It’s an old-school retail strategy, nearly as old as the largest department stores. This is the venus fly trap of impulse purchases, based on the premise that the longer time you spend in the location, the more likely you are to buy something, and to be fair, there is plenty of research to support this conclusion.

Like any trend, it has had its ups and downs and reinventions, but the concept has recently regained traction, albeit with a few notable differences. Younger generations are driving a shift towards a new type of retail space that blurs the distinction between social hangout, job, and marketplace. The now-famous WeWork and other similar concepts have helped form this mindset, resulting in individuals no longer distinguishing between work and life, which means that a store is now seen as excellent a place as any to work, exercise, socialise, dine, or occasionally purchase.

At Clarity, our recent retail disruption report focuses on how retailers are adopting strategies to deal with increasingly difficult operating conditions, and the emergence of destination stores is something we are keenly monitoring. The in-store restaurant was often thought to be little more than an onsite amenity, frequently reserved for the largest chains, but this is changing as smaller businesses, single-location boutiques, and even banks understand the value of a strong F&B offering.

It can be tempting to try and do it all yourself and maintain complete control over the operation like the successful TOMS café stores. TOMS founder Blake Mycoskie originally conceived the cafe-stores as places that would be more than just a retail outlet, with the first one in Venice, California, near his home, offering laid back vibes, yoga, movie nights and craft evenings in addition to sales of shoes, eyeglasses and their own TOMS roasting co. coffee. By keeping close control over the hospitality experience, TOMS can always ensure their food offer properly reflects the brand and its values and the spin-off into cafes has also helped to uncover fresh global revenue streams and a new CSR mission through its coffee bean trade. However some of the more exciting examples of this store crossover come from brands that chose to partner instead of going it alone.

The Sweaty Betty store in Soho perfectly demonstrates the power of well-selected partnerships, delivering an engaging retail concept that incorporates a basement gym, Farm girl cafe and blow dry bar from Duck & Dry. The website description states: “Three floors of fashion, fitness, food and beauty. Shop the collection, let London’s best workout studios put you through your paces, enjoy the infamous avo toast at the Farm Girl café and then treat your hair to a blow-dry at Duck & Dry! You could spend a whole day at No. 1 Carnaby!” In theory the store could be used by someone who never buys a single item of clothing from Sweaty Betty, instead just visiting for yoga classes and a healthy breakfast after their workout. The likelihood of them completely resisting a purchase seems pretty slim though as their dwell time in store increases and they are constantly being exposed to yoga trainers wearing the latest Sweaty Betty must-have items. An interesting thing also starts to happen when you have multiple activities happening in the same place at the same time. A sense of community feeling starts to grow.  The café becomes the glue that binds the experience together ensuring that people stay to chat over lunch or a coffee.. It creates more meaningful brand interactions without feeling too forced. 

Lululemon in Chicago, a fellow lifestyle brand, is perhaps the best in class example of experience driven retail. 

The location, which included classic retail space, a workout center, a meditation area, and a restaurant immediately saw large numbers of visits in the first two weeks of operation. The excellent visitor metrics are important but just as important is the presence of other unique characteristics that can be linked to a more experiential location. As the graphic above shows the new store (green) managed to drive visits in off-hours with major increases in the percentage of visitors in the morning and evening. It also showed a greater ability to drive traffic during weekdays and off-peak shopping days. Yet, most importantly, it demonstrated a capacity to activate trading days earlier and keep them going longer whilst also expanding overall dwell time thereby increasing earning potential when compared to other high performing sites. This difference is massive not just for the extended abilities to drive revenue, but also in deepening the relationship and emotional connection between Lululemon and its customers.

The idea of making the F&B offer feel like a natural part of the shopping experience is essential. It needs to make sense to the customer and feel seamless with the rest of the concept, otherwise it will be impossible for people to forget that they are always being seen as not only a diner, but a retail customer as well and that weakens the emotional draw. Also lets be clear no one wants to eat a watermelon salad in a bathroom store.

Another approach to this collaborative F&B strategy is starting to take hold at the more upscale end of the retail market and is catching the attention of big-name restaurateurs and chefs. They are recognising that the right partnership opportunities don’t carry the same risks as opening their own restaurants and can bring with it access to prime real estate, steady footfalls and increased financing options. 

A good example of this trend in action is the Hicce restaurant at Coal Drops Yard in Kings Cross which finds the new eatery tucked away inside Wolf & Badger, alongside independent fashion, beauty and homeware brands. Wolf & Badger made a name for itself selling items from the most up and coming independent designers, and saw most of its trade coming from online sales but like many retailers has recently branched out into more elevated forms of bricks and mortar retail. The problem was the algorithms were serving up the same old audiences online so reaching a broader customer base would require a different strategy. 

The idea to consolidate their existing smaller stores into a bigger destination experience was formed and the plan included a restaurant space that would be reserved for just the right culinary creative. 

The magic final ingredient appeared in the form of a collaboration between Pip Lacey, former head chef at Michelin-starred Murano, and her long-time friend and business partner, Gordy McIntyre. The restaurant uses Charcoal as a key theme on the menu to align with the original use of the venue and the name hicce means “current, of the moment” in Latin, which compliments the Wolf and Badger ethos well. You could argue that to really match the Wolf and Badger brand heritage a more experimental approach to F&B could have worked well here with independent chefs or food startups making guest appearances in the space, but logistically that would have added many more moving parts to the operation. Ultimately if either the retailer or the F&B provider has a profile that will draw new types of customers to the venue then the opportunity for cross pollination during the experience can be extremely powerful.

Stats definitely back up a desire from shoppers for there to be more places to unwind or just chill.  The indications from recent surveys in the US is that younger generations highly prize the role of physical retail in their lives. It is clear, restaurants, cafes and other types of food outlet in stores can really work now and in the future, but context, brand, and the strategic fit of partnerships all have to be carefully balanced. Retailers can think about offsetting some of their advertising spend to install F&B offers as part of a diversified strategy and food service providers can minimise the economic burden and other risk factors associated with opening new ventures by partnering with retailers. However the bottom line remains the bottom line and square footage always has to be justified so it is important that the projects remain sustainable if they want to be around long term. We are excited to see how this trend continues to grow and what other exciting brand collaborations are on the horizon, watch this [Retail] space as they say.