December 2, 2014
Retailing to win: Stores become local hangouts
From their beginnings, businesses as diverse as the local barbershop and retail giants such as Apple and Starbucks have succeeded by becoming a third place outside of home and work for consumers to pass the hours. The success of various third place destinations, no doubt, has influenced others to share a similar goal, if not necessarily following the same path.
A recent piece by Crain’s Chicago Business points to Shinola, TOMS and Warby Parker as a new generation of retail brands looking to fill a third place space for their customers.
Shinola, which is looking to build a business with items, most notably watches, made in the U.S., has focused on workshops and tasting events to attract consumers to its flagship store in Detroit as well as others in London, Los Angeles, Minneapolis, New York and Washington, D.C. The company plans to open another new store in Chicago this month.
TOMS, which has attracted good deed-doers to its brand with its buy-one, give-one sales model, is looking to bring together like-minded individuals for extended periods of time with its own in-store café offering free Wi-Fi.
Warby Parker owes much of its success to a combination of low prices and great service. The eyewear company, which was founded in 2010, offers itself as an alternative to industry giant Luxottica, which owns and licenses eyewear brands such as Oakley, Ray-Ban and others as well as retail outlets including LensCrafters, Sunglass Hut, Pearle Vision, etc.
"The technology behind a pair of glasses is 800 years old," Warby Parker co-CEO Dave Gilboa told USA Today. "And it’s kind of crazy you can buy a new iPhone for less than it costs to buy a pair of glasses."
Warby Parker, which also operates a buy-one, give-one business model, has a professional photo studio at its new location on the site of a former American Apparel store in Chicago’s Lincoln Park. Customers can shop for new frames and also get a free professional portrait to share with family and friends. They can also hang out and watch a VHS tape of classic holiday movies in the store.
- Warby Parker To Open Lincoln Park Shop With Portrait Studio – DNAinfo
- Please don’t call them stores: modern retailers aim to be hangouts – Crain’s Chicago Business
- Warby Parker: A visionary approach to selling eyewear – USA Today
- First look: Warby Parker’s San Francisco flagship – SFGate
- Why Open a Watch Factory in Detroit – Shinola
- About TOMS – TOMS
- History – Warby Parker
- Luxottica
Discussion Questions
What are the keys to becoming a third place retail space? Are particular types of retailers more suited for third place status or is it something that most can pursue?
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Surf shops and coffee shops have been third places forever. I don’t really get the Warby Parker third place or some of the others.
I think the challenge would be creating a third place for customers or, like the McDonald’s and some others in Brooklyn, it could become a third place for old guys who frequently bring in their own food and drink, just a safe place for non-customers to gather.
I admit I am the wrong type of consumer to respond to this article. I don’t want to hang around stores, even ones I like.
I want to get in, find what I want (assuming they have it), buy it, and get out. I will add that if the stores that I shop in are successful in being a third place with people hanging around I will find another place to do my shopping.
OK, rant is over.
I haven’t thought of this for a very long time though I remember it like yesterday. 30 years ago a hair styling studio was a client of mine. I noticed that every school day around 4 in the afternoon a little girl came into the shop all by herself and just sat there looking at magazines for at least an hour if not two. The story, according to my client, was that she didn’t want to go home and, in fact, they were trying to see what they could do to help the child and perhaps the family.
I use that somewhat dramatic story to ask this question: Why do people need a third place to “pass away the hours?” What is that saying about our world? About our lives? We all know that Starbucks is the cheapest office space in town averaging around a dollar for an hour of office time, but is that what this is all about?
If more and more retailers are looking to compete for the hangout market they must be doing it for socially compassionate reasons. If I’m wrong, I’d sure like to see the data on how this is a business/profit strategy. Admittedly, a store that looks full of people is a lot more appealing than an empty one and perhaps that’s the primary motivator. But are these full third place destinations pointing to first person emptiness?
First and foremost you need space. An obvious necessity, but square footage costs money. The business model needs to account for that space. It seems the home improvement stores would be a good location to provide recharging stations for contractors and construction professionals. Their “office” is their mobile phone and there seems to be an opportunity around this reality. Perhaps a better investment than a robot that greets at the door?!
Another opportunity for retailers and brands is the growth of communal work spaces for the self-employed entrepreneurs. Couldn’t select brands leverage these locations as retail outlets? Any opportunity to create a space for personal interaction and creating a community is valuable for shoppers and brands alike.
This is an interesting question, timing-wise, as I’m in the process of putting together a list of stores to visit in New York for some European retailers. Their request: Find stores that are using technology innovatively, or find retail business models that are new and different. In my search, I found myself most attracted to retailers that are either creating a dynamic store environment (Story comes to mind), or are investing in the third space concept. For example, Urban Outfitters has a store in Brooklyn with a rooftop bar.
I think the questions about what kind of third space and who do you expect to hang out there are very valid questions. But I think that the answer is to try to shoot for a third space that fits well with the brand and the target customer, and not just some kind of generic hang-out location. Whole Foods’ hangout is a cafe. And they invest in cooking school space as well. That makes sense because these things are extensions of Whole Foods’ brand as a gourmet, healthy food retailer.
Tommy Bahama has been opening restaurants right and left and they’re wildly popular, apparently. But honestly even with their success, and even hearing the story of how that brand extension came about, it still feels tacked on to me and not an integral part of their brand experience.
If the strategy is to enable experiences that are directly related to the brand, then yeah, go for it. If your strategy is, “Hey, people who stay longer spend more,” then you’re in it for the wrong reason.
Nikki’s commentary prompts this additional thought.
A brilliant businessman, and current president of High Point University in North Carolina, by the name of Nido Qubein taught me a key phrase as I sought to diversify my work. The phrase was “Intentional Congruence.” As Nikki wisely put it, “tacking on” activities and initiatives merely because it’s trendy or has the possibility to make some money will come back to haunt you. And, yes, you are in it for the wrong reason.
Qubein’s advice was for me to expand in creative ways if I wished but to be sure I was being intentionally congruent with my core purpose and calling.
Mariano’s in Chicagoland, enough said.
Eat, drink, be merry, all while spending time shopping, sitting at the wine bar, maybe the oyster bar and getting to know your neighbors all the while spending an evening at the local hangout.
It’s catching on like wildfire here. I personally spend hours at the local West Loop Mariano’s in Chicago. But it’s not just “my” store, it’s all of the Mariano’s in Chicagoland. People come to not only shop, but to hang out and enjoy the atmosphere.
Why? Customer service is excellent, stores are modern, the atmosphere is vibrant with paging/background music, managers are constantly on the sales floor to help, there are enough cash registers open, there is fresh prepared quality foods, there is excellent interior design, beer and wine can be sipped while shopping, there’s an excellent sushi bar and oyster bar, excellent pricing … The list goes on and on.
Thanks Bob!
A couple of thoughts come to mind.
The more you give, the more you get. Create a space, or incorporate into your business model, a place for customers to just hang out—no strings attached. Starbucks encourages people to use their stores as a place to hold a meeting, get work done, etc. Free Wi-Fi promotes the concept. Book stores encourage customers to come in, find a book and read it there. At some point, the law of reciprocity takes over and customers return the favor by making a purchase.
The other thought that comes to mind is from the Cheers TV show jingle, “Where everybody knows your name.” That’s the barber shop mentioned in the article above. When employees recognize a customer and use their name, it creates a stronger bond.
Obviously, not all businesses are suited for a “third place” model. Yet there are some unlikely candidates that should probably be considered. Car dealerships come to mind. I can see my car dealership encouraging me to stop by for a cup of coffee or a soft drink, while I wait for my car to be washed (free because I bought the car there), while sitting in their waiting room with TV’s and Wi-Fi.
Fun, comfort, escape or almost any other need not totally connected to our faith-values can be a reason for a third place retail space.
This is something that most can pursue. But it will be the innovators who will initiate the next retail space, which will be based on contemporary style, not necessarily sincerity.
One of the key insights that will largely contribute to value-added selling is that consumers are often forced to buy what they do not know. Collecting the necessary ingredients for a win-win transaction always includes market awareness. Market awareness is a focus for the retailer and not a single entity or topic. Large purchases like transportation, real estate and extended travel are well-known blind investments where the consumer looks to be made fully aware of all important issues and needs to insure success by a single agent or supplier.
Additionally, enhancements and upgrades in any and all aspects of the deal are only considered and approved if the value is understood as a reasonable and/or accommodating investment. Companies willing to explore more of the value-added sales process will find the means to increase market share and profit levels with remarkable ease and at the same time claim ownership to an improved level of market esteem also known as differentiation. A case in point is Starbucks making the one dollar cup of coffee market aware of, interested in and now standing in line for the ten dollar bigger and better latte of the day. People respond best when they feel welcome and informed.
So this is not a new idea. Just an idea that we got almost tragically led away from in our enthusiasm to fuel stock prices through growth. And I’m not talking about Howard Schultz’s Third Place statements. An author named Ray Oldenburg put out a book in ’89 called “The Great Good Place” that I would suggest anyone involved in retail read, especially now.
In that book, Oldenburg talks about the importance of cafes, bookstores, coffee shops, parks and other hangouts that form the “heart of a community.” He describes how these places are essential to human connection and well being. Super relevant, check it out.
It’s great that Warby and the likes are getting retail back on track. And I believe they’ll be rewarded for taking the lead. But to Oldenburg’s point, it is something we should never have gotten away from. Lesson learned!
Great to see the words “flagship” and “Detroit” strung together as something other than a joke. But back on topic, yes, of course “particular types of retailers are more suited” than others…namely coffee shops/restaurants, book/music stores, and all others where “third place” is a DIY experience, not a carefully orchestrated marketing effort. Not that there’s anything wrong with that, mind you…we should all welcome a return to creativity in retailing.
When done right, the third-place or hangout can create a powerful connection between retailer and customer. As Lee Peterson mentions in his comments, it didn’t start with Starbucks and it’s a shame that it became such a rarity.
One of the great examples I think of is the soda fountain and cafe counters in the pharmacies of the past. The forging of community and place-based experiences and memories provide deep bonds and loyalty.
I think the types of retailers and spaces that work will depend on the lifestyles and needs that are served by the very notion of hanging out. Some spaces may work better for business professionals, while others cater to families, teens, singles, etc.
Also, while some innovative retailers are becoming curators with rotating brands and products, they might create value by curating experiences, content and community events.
One of the keys to becoming a “third place” is putting your consumers’ needs first and using the data they share with you to generate relevant experiences they value.
For instance, we recently conducted a U.S. consumer survey that showed that 84% of millennials (age 18-29) said that being able to redeem rewards/loyalty program points for a session or consultation with a chef or nutritionist would motivate them to shop more with a grocer offering such an opportunity. A session like this clearly is a significant time investment on the part of the consumer that would be spent in a grocer’s retail space and these results are not just limited to grocery.
In fact, 79% of LoyaltyOne survey respondents said a session with a stylist as a loyalty program benefit would entice them to shop more at a clothing store offering the session; 77% said a session with a technician or software expert would spur them to shop more at an electronics dealer; 68% said a session with a makeup artist would prompt them to shop more with a cosmetics retailer, and 69% said a session with a plumber or electrician would motivate them to shop more with a home improvement or renovation store.
Using consumer insights like these to determine what your customers would find useful and relevant is an important step to becoming a third retail space where your best customers would opt to spend their time.”
I really like what Warby Parker does—buying eyewear can be boring and when you go into a Warby Parker, it’s a lot of fun and people linger for a while. The have also done some social events, which are really fun and customers really appreciate that. I think the millennials are a driving force for the advent of this type of shopping—not a bad thing.
Gosh, “The Experience Economy” was published 17 years ago. As more retail commerce shifts online, as e-commerce destroys certain business categories (bookstores, office supplies, etc.) that function at the sub-big box scale, retail (as opposed to restauranting-eatertainment) will have to reorganize to continue to attract customers.
For example, with Warby Parker, I only buy glasses every 3-4-5 years. Other things might get people to come into the store more often, and to consider glasses more as a discretionary, fashion-oriented purchase and therefore more frequently, than those of us who see glasses as a kind of commodity from the standpoint of fashion.
In Savannah a couple years ago, I was impressed that the Modern General Store had an espresso counter in the back, and the Paris Fashion store (was that its name?), also had a coffee bar.
We drink coffee every day, we buy housewares or apparel much less frequently.
I would say business models like TOMS probably have a pretty low ceiling. There are only so many consumers motivated by the “doing good” element influencing their choice of purchase.
Gonna pile on with “omnisuperstore” regarding Mariano’s. Thats my Chicago office. With Hy-Vee’s, HEB Central Market, and Whole Foods adding full service bars with TVs, good eats, and WiFi, what more can you ask for? Target, Safeway and a few others have put in a Starbucks—snore. These days you need more than just a coffee shop, you need a real reason to want to hang out.