Store Innovation Watch: September 2018

I will be honest. I have tracked cool stores to visit for years, though never as actively as I have in the last 9 months. And when I started this endeavor in June, to actually publish a curated list of store innovations, and make a commitment to doing so on a monthly basis, I was a little worried. In fact, I was most worried about the end of the year. Will retailers have fewer innovations to share as they approach the holidays and decide to lock down the enterprise in favor of making certain they can meet customer expectations over the holiday season? Will there be a rush in September as retailers push new innovations in advance of a holiday season lockdown? Is there a kind of seasonality to store innovation?

The early answer is "possibly, yes." Where I normally have 7-8 concepts worth discussing and I might whittle that down to six or so, this month I had twelve. Some were better than others, but all interesting in their own right. It was tough to knock it down to six. Nevertheless, here are six store innovations that captured interest in September.

1. What is old is new again: FAO Schwarz

   I did not remember that Toys R Us owned FAO Schwarz. The iconic toy store has been shut down for years, but with Toys R Us's bankruptcy the name was put on the auction block along with anything else that had value, and a company bought it (paywall), with plans to reopen the store later this fall, near Rockefeller Center in New York.This is notable because it is, perhaps, the original "experience store," where you were encouraged to play with the toys and it was all about the customer service that was right there in the aisles. It appears the new owners are returning to that original intent because part of their efforts to reopen the store involve not a hiring drive, but a casting call, where future employees are invited to "audition" for "roles," including dancers to dance on the giant piano keyboard and toy soldiers to walk about the store.

   My question for you and your stores: "employees"? Or "entertainers"? Or something else entirely? When I've posed the challenge for retailers to rethink the role of their store employees, I never imagined quite this much of a rethink. Kudos to FAO Schwarz for thinking "Big" (pun intended).

2. Data-driven Retail Part 1: POPSUGAR x Kohls and Facebook x Macy's

   A two-for-one: two media companies (I agree with Scott Galloway that Facebook is fundamentally a media company), conducting collaborations with two retailers. The very interesting thing about these collaborations is that each media company is providing the data and the recommendations on the fashion trends (in POPSUGAR's case) or even the very brands to carry (in Facebook's case).

   There are a few things to think about here. Retail is supposed to be all about understanding the customer. While it is interesting to think about the slice of customers that a targeted, focused media company like POPSUGAR sees, and what kind of tastes and preferences and trends you might be able to identify out of that slice of data, it's also disconcerting to think that Kohl's is effectively outsourcing its understanding of that slice of customers to another company. That doesn't seem like a good idea. However, on the other hand, and probably a distinct consideration in forming the collaboration in the first place, there is a built in audience available for whatever Kohl's and POPSUGAR decide to sell.

   With Facebook and Macy's, the relationship is a bit different. Facebook has a much larger audience, and presumably is filtering that audience down to characteristics and behaviors that both companies anticipate will make for highly-likely Macy's shoppers. This collaboration is about surfacing small, but highly relevant brands that could potentially do well in Macy's pop-up Market@Macy's, which it is busy rolling out to more and more stores. But again – Macy's is supposed to be an arbiter of brands its customers will think relevant. So, by outsourcing that process of identifying what customers want, is Macy's throwing in the towel? Losing touch with customers?

   It comes back to what you think retail needs to be good at. I would argue that there are two things: identifying its customers, and identifying the products and services its customers need. These two collaborations seem to be handing over those capabilities to other companies entirely.

3. Data-driven Retail Part 2: Good Housekeeping x Amazon x Mall of America

   On its surface, a collaboration between Good Housekeeping, Amazon and Mall of America sounds just like the crossovers noted above. However, this one is indeed different. In the US, Amazon may be compared most directly to Walmart. But when you broaden the horizon, Amazon looks more like Alibaba, the Chinese tech/retail giant that is positioning very heavily as a "platform for retail." An increasing number of Western retailers are signing up to work with Alibaba to enter the Chinese market, whether through Tmall online or through physical "New Retail" models. And the company is very public that its intent, through its tech divisions and its retail properties, is to be platform and infrastructure, rather than direct competitor. In the "retail gold rush" game, Alibaba is more interested in selling the picks and shovels.

   Amazon doesn't compare very favorably to Alibaba when it comes to positioning as the infrastructure of retail. Yes, it has the pieces in place to execute the same strategy, but it has not demonstrated that the company can really be a trusted partner. Even when it's not being accused of suddenly directly competing against best-selling branded products with Amazon private label, the company faces criticism that it does little to police counterfeits among third-party sellers, and of course, that it uses the profits from its Amazon Web Services division to subsidize prices, thus turning the whole retail industry into some kind of loss-leader. If retail was the 1850's gold rush, Amazon would be the strip-mine operation.

   However, the Good Housekeeping collaboration (which they're calling GHLabs) suggests a redeeming value. Amazon sells pretty much everything, and even in its facets for refining product searches, it hasn't really invested a lot. A curator, Amazon is not. So unlike Kohl's and Macy's it's not really giving anything up by having GH tell it what the company thinks should be sold. GH, for its part, is leveraging its own Intellectual Property of ratings and product comparisons, to put together a veritable house full of recommended products, all of which can be sold using Amazon infrastructure – order through an app, by scanning QR codes (Amazon smiles), and have the products shipped to your home. And then put that house full of products in the center of one of the largest shopping malls in the country. Seems like a win all around.

   The question for main street retailers is simple – #2 and #3 in this list both mention retailer-media company collaborations, but one is very different from the other two. Do you follow suit? Can you do it in a way that doesn't give up ownership of customer understanding? Can you do it in a way that highlights your own curation skills, or will you give that over to the media company too? And will that leave you to becoming simply the retail infrastructure that delivers what others come up with? Is that what multi-brand retailers face as their future? I hope not.

4. Not a Store, But Notable Regardless: Choosy

   While I am by no means in the target demographic (half the time I have no idea who the celebrities are in the inspiration pics), I am in love with online retailer Choosy. It is the perfect example of recombinant innovation: it takes celebrity looks that are trending on Instagram, knocks them off in fast-fashion style, and releases them in limited edition drops that are updated every week. You want that Khloe Kardashian look that hit it big with her followers last month? Here it is, just for you. But buy it now – before it's gone.

   How many innovation buzzwords did I fit into the above description? Celebrities. Instagram. Fast-Fashion. Limited Edition. Weekly Drops. Time-delimited.

   I firmly believe the future of retail will be about exploring these kinds of mixing and blending of trends and innovations. Limited Edition has been done. Limited edition, celebrity crossovers – increasingly also "been there, done that." For retailers to keep up, they need to be thinking about how to mix and match these trends in new and unexpected ways, and to ride that success for only as long as it is fresh. There's a reason every retailer under the sun is looking at pop-up retail and considering things like high-turnover marketplace spaces under their roofs. General retail has been commoditized. Differentiation will increasingly come at the edges of retail – at the places where customers live and play, instead of in stores, for example. That doesn't mean that stores are obsolete. But it does mean that you can't win with "just stores" – especially stores that are only designed to "sell stuff."

5. Speaking of Taking Retail to the Consumer: IKEA Space 10

   IKEA's Lab, Space 10, has been busy envisioning the future of the autonomous car, and while there are concepts in there that seem pretty far-fetched, like roving hotel rooms, there are two important things to consider from a retail perspective.

   One, when consumers are being driven around everywhere, instead of driving themselves, that leaves them with a lot of time on their hands. When I'm trying to be provocative, I often throw out questions like "What is your smart refrigerator strategy?" or "What is your driverless car strategy?" The questions aren't meant to be real, as in, a smart refrigerator strategy is somehow essential – especially if you're talking to a fashion company, for example, vs. a grocer. But the idea is that retail can happen anywhere. Back to the concept that it's increasingly more important to bring the store to the customer rather than the customer to the store, if consumers are spending a lot of time entertaining themselves as their cars roll on their own to destinations, retailers really do need to think about how they fit into that environment. Space 10 has some interesting ideas around AR and making use of the car's windshield. Not to mention the question of what a user interface looks like in a driverless car – Tesla's giant touchscreen gives some potential ideas there.

   Two, there is the concept of literally, rolling retail. Space 10 also looked at what that might look like, as in, the rolling produce cart or drug store, or even rolling IKEA showroom. Some of those visions are rapidly becoming reality (or at least, real-life prototypes). And again, become questions that retailers should keep an eye on ("what is my driverless car strategy?"), even if no one really knows the answers today.

6. Really Taking it to the Consumer: North Face's Alps Store

   Yes, the North Face really did open a pop-up shop – literally – at 7,000 ft in the Italian Alps (the images are pretty amazing). Admittedly, it was part of a mountaineering festival with dedicated time to hike to the location, so there was built-in traffic. It wasn't like the company dropped a tent at some random saddleback at altitude. But with the festival over, the company is leaving the tent behind as a mountaineering shelter going forward.

   There are so many things to like about this concept. The gear featured in the shop had a very exclusive bend to it. There is the adventure of having to put some effort into getting to it (can you see a GPS-cache style hunt for your brand's shop?), which has an exclusivity of its own. There is the authenticity of hauling the tent and the merchandise to the location, which demonstrates that the company can get its gear to the kinds of extreme places where it would most likely be used. There is the Instagrammable nature of the location. And then there is the genuine contribution to the mountaineering community, by leaving behind a free shelter for future trips to the location. That's a lot for retailers to chew on in thinking about their own ways to be genuine and authentic in how they engage with their customers.

7. Bonus Innovation: Owning Your Notoriety – The Last Blockbuster Gets a Beer

   There is one Blockbuster left in America. It's in Oregon. It has its own Instagram and Twitter account. And now, it has its own beer. The last Blockbuster is bittersweet for me, in part because it was my first consulting client way back when I worked for PricewaterhouseCoopers doing IT strategy. I don't think it will be quite as bittersweet as "the last Sears" – which will be bitter because of how horrible it has been to watch the iconic brand get sucked dry before our eyes, and sweet because finally, finally, the torment will be over.

   But you have to give props to the last Blockbuster for owning every inch of the notoriety it has achieved by simply being "the last." For every alpha there is an omega. The last Blockbuster is the omega of retail. And for that, it deserves a beer.

Content Note: As we near the end of the year, I'll keep looking for innovations, but I suspect the volume of ideas to talk about will drop off significantly as we get closer to the holidays. If I'm wrong, that's fantastic – more innovations to share. If I'm right, what you'll see over the next 2-3 months will be some analysis. What do the store innovations we've seen so far have in common? What makes them different? Are there distinct differences in the approaches taken in the US vs. Europe? What is the likelihood of those trends continuing into 2019? We hope you'll find that valuable. No matter what, the regularity of fresh concepts will return in the New Year.