way. Having just left the NRF Big Show, it is abundantly clear that the implementation of technology will alter the retail landscape, both in the ways that we will do business and the tools available for the consumer:
    • AI is transforming the way retailers do business. Everything from assorting, pricing, displaying (in-store and on-line), replenishing is being changed by AI. It will also begin to more aggressively enter the consumer realm through anticipating and responding to consumer needs.
    • A gimmick today, applications like Siri and Alexa are gaining usefulness and will be embedded everywhere we live, work and play. This is going to impact shopping in the same way we have seen mobile devices transform the retail experience.
    • The end of the front end. It is not difficult to look ahead over the next decade and predict the end of human interactions at the beginning and end of the consumer experience. Automated ordering and automated checkouts will rule the day as technology, consumer preference and very real labor shortage issues will drive adoption of these technologies. The mobile phone and social shopping will likely become the new front end.
    • Robots and drones…maybe. Robotics will change distribution centers, fulfillment and automate certain retail tasks like inventory management and maintenance. However, I have not seen practical examples of how they will transform the front end of the consumer experience….yet.

      Amazon Go relies on technology and smartphones to link customers to their Amazon account, streamlining the customer experience.

  1. The battle for the Last Mile. The costs and inefficiencies of package delivery (and returns) to the home is already catching up to retailers who attempt to match Amazon’s deep pocketed and money losing approach. While consumer expectations for increasingly faster and still free won’t change, retailers must change their approach.
    • Access to consumer’s home. Along with smart technology, access to consumer’s homes, garages or dedicated “home lockers” will accelerate.
    • Consolidated lockers and pick-up points. Stores will reconfigure themselves as efficient and potentially consolidated pick-up points to reduce costs of the last mile.
    • BOPIS done well. Buy on-line and pick-up in store (or through a drive-thru) has real potential to both lower retailer costs and make it easier for the consumer. Largely, it is not being done well today. That will change.
    • Amazon goes full retail. Why? It is the only way for them to continue to efficiently grow and gain access to large categories like food. Retail might look quite different, with a lot less traditional space for inventory and much more space dedicated to omni activities (see above).
  2. Greentailing becomes mainstream…really, finally. I wrote Greentailing and Other Revolutions in Retail in 2008. At the time, there was ample evidence that the consumer was ready to embrace new behaviors in the way they live and shop. Then, the recession happened, and behavior shifted back to worrying more (understandably) about managing a budget. We seem to be at an even more pronounced inflection point today, driven by the next generation of consumers who want to shop and live more sustainably. This will have a profound impact on packaging, ingredient integrity, food waste and the rise of the rental and second-hand resale markets. And yes, taken all together, it could signal a shift towards less overall consumption. Companies who embrace these values will be well positioned for the next decade.

    Peloton’s Orange Showroom serves as a central hub for prospective members to test out the Bike and Tread firsthand, receive a personalized tutorial and learn more about the live studio experience that they can bring home.

  3. The shift towards an experience. We have been speaking about experiential retail for some time. It is often misinterpreted to be about “entertainment”. But, the real shift will be away from retail stores and toward shopping centers which focus on product and an increasing move towards services, food and beverage, health care, fulfillment and yes, entertainment. As “purchasing” continues to shift on-line, stores must rethink space, rethink assortments and rethink the purpose of a retail trip. The new Nordstrom Flagship in New York is illustrative of this shift, with less space dedicated to products and more space dedicated to services, food and experiences.
  4. The economy comes into play. Somehow, we managed an entire decade in the U.S. without a significant economic downturn. We won’t be so lucky in the next decade. With an inevitable downturn, expect a greater number of retailer casualties (bankruptcies, closures, downsizing) coupled with new behavioral shifts. Value retail and private label are examples of segments that thrive during recessions. If retail has been tumultuous during good times, imagine what changes a real recession will bring.

    Starbucks Reserve Roastery Chicago is the company’s largest retail experience celebrating the company’s heritage and paying homage to the roasting and craft of coffee.

So, what does it all mean?

  • Expect significant change in retail. Retail will change dramatically in the next decade, particularly in the ways in which we manage the business and the way that customers will transact on-line and in-store.
  • If you’re a retailer, supplier to retail, in retail real estate, etc., you need to ask one simple question: Are you ready for the next decade?

How you answer may well determine whether you’re still in business in 2030.

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Different Leaders, Different Results: Modern Retail Requires A New View From The Top

CHICAGO, IL- Aug. 5th, 2019 In this report McMillanDoolittle details shifting consumer expectations across all retail categories – and the blind spots the leaders of both legacy retailers and digital natives must overcome as they adapt to an integrated retail landscape.

In Different Leaders / Different Results McMillanDoolittle estimates that consumers already spend $.45 of every dollar within categories where they expect their retailer to provide an integrated user experience, allowing them to make purchases and fulfill their transactions in the way that best suits their needs.  These retailers require a new set of capabilities – driven by a new leadership mindset – to provide an integrated consumer journey.

As consumer expectations have shifted, new winners have emerged. Target, Warby Parker, & Domino’s are retailers that top our list.  Meanwhile, some retailers that are just now opening stores are missing the opportunity to build integrated capabilities from a clean foundation.  Many Digitally Native retailers are rapidly opening stores but do not operate “as one” with their digital presence. The customer is not at the center.

Due to their heritage, both digital natives and legacy retailers have executive blind spots that can be barriers to effectively operating an integrated retail model.  McMillanDoolittle research found that only 7% of the leaders of digital natives come from traditional retail functions such as buying or merchandising.  Meanwhile, legacy retailers lack marketing-driven retail expertise, with only 5% coming from marketing and even fewer have technology or analytics expertise.  Both leadership profiles have their advantages – and blind spots. These legacy retailer and digital native executives can learn from each other to develop new models for leadership, customer-centricity, multi-channel shopping, and operations.

McMillanDoolittle forecasts that spending at integrated retailers will nearly double to $.86 of every dollar within five years. It remains to be seen which culture of leadership – and business model – can integrate more quickly to capture this share but doing so will be key to the future success of each.

McMillanDoolittle LLP is a retail consulting firm based in the U.S.A.  Since 1986, our team has helped retailers and suppliers worldwide to successfully navigate and conquer the changing retail marketplace.  There are only winners and losers in retail. Armed with decades of experience, an unparalleled commitment to your team, and play-making insights, McMillanDoolittle helps you win.

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Robots Are Coming To Grocery Fulfillment: Can They Drive Profitability?

As I’ve written several times before, there are multiple reasons why the grocery category is well under-penetrated relative to other e-commerce categories. Multi-temperature products, awkwardly sized and shaped products, product and SKU proliferation, delivery challenges, combined with razor-thin margins have kept e-commerce penetration today to under 3%. However, there are multiple efforts underway to change this, from massive investments in buy online, pickup in-store infrastructure (Walmart), third party, on-demand fulfillment (Instacart) along with a host of new investments in sophisticated robotics and AI from a variety of start-ups and established companies. These efforts are all designed to address the fundamental challenge of reducing costs/increasing efficiency to make grocery e-commerce more profitable, or frankly, profitable at all.

Three new developments in robotics are all working on the profitability equation for grocery e-commerce. Commonsense Robotics, Takeoff Technologies and Kroger/Ocado are approaching this issue from different but equally fascinating angles. All are implementing automation and robotics in different ways, but they are designed to address one of the key fundamental cost challenges—picking groceries. The other, of course, is delivery, which also is seeing advancements through route management, autonomous delivery and naturally, not delivering at all (pick-up).

As Scott DeGraeve, COO and Co-founder of Locai Solutions explains, “Robotics in e-grocery are aimed at making a step function change in labor costs and throughput time. As customer penetration grows, more and more retailers are feeling the effects in their busier stores of the challenges of the in-store pick”.  While the efficient way into e-commerce is through utilizing existing in-store infrastructure, it is not likely the long-term solution.  DeGraeve cites congestion in the aisles, higher out of stocks, and issues with labor productivity as key issues, with “stores designed to sell products, not provide for an efficient 40+ item order pick”.

But, are robots truly the answer? Three notable efforts are designed to address this.

Takeoff Technologies, creator of the world’s first automated micro-fulfillment centers (MFC’s) recently announced a partnership with Wakefern Food Corp., the largest retailer-owned grocery cooperative in the U.S. Takeoff is an eGrocery solution that leverages automation on a hyper-local scale. Orders are placed online through established retailers and Takeoff’s automated technology fulfills the order using robots in the MFC’s. These centers are significantly smaller and less capital intense than full scale solutions, which could allow faster deployment and centers closer to the end consumer. The first such center will open in Clifton, NJ and work with Wakefern’s ShopRite from Home platform. It promises orders of up to 60 items being fulfilled in minutes.

CommonSense Robotics, an Israeli start-up, is also focusing on micro-fulfillment centers. Their twist—the first underground and automated grocery delivery center that will make one-hour deliveries for grocers while utilizing existing space and can also be placed closer to the consumer in denser urban markets. Their new micro-fulfillment center will be in downtown Tel Aviv, located in the parking garage of the city’s oldest skyscraper, Shalom Meir Tower, and will only take up 18,000 square feet of triangular space.

Finally, Kroger’s partnership with Ocado is an example of automated fulfillment centers at scale. Kroger has announced that they plan to build as many as 20 automated grocery warehouses with a capital cost of up to $55 million for the land and equipment. UK based Ocado is clearly a leader in the space and is perhaps the only company (certainly a public one) that has shown grocery e-commerce profitability at scale. Kroger has announced the development of the 355,000 square foot Monroe, Ohio fulfillment center known as “shed” in spring 2021. These centers are also powered by sophisticated technology and advanced robotics and Ocado is perhaps furthest along in streamlining every aspect of the process (order, pick and delivery). The disadvantage of these centers is capital cost, time to build and time to achieve economies of scale.

From in-store pick, dark stores, semi-automated fulfillment, micro fulfillment centers to full scale automated warehouses, the rush is on to figure out a way to lower costs of grocery fulfillment. As always, there will not be a one size fits all solution for the right way to approach the problem. The best retailers will have flexibility in their solutions (urban vs. suburban, delivery vs. pick-up, immediacy vs. scheduled) that ultimately meet consumers, at a profit.

Neil Stern for Forbes

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Walmart And Target Stand Tall During Prime Day

Like most retailers, Prime Day has challenged Walmart and Target over the last five years. But this year, the two heavyweights developed a strong strategy to combat Amazon and executed against it.

Amazon will still have a glass-half-full that goes as follows:

  1. Total sales volume will be up – both for Prime Day(s) and for July. There are 12 extra hours of sales and Amazon spent more advertising dollars to promote the event. The lift for the event will be more significant than the total sales for the month, but an increase is an increase, and growth is nothing to downplay.
  2. Membership will go up. At roughly 60% of US Households, there are still more households that can join the loyalty program.
  3. Amazon’s ad revenue will go up. The pressure is on to promote items. Brands and retailers will spend.
  4. Prime Day Live – the video streaming shopping experience – will be a success. Whether using the influencer model or the tv shopping network model, Live captures the attention of consumers and drives them to key products. This will be a key victory for the retailer, and it will be interesting to see how Live is used in the future.

None of that seems rosy for Target or Walmart.

But there is plenty that will hurt in Amazon’s HQ1. Walmart and Target played an intelligent strategic offense that highlighted Amazon’s shortcomings.

The first move was to message that everyone-is-included. “No membership required” was Target’s move. “Exclusive for Everyone” was Walmart’s.

Secondly, both highlighted same-day delivery or pick-up, emphasizing the fact that their stores are a significant advantage. Target’s deals all screamed “available at the nearest store” or ship-to-store options. Visiting a Walmart or Target to pick-up a purchase often adds a transaction and captures additional share. Same-day home delivery does not compel add-on purchases at Amazon.com.

And finally, the two competitors did not make the mistake of loading their stores with additional promotions. This was probably considered at leadership levels as a way to utilize their store fleet to defend share. But in-store promotions would have minimized the positive impact of compelled store visits and bled margin. There was no panic-planning this year.

Amazon’s short-term win is significant. But Walmart and Target both kept their heads poked Amazon, and highlighted their own strengths. In the long-term, this is a concern for Amazon.

David Weiss for Forbes

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Dining and Retail: Lululemon and Crate & Barrel Join the Trend

Adding foodservice to a retail environment is hardly new. Department stores have married retail and restaurants for well over a century and drugstores routinely had soda fountains. Brands like Ikea have become almost as well known for their meatballs as their dressers and have contemplated having freestanding versions of their restaurants. It now seems to be a trend that has more urgency as retailers scramble with declining traffic and a need to emphasize experience over simply selling product.

The need to create a reason to come and linger is a driver behind some of these collaborations and some brands, like Restoration Hardware and Tommy Bahama have used restaurants as a driver of brand transformation.

Two notable new entrants entered the fray this week. The new Lululemon Flagship store in Chicago covers 20,000 square feet over two levels and features their first restaurant, Fuel, as well as two fitness studios and plenty of space for their expanding product assortments including a broader range for men and personal care products. The Table at Crate is Crate & Barrel’s first effort in the Oakbrook Shopping Center, largely occupying a space once devoted to their Land of Nod children’s brand.

While both are very different in some ways, including menu and focus, they do share a number of similarities:

  • Strong Partners. They are done in collaboration with seasoned partners. Fuel at Lululemon is done in collaboration with Blue Plate, a well-known caterer and event company in Chicago. The Table at Crate is run by executive chef Bill Kim whose Cornerstone Restaurant Group has created well-known spots such as urbanbelly and bellyq. While there are examples of retailers developing their own F&B expertise, it is likely that the right route is to find credible local partners for expertise and authenticity.
  • Brand Consistent. Not surprisingly, a Crate & Barrel restaurant should look and feel very different than one from Lululemon. The Table at Crate features simple, tasty foods with a farm to table focus. The menu offers a relatively limited variety of offers, from salads to tartines and main courses that are designed to be shared. And of course, everything from the tables and chairs to the forks, glasses, and plates are available for purchase within the store. Fuel from Lululemon offers the expected “healthy” fare from smoothies to bowls but also sneaks in a burger here and there to indulge after a workout. While Crate is more of a sit-down (with reservations) affair, Lululemon’s offer is more casual.
  • Integrated. In the end, a restaurant for restaurant’s sake doesn’t accomplish much unless it ultimately leads to longer, more frequent visits and more retail products going out the front door. Both brands can benefit from a reason to come more often and cross purchasing once a customer is there. Lululemon has touch screens on the first floor to encourage ordering and The Table at Crate has outdoor seating that lets the store itself spill out into the mall. Both, I would suspect, will accomplish their goal of driving more overall traffic.

To be clear, this is not a ubiquitous solution. The Table at Crate takes advantage of excess space and a configuration at Westfield that lends itself to built-in traffic. Not all (or even most) Crate’s are similarly situated. For Lululemon, this is their first experience store. Further food offerings, for the most part, would need to be planned as part of what they have planned for more large Flagship locations. Finally, not all brands lend themselves to a lifestyle spin that enables this combination. Yes, I desperately want to have “breakfast” at Tiffany’s (the chain has more restaurants planned after the success of the New York flagship) but I’m not really sure I need to have a dining experience at Café Beyond (yes, Bad Bath & Beyond has a café at their 6th Avenue location).

For now, expect more dining as chains amp up their experiential component. These two are welcome additions to the mix.

Neil Stern for Forbes

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