Retail, shopping & leisure

Is small the next big thing in retail?

The quest for new sites is a big problem for 'category killers'. The traditional answer is to build larger stores in areas where there's lots of underdeveloped space - or build smaller stores in high-density urban areas. However, the former is becoming saturated with big box retail and the latter is problematical due to pressure from environmental groups, small shopkeepers and local councils. One new solution is opening smaller stores in smaller towns. Home Depot (US) has opened new stores in places like Barbourville, West Virginia (Population 2,742) while Wal-Mart is experimenting with fifty Neighbourhood Market stores dubbed 'Small-Marts' (which, amongst other things, use an honour system for their coffee bars to give the stores a hometown feel). Part of the reason for this small box trend is cannibalisation, but it's also to do with consumers getting increasingly turned off by giant stores and shopping malls. In 2000 shoppers in the US spent 4.0 hours per month inside malls but by 2003 this had fallen to 2.9 hours. The explanation for this is primarily speed and convenience. Shoppers no longer have time to take long leisurely walks across football-pitch-sized car parks or walk down endless walkways or big aisles. Shoppers are also growing increasingly tired of long checkout lines, poor sight lines and invisible customer service. Solutions include innovations like oval race-track designs (Kohl's), drive-thru windows (Starbucks) and cashless payment (McDonald's), but it looks increasingly as though micro-stores with limited choice and easy access could be the future. Have we seen this before? Yes. In 1879 Frank Woolworth came up with exactly the same idea.

Pop-up products

The pop-up retail trend, which blends business and conceptual art, has been around for a while. Shops that suddenly appear (and then disappear) like the Meow Mix cat food Café in New York work because they generate buzz and because people these days have short attention spans. The idea also recognises the fact that in retail you can only be hot for so long and is arguably also reaction to high-concept retail (flagships like the Rem Koolhaas Prada stores). So where will pop-up retail go next? One trend that's already emerging is pop-up products. Last year a New York gallery got together with Levi jeans to create a line of denim that was available for just a month. Over in Australia a fruit juice company has created a range of seasonal juices that only appear for a limited time. Back in the US products like Sprite Re-mix and Mountain Dew Pitch Black are possibly the shape of things to come. This is all good news for consumers (who get more choice) but we suspect that people will eventually become bored with this too. Pop-up is already looking more like a fad than a trend and we suspect that the desire for simplicity and convenience will ultimately marginalise pop-up to youth markets like fashion.

Coffee with a twist

Tchibo has come up with an answer to the question “What's the next coffee?' The answer is coffee with a twist. The German company (which has 1,150 stores worldwide) has started selling other products alongside coffee in some of its stores. Nothing new there right? Yes and no. The company has dispensed with conventional wisdom that says that you should focus on core skills and has adopted a philosophy of “a new experience every week'. This means that one week you can buy a ski-suit with your latte, while the following week you might be offered a reflector telescope or an electric pencil sharpener. Personally we'd rather they just stuck to coffee.

Celebrities are the new super models

One of the big retail hits of Christmas 2004 in the UK was a website called Asos.com (formerly known as As Seen on Screen). This pure e-commerce retailer is a combined personal stylist and shopping destination that allows people (mainly women aged 16-35) to copy the look of their favourite celebrity. For example, last year Gwyneth Paltrow was seen wearing a 'Golden Balls' T-shirt given to her by the footballer David Beckham. The website had a batch of identical T-shirts made up within hours and had them on the website and featured in the Sun Newspaper the following day. The website has almost 500,000 registered users and visitors to the site can search by celebrity (e.g. Liz Hurley) as well as by item or category (e.g. sun-glasses). The success of the company is obviously down to blatant copying but this doesn't seem to be a problem because “everyone's doing it'. A case in point is Dooney & Bourke (US) who copied a successful Louis Vuitton handbag and ended up in court as a result. However, the judge dismissed the case on the basis that such copying was sampling or re-mixing.

Not just in Japan

Dynamism.com and Japan-Direct.com are interesting businesses that make money by exploiting the time gap between when high-tech products are launched in Japan and other places like the US. However, the businesses could be a victim of time convergence as the lag time between launches in different countries has closed from 18months to 6 months or less. In some cases the gap has closed completely as companies launch new products on the same day globally while companies like Nintendo have reversed the traditional launch cycle by launching products in the US ahead of Japan or developing products solely for the US market. Why has this happened? One reason is that Western countries like the US have become more Japanese in their thirst for new technological products and will often pay a premium for the very latest gizmo. Another reason is that product development cycles are speeding up and the shelf life of new components (hence innovations) is being compressed. Traditionally release cycles would start in Japan where early adopters would be willing to pay a premium for the newest products and then roll out to more value conscious countries once prices started to drop. But it's not all bad news for gizmo junkies. Some products will always be designed purely for the Japanese market simply because Japan is different to some other countries. Most Japanese live in small apartments and have smaller hand sizes than their Western cousins. This results in miniature products (e.g. tiny keyboards) that do not suit people in other nations.