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Blog / Mar. 27

Store Innovation Watch: March 2019

Nikki Baird

This month, Store Innovation Watch takes a look at retailers who are still very much focused on “flagship” experiences. My colleague Dave Bruno and I debate this one all the time: can flagship experiences make it to Main Street? Or can they only survive in the rarified air of high-rent, high-traffic destinations? With three new high-test experiences arriving on the scene, the jury is still out.

March also saw retailers that are investing in retail at the margins – two completely different interpretations of the idea of capitalizing on a flashy trend by being fast and flexible and willing to partner. We also have one honorable mention for a retail pop-up experience that turned out not to be retail at all.

Finally, we have three “experiences” – two virtual and one in real life, all three focused on creating something memorable, rather than selling products.

Let’s dive in!

Flagships
Three retail brands announced new flagships of note during the month of March.

LUSH, the eco-friendly and natural cosmetics brand has opened a three-level flagship store in Liverpool, UK. One whole floor is dedicated to spa services. The retailer has included several characteristics you’d expect to find in 21st century physical retail. In addition to services, LUSH has a coffee shop and a floral shop – with a brand-reaffirming focus on locally sourced flowers. Trying and sampling is encouraged, and the retailer is looking at how to bring in lessons learned from some of the “naked” stores the company has recently opened – stores that minimize packaging as much as possible. Coverage of the store notes that it is very Instagrammable, though that is not the main intent.

Another cosmetics brand, L’Occitane, has announced a flagship store on 5th Avenue in New York City. The store is branded 555, as in 555 5th Avenue. It offers snacks and drinks, as well as the opportunity to try and sample products that have not yet been brought to market – something unique to this location. It is also a recycling center for empty bottles and packages, and offers an in-store VR experience – this one transports the shopper to a hot air balloon ride over fields of lavender in Provence. You can apparently also get a hand massage while experiencing this, which seems a little strange, but you have to give them points for trying to make it a “fully immersive” experience.

Starbucks has also announced a new Starbucks Reserve Roastery in Tokyo. What makes this location different from the other Roastery locations is the degree to which the brand has embraced local relevancy. The store was designed and built completely by local resources, apparently a first for Starbucks. The first floor is all coffee and an Italian bakery, a first for Starbucks in Japan. The second floor is all tea, with Starbucks’ largest Teavana bar globally. The third floor is a cocktail bar, featuring coffee and tea inspired drinks that are only available at that location. The fourth floor – and this is where things get really interesting – is only a community space, no retail. The company plans to offer coffee roasting certification classes there, but also plans speakers and events. The space is branded the AMU Inspiration Lounge, tapping into the Japanese concept of amu, or knitting together.

Of the three, LUSH and Starbucks have focused the most on presenting global brand elements within a locally relevant context. LUSH’s flagship is in the brand’s home territory, so the location is not exactly outside the company’s comfort zone, but even within that context, LUSH is focusing on elements that highlight important brand elements, like local sustainability.

L’Occitane is trying to lean more heavily on bringing the brand’s home to customers, but even with an emphasis on experiencing Provence, the company is emphasizing experiences unique to the location.

Can these brands take these concepts to a larger audience? How many Roasteries can Starbucks open before the “reserve” nature of the brand loses its specialness? Those are not easy questions to answer – but important ones to test, because while each of these brands have designed concepts that explore new roles for stores, none of these concepts will be coming to the suburbs any time soon.

Retail At The Margins
In some ways, flagships are marginal retail, marginal in the sense that it adds incremental value but is not the main driver of sales. Pop-ups and limited collaborations are also marginal retail. In fact, I have argued in the past that the future of retail opportunity lies more with these marginal opportunities than with growth in mainline stores. In the US, certainly, retail stores are maxed out in real estate and size. If retailers continue to pursue a cookie-cutter approach to stores across markets, then it becomes very difficult to sustain traffic – if you’ve seen one store, you’ve seen them all.

This month, two brands announced activities designed to address the store “sea of sameness.” American Eagle announced a collaboration with Urban Necessities, a sneaker reseller in Soho, New York City – and not just any reseller, but one that can sell collectible sneakers from $150 up to $50,000 per pair. Not exactly for the faint of heart, and not necessarily the kind of products the typical American Eagle customer has the budget to buy. The collaboration involved turning over some of the Soho store space to Urban Necessities to stock as they please.

American Eagle believes that having the opportunity to see once-in-a-lifetime collectible sneakers – even if you can’t afford to buy them – is enough of a draw to get more Gen Z customers into the store, where they will hopefully linger and buy. Coverage implied that this was a way for American Eagle to appeal to Gen Z’s eco-mindedness (because the sneakers are resale). That seems like a stretch, but apparently the concept is working, because American Eagle plans to expand the concept to up to 8 locations.

The second example isn’t necessarily true retail, but it illustrates just how much playing the margin can pay off. It involves the hockey team the Carolina Hurricanes, and a spat with a TV sports announcer in Canada on the CBC. The announcer was covering pre-game time before the Hurricanes took on the Dallas Stars, and mentioned that the Hurricanes are “a bunch of jerks”.

The moment, naturally, went viral among Carolina hockey fans. The Hurricanes social media team had not seen the broadcast as it happened, but someone eventually shared the footage online. The social team jumped in with both feet by changing their Twitter display name to Bunch of Jerks, but it didn’t stop there. The company took the social viral moment, and turned it into a Bunch of Jerks t-shirt with Hurricanes branding – and in 72 hours had sold over 5,000 t-shirts at $32 each, and had them stocked in the stadium by the next home game.

In the August 2018 Store Innovation Watch, we covered a vending machine in San Francisco Airport that had averaged $10,000 per month in $50 puffy vests made by Uniqlo (the puffy vest is the current apparel du jour of the San Francisco VC set). The Bunch of Jerks t-shirt is very similar in concept – the right time, the right place, striking while the iron is hot. It’s not something that a retailer can use to rake in the sales across a thousand locations, or ultimately move 5 digits’ worth of units of product. It’s all about capturing the moment, and having the speed and flexibility to capitalize on it.

There’s one more element to these kinds of moments: having a personality about it. Rather than start name-calling back, the Hurricanes turned the bunch of jerks comment into a moment of team pride, owning the label in the process.

So as a bonus, I have to also give a nod to the Captain Marvel movie promoters, who flawlessly executed this concept, right up until it came time to actually sell product. To be clear – they never intended to sell product, so that’s not a knock against them. A hapless Blockbuster store plays a key role in the beginning of the film, one of the beginning of a stream of tongue-in-cheek 90’s references.

To promote the movie, one publicity stunt opened several fake video stores – straight out of the 90’s (they weren’t able to use the Blockbuster branding, which is a shame) – in a handful of shopping malls. Curious shoppers found themselves moving from browsing videos to being invited on a scavenger hunt in the store that culminated in limited edition Captain Marvel pins. The stores didn’t actually sell any videos, but turned the moment into a viral social campaign for the movie – one fully in keeping with the 90’s authenticity of the movie, and the sense of fun that came with it. I would definitely challenge retailers to see how they can create these moments in any of their stores, anywhere, at any possible time.

Retail Experiences
We’ve already had one mention of VR this month, and it’s hard to talk about experiences in retail without VR playing some kind of a role. Right now, VR is not widespread or easy at home, so it makes sense that retailers can potentially invest in the hardware and use it to offer an experience that you can’t readily access anywhere else. Hot air ballooning over Provence, as L’Occitane offers, is “experiential” in the sense that it can be immersive, and it does play on an important element of the brand promise, but it’s not like you’d go to the L’Occitane store on 5th Ave just for the express purpose of experiencing their VR. For these two brands, though, you would:

Black Box is a VR gym that just opened in San Francisco. It offers VR-gamified workouts assisted by real-life equipment like resistance bands and weights. Customers pay $199/month for an unlimited pass which gives them the ability to reserve a 10 foot square room equipped with an HTC Vive (with special disposable covers and sweatbands) and all the needed workout equipment. The company wants to be able to eventually offer home fitness packages, but it reflects the state of VR – and high-end fitness equipment – that they consider this to be too expensive to offer today.

Nike is offering a 720 Air Max VR store – which is only available to 720 Air Max customers. It doesn’t really sell products. Customers get an invitation to the store on purchase, and have to use their order confirmation number in order to access the VR store. Their purchase price gets converted into store points, which can be redeemed for things like water bottles or socks. The store is hosted by a VR avatar that is a rotating selection of celebrities.

There’s a lot to unpack here. Exclusivity is all over the place – in the invite, and in the products you “buy”, which are exclusive to the VR store. The celebrity avatars are a nice touch as well. The whole store was put together to celebrate the Air Max anniversary, an additional nice touch.

This last experience is about as “in real life” as you can get. LVMH has recently acquired a hotel chain, in addition to some hotels that came along with the Bulgari acquisition. They are taking that expertise and applying it to the first LVMH-branded luxury hotel which will open in London in 2022. There’s not much more to say about it, except that the brand emphasized something that all retailers should be paying attention to: they cited that due to shifting consumer expectations, they need to become experts not just at fashion, but at experiences. They see the hotel business as a way to do that.

A bellwether for all luxury? For all brands? Possibly.