IT'S SWEDISH FOR SHRINKING - Amazon AWS
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
IKEA’s “planning studio”
in central London
INVE NTORY its typical 300,000 square-foot
locations—and better e-commerce
IT’S SWEDISH FOR SHRINKING tools. To that end the company
IKEA is opening smaller stores where shoppers can test drive furniture
recently acquired TaskRabbit, an
and order for delivery. Will it be enough to lure the Amazon and Wayfair
on-demand, smartphone-based service
crowd off their couches? BY MATTHEW HAGUE
that quickly matches customers with
helpers to assemble furniture.
The shift is evident at one of its most
Last summer, when IKEA cut the the increasingly challenging retail recently opened stores in central
ribbon at its latest Canadian outpost, market—with its switch to online London, U.K. Instead of a cavernous
on the edge of Quebec City, more sales, and the millennial migration space with a maze-like layout that
than 4,000 people were lined up out- to the downtown core—has forced wends past just about every piece in the
side to buy new Billy bookcases, IKEA to rethink its reliance on IKEA catalogue, the diminutive,
Malm beds and suspiciously cheap suburban, car-centric markets. so-called “planning studio”—just
meatballs. The store didn’t open until Which is why, in 2017, after profits 17,530 square feet—looks more like a
9 a.m., but the parking lot was full at dropped by 26 per cent—the first such glass-walled Apple store and has a
PHOTOGRAPH BY TERI PENGILLEY/COURTESY OF IKEA
least six hours earlier. Some people dip since 2009—the company shelved tight focus on kitchens and bedrooms.
started camping out the night before, plans for new big-box stores in No items are stocked in-store. Instead,
even though it was pelting rain. Tennessee, North Carolina and shoppers can book one-on-one sessions
Such brand fervour explains how Arizona. Instead, “over the next three with salespeople to find the right
IKEA has become the world’s largest years, we will become more accessible products, then use one of many iPads to
furniture retailer, with global and convenient for our customers with order what they want for home delivery.
revenues of US$44.6 billion last year. new store formats, city locations and a Another planning studio is set to open
That predominance, however, is far better digital offer,” said Tolga Öncü, in downtown Manhattan in 2019, with
from secure, and the scene in retail manager of the IKEA Group. 30 others to launch globally over the
Quebec City might not soon be That means smaller spaces—new next three years. Kristin Newbigging,
repeated. Over the past few years, stores that are one-quarter the size of public relations manager for IKEA
MARCH/APRIL 2019 PIVOT 53
LAST OUT
Canada, will only say the brand doesn’t by 47.7 per cent. Vancouver-based BUYING A COUCH
“have any specific expansion plans to Article, on the other hand, projected FROM YOUR COUCH
share” yet. However, she continues, a doubling of its revenues. (Actuals
Projected growth
“it is still our goal to grow and expand have not been disclosed.)
IKEA in Canada”—so it’s a reasonable A big reason for the success of both
in worldwide online
sales of furniture $306.1B
guess that Canadians will be sampling companies is how they track and target and housewares
(USD)
a mini-IKEA before long.
The question is, can these changes
potential customers using the granular
data that comes from every click,
$281.8B
revive the brand? “I think what they like, share and order online. “We are
are doing is really smart,” says Craig constantly collecting information,” $254.5B
Patterson, editor-in-chief of Retail says Article CEO Aamir Baig. “We are
always looking for insights that will
help us answer our customers’
$225.3B
questions before they even have to ask,
and provide an amazing shopping $196.3B
experience even without physical
stores. I definitely see the future being
this way.” Article makes it easier to buy
furniture sight unseen with simple
exchange and return policies: it will
coordinate pickup of most items with
its delivery partners, while Wayfair will
issue a return label for most purchases,
good for 30 days.
The biggest threat of all, however,
might be Amazon. It’s one of the
world’s savviest data miners, and
Inside IKEA’s central although it only recently launched two
London location
in-house furniture lines manufactured
2020
2022
2021
2019
2018
exclusively for the company—Rivet for
Insider, an online industry magazine. modern pieces, and Stone & Beam for
“A lot of people, including me, don’t more traditional—it’s been aggressive
like going to the suburbs for their as usual. While IKEA, which often
51%
Online sales
shopping. And I don’t see the end of wins customers with affordable prices, growth of the
brick and mortar anytime soon. Retail retails sofas for an average of US$800 industry giants
spaces are valuable for increasing brand (less than Article), Amazon is beating AMAZON
engagement and awareness. People like that by nearly US$500. It’s also offering US$4 Billion
lying on the mattress and feeling the free delivery on its furniture, which 2017 (v. 2016)
pillow before they buy.” Even young IKEA has yet to do.
people. According to a survey done by
American magazine Home Furnishings
News, 63 per cent of millennials’
Bob McMahon, CPA, BDO Canada’s
national retail and consumer business
leader, sees strengths on both sides.
28% IKEA
indoor home furnishing was purchased Amazon, he says, is “the most US$2 Billion
from a bricks-and-mortar store. competitive on price and convenience, 2017 (v. 2016)
Still, online sales are growing fast, both things that shoppers value very
and one major challenge will be highly. That said, consumers still
catching up to the data-mining want choice and brands they know.
capabilities of digital natives like Which gives IKEA some runway to
Wayfair and Canadian upstart Article. test and implement this strategy.”
Both operate in the U.S. and Canada Challenging its old way of doing retail
and are beating IKEA in revenue is critical, he says. “[IKEA] is still the
PHOTOGRAPHS BY ISTOCK
growth. In 2018, IKEA’s global sales biggest in their area, which is a huge
ticked up a respectable five per cent, asset, but they can’t take that for
the majority of which came from its granted. Look at Sears. They were
physical stores, not its website. Wayfair, the biggest, they didn’t innovate, and
on the other hand, saw revenues jump now where are they?” ◆
54 PIVOT MARCH/APRIL 2019 SOURCES: STATISTA DIGITAL MARKET OUTLOOK; REUTERS; ONE CLICK RETAIL
LAST OUT
E X T R AO R D I N A R Y I T E M S by as much as 50 per cent, according to
management consulting firm Kantar.
DOLLAR DAZE But it’s highly competitive and
increasingly international. Canada’s
Is novelty enough to lure
largest homegrown dollar store,
shoppers from Canadian
Dollarama, plans to open 60 to 70
bargain giants to a stylish new
stores per year, to take their count
Japanese-inspired discount
from 1,203 today to 1,700 by 2027.
store? BY MATTHEW HAGUE
At the same time, China-based Miniso
plans to expand its 50 Canadian
Oomomo, a Tokyo-style dollar store locations to 500 stores in the coming
named after the Japanese word for years, and U.S.-based Dollar Tree is
big peach, looks anything but cheap. considering quadrupling its 220
Its most recent outpost, in Toronto’s locations to close to 1,000.
Don Mills neighbourhood, is an airy, That makes Oomomo, which wants
sun-lit space dotted with blond-wood to expand to 30 stores by 2022, seem
display shelves. J-pop beats fill the almost timid. But it’s bucking the
bustling store as clusters of students conventional approach of opening as
and young families peruse each many shops as possible and using
department—crafts, toiletries, snacks, that scale to keep prices low and drive
housewares—hunting as much for market share. Instead, it’s carving
novelties as for discounts. The wares out a specific niche. It wants to be a
themselves—pastel-coloured ceramics destination discount store, appealing
(tea sets, decorative bowls), Asian to consumers with its stable of
snacks (like Pejoy, which are inverse Japanese items that aren’t available
Pocky sticks with chocolate on the anywhere else.
inside), and a wide array of crafting That could be its secret weapon.
supplies (erasers shaped like sushi)— “Culturally, Canadians are very
are a step up from what you’d find at accepting of diverse brands from
an ordinary dollar store. around the world,” says Daniel Baer,
But “dollar store” is a bit of a an FCPA and partner at EY who
misnomer. Oomomo’s average price specializes in retail. “And when a
per item is closer to three dollars, retailer can focus in on a specific
since 90 per cent of the products are marketplace and specific
imported from Japan, where demographics, with specific products,
manufacturing is more expensive than it can do very well.” The go-slow
in China. Some items cost as much as approach may help, too, he adds:
$15. This has retail watchers wondering “It’s always good when a retailer takes
whether this Vancouver-based chain, the time to make the best decisions.
which launched in the summer of We’ve seen a lot of high-profile
2017 and already has five Canadian entrants and expansions over the
outlets—it also has two in Edmonton past few years. But not all of them
and two more in B.C.’s Lower have been successful.”
Mainland—will survive in Canada’s Because Oomomo is privately owned,
increasingly crowded discount market. there are no financials available. There
Low-cost shopping is big business. are, however, other indicators that
Between 2012 and 2017, sales at stores consumers are buying. When the
such as Giant Tiger and A Buck or Toronto store opened in December
Two grew at twice the national 2018, there were long lines snaking out
average. Through 2022, that growth the door—not something you’d see at
will continue to outpace other retailers a typical dollar store opening. ◆
46 PIVOT MAY/JUNE 2019
BIG IN
JAPAN
Here’s what
they’re lining up
for at Oomomo
It’s hard to make
tofu exciting for
kids, but the Tofu
Decostamp allows
young ones to
stamp cute faces
into their soy
protein before
it’s tossed into
a stir-fry. $3 for
four stamps.
Sakura ceramics
are painted with
delicate cherry
blossoms—perfect
for serving
Japanese green-tea
cookies and other
little confections.
$1 to $5 each.
Oomomo’s line of
beauty products
includes $1 DIY face
masks with aloe,
rice or rose
extracts, and $5
“hair mascara”
wands that give
locks streaks of
temporary colour.
The snack options
are truly special,
including matcha-
flavoured Kit Kats
for $2 and Striking
Popping candy (50
cents per pack)—
mouth-puckeringly
sour confections
that, like Pop Rocks,
sizzle when they
touch your tongue.
PHOTOGRAPHS BY KAYLA ROCCA MAY/JUNE 2019 PIVOT 47
LAST OUT
INVE NTORY
WHAT’S IN
STORE FOR
BRICKS AND
MORTAR?
More and more brands are
treating their retail locations
as places to experience products,
not just purchase them.
And, so far, it’s driving sales.
BY COURTNEY SHEA
At first glance, Lululemon’s new
20,000-square-foot, three-floor flag-
ship store in Chicago’s trendy Lincoln
Park neighbourhood looks pretty
familiar: racks of rainbow-coloured
yoga pants, hoodies and sports bras as The cold room at
far as the eye can see. Up the escalator, Canada Goose’s
Montreal store
though, are a few things you might not
expect: the brand’s first restaurant,
Fuel, a serene eatery that looks like winter, Canada Goose turned change Experiential retail is the surprising
Gwyneth Paltrow’s living room; a rooms at several of its major retail next chapter in the story of bricks and
meditation studio outfitted with bean- locations—including Montreal, mortar. The millennial desire for
bag chairs; and two workout spaces— New York and Beijing—into “cold instant gratification was easily fulfilled
one for yoga, one for high-intensity rooms,” winter wonderlands where by clicking “buy” on a smartphone, but
fitness. Forgot your workout gear? customers can put the brand’s with Gen Z (between the ages of seven
Not a problem. Visitors can borrow a “warmest parka on the planet” claim and 22 and making up a quarter of the
set of Lulus and return them when to the test at -33° C. And Mountain global population), the pendulum has
they’re finished. Handing back a pair Equipment Co-op’s new flagship swung back. “This demographic is
of sweaty stretch pants seems like a location in downtown Toronto features looking to form relationships with
notable transgression of the old “you an in-store climbing wall where brands they spend their money on,”
try it, you buy it” business model. But experts and would-be adventurers Patterson says. And if those experiences
these days, giving customers the chance can experiment with equipment. happen to be Instagrammable—the
to experience a product before purchase Seeing brands invest heavily in Canada Goose cold rooms turned into
has emerged as a strategy for driving physical locations seems, at first last winter’s hottest selfie location—all
sales, both in-store and online, and glance, out of step with broader the better. “With big box retail, it was
building all-important brand loyalty. industry trends. Thanks to the online about getting in and getting out,” says
According to retail analytics firm retail revolution, experts have long Ryan Dostie, CPA and head of the retail
Brightpearl, up to a quarter of retailers predicted that physical retail would go and service group at Welch LLP.
are planning to implement some form the way of the rotary phone. For the “Today, younger consumers know they
of “try before you buy.” Many have most part, they were right: last year can do that online, so with retail they
PHOTOGRAPH COURTESY OF CANADA GOOSE
already started. At the Dyson demo smashed 2017’s previous record for want an experience.”
store in Toronto’s Yorkdale Mall, you retail closures in the U.S. with brands According to Lululemon’s growth
can scatter Cheerios on the floor and like The Gap, Victoria’s Secret, Payless plan, the Chicago store is part of the
then clean up the mess with their and Tesla announcing significant “omni guest experience” strategy—a
vacuums. (You can also book an closings. “We used to hear all the time, buzzy retail term that describes how
appointment for a free blowout with ‘physical retail is dead,’ ” says Craig contemporary brands are using
their Supersonic—because if you’re Patterson, editor in chief of Retail e-commerce to leverage in-store
going to drop $500 on a hair dryer, Insider. “But what we’re seeing now is visits and vice versa. The company’s
you want to be sure it’s worth it.) Last it’s not dead, it’s just different.” ultimate goal is to enhance customer
48 PIVOT NOVEMBER/DECEMBER 2019
LAST OUT
says Patterson. “But a lot of companies
are finding that it’s worth it.”
At bricks-and-mortar locations,
providing an opportunity to test drive
means returns are a lot less likely.
“If you’re in a Nike store and you’re
actually trying running shoes on a
basketball court, you’re a lot less
likely to want to return them,” says
Dostie. “That can lead to a significant
cost savings.” Perhaps that’s why
another study, conducted in 2018 by
CPA Canada, found that despite the
December rush, shoppers planned to
spend 46 per cent of their holiday
shopping budgets in-store.
Kate White, a professor of marketing
Yoga class at and behavioural science at the Sauder
a Lululemon School of Business at the University of
in Chicago
British Columbia, explains that there is
an added psychological component to
“WE USED TO try-before-you-buy. “Whether you’re
letting customers try your product in
HEAR ALL THE the comfort of their own home or
TIME, ‘PHYSICAL in-store, the point is you’re getting your
product in front of them,” says White,
RETAIL IS DEAD.’ who consulted on Lululemon’s Lincoln
Park project. It’s the endowment effect
BUT IT’S NOT at play—a phenomenon wherein we
Dyson’s demo store DEAD. IT’S JUST assign greater value to the things we
own or have a chance to interact with,
offers free blowouts
DIFFERENT.” compared with identical products that
we don’t have that attachment to.
engagement, in part to double digital customers are encouraged to not just Translation: you’ll want that sweaty
traffic by 2023. “It’s almost like a hybrid try out the mattresses, but take a nap. pair of post-workout yoga pants more
marketing and retail play,” says That makes sense, given that statistics than a pair with the tags still on. ◆
Patterson. “Yes, they’re happy to sell from NPD Group show 55 per cent
you a pair of yoga pants, but the larger of shoppers see the opportunity
focus is engaging with core customers to touch and try merchandise as the Companies With Purpose
PHOTOGRAPHS: YOGA COURTESY OF LULULEMON; BLOWOUT COURTESY OF DYSON
and potential new customers.” No. 1 reason to visit a retail location.
It’s a strategy with sound numbers Meanwhile, 65 per cent of Gen Z
SIGHT FOR
behind it. A 2018 report from the shoppers say they prefer feeling SORE EYES
International Council of Shopping something before buying it.
Centres, a group that represents malls, These stats also explain why Since it was founded in 2010,
reveals that opening a physical e-commerce sites are getting in on the the American eyewear company
Warby Parker has built a reputa-
location leads to a 27 per cent hike in try-before-you-buy trend. The tion for giving back. For every
web traffic for established brands. Canadian clothing brand Frank and pair of glasses it sells, it ensures
For digital brands opening their first Oak offers a subscription service. another pair finds its way to one
of the 2.5 billion people in the
brick-and-mortar store, the spike Customers pay a $25 “styling fee,” world who need glasses but can’t
(37 per cent) is even more dramatic. receive a monthly delivery of multiple access or afford them. Through
One such venture, the Canadian wardrobe pieces and keep (and pay for) partners in more than 50 countries,
mattress company Endy, opened the only the items they want. The eyewear the business donates pairs
directly to schoolchildren and
Endy Lodge in Toronto earlier this company Warby Parker ships multiple trains social entrepreneurs to
year after launching as a digital-only frames to customers before they have to conduct basic eye exams and sell
brand in 2015. The pop-up location make a commitment. “There is a cost glasses to their communities at
affordable prices.
has a cozy Canadiana cabin vibe, and associated with the shipping involved,”
50 PIVOT NOVEMBER/DECEMBER 2019
You can also read
