This past week we have been in San Francisco looking at retail and talking to some of the people ‘making it happen’ as a part of our annual tour*. Last year we just did NYC and the National Retail Federation’s ‘Big Show’. This year we took it a little further and decided to head to SF as well as Seattle (stay tuned for our top stores of Seattle coming later). We saw some world class retail as well as retailers (and malls) that are quite frankly struggling. To us these are places that have forgotten they’re here to inspire their customer…not just reach into their wallet. So let’s leave the doom and gloom …and in stead focus on whose totally killing it in SF.
Here’s a little list of our favourites…
FY 16 – Sales: $4.85B; Comps: 15.8%; Stores: 974 (now 1,048)
Yes you saw right – an established, bricks and mortar retailer totally killing it! (FYI Ulta have been around since 1990).
There is a huge lesson in this business around the importance of focus. You can attract many people to your business as long as you do one thing and you do it well. The common mistake we all make is we think we can attract more people by offering more things – ‘duh-do’. Ulta is a case in point. A business that, until recently, was offering everything from cigarettes to yoga matts as well as a hair salon in order to grow. With the introduction of a new CEO, Mary Dillon (one of the few Fortune 500 female leaders), there was a renewed focus in the business around beauty and just beauty. To quote the amazing team we spoke to at the SOMA Ulta store they focused and decided ‘To put all things beauty, all in one place’.
That means everything from prestige product like Tarte, Nars, Dermalogica (including their beauty room for facials) through to ‘masstige’ like their private label, Revlon etc. Added to this they have a hair salon and offer services like brows etc. In 2016, services (less Benefit brow bar) was worth $241M…but it’s important to note it’s not about the ‘salon spend’ it’s the fact that a salon customers opened 3x more than non salon guests. There’s another important lesson in that fact. Understanding the role of services in retail to introduce to introduce the customer to more brands…not to just create a new revenue stream.
The stand out element of the whole experiences was the people. I think this is going to become a bigger and bigger topic of conversation – the question – are your staff (from HQ through to store) your customers. When employees live and breath the category they are working in (as well as the business) it makes a world of difference. There’s a level of care and empathy – call it nuance – that can only be learned by loving that industry. Mary Dillon is a customer of the brand and so to were the staff running the store – totally comfortably with any beauty questions thrown at them because they themselves live and breathe this interest.
World’s 3rd Largest Retailer. 2017 Sales: $129B; Q1 Comps: 10.5%; Stores: 741
Another store we were lucky enough to walk with the Costco manager. At 1pm in the afternoon it was going off (as you can see below)…even though, according to the store manager it looked slow. This is another ‘traditional’ retailer who is continuing to thrive. So much so, that one of the craziest rumours (or should we say predictions for 2018) in Silicon Valley right now is that Amazon will buy them.
Some quick facts, customers typically shop for an hour, the store we visited had 100,000 members (pay US$60 – 120 pa…just add up that cashflow), and an average basket of US$132. Aside from the stats, what’s interesting about Costco is it’s culture (again similar to the point made in regards to Ulta). Culture is not something you immediately think about when you think Costco – yeah I mean they have the whole discovery shopping thing down pat (we spotted a Chateau Pavie St Emilion Grande Cru for $329.99 which retailers for about $450) – but believe it or not this company really looks after it’s staff. They understand that satisfaction is tied to productivity. In a nutshell they offer great benefits (full health insurance and dental even for part-timers), great pay (av. Pay is $22 ph versus Walmart $13.38), with opportunity to grow (98% of Store managers rise up through the ranks) and communication between the team. This all adds to a retention rate of 94% for employees who’ve stayed longer than a year. FYI as a quick fact – during the 2008 recession when everyone was cutting staff costs, Costco increased their av. Wages. This is a business who sees culture first and it’s a culture of being ethical…their internal mantra ‘Do the right thing’.
2015 sales: $50m; 2016 est: $100m; Valuation $250m
Labeled ‘J.Crew for Millennials’ (in the good way), this is a mass fashion brand not missing a beat with it’s consumer. They’re clothes are totally en point, they’re ethical and totally transparent. For example, post Christmas they ran a ‘Pay What You Feel’ sale promotion – where customers could see (like they always can) how much an item cost to make. From materials, labour, shipping etc to the final price. They could then choose what they wanted to pay for that item…very Hari Krishna right!
We visited their ‘lab’ in San Fransisco. As a pure play business they opened a couple of ‘labs’ (SF being their first) to experiment with bricks and mortar. No surprises it’s been a success with their first flagship opening in NYC, and SF due to open a permanent location in March. The brand ship to Australia at the moment and their website is worth a look – you can even see which factories their goods are manufactured in, when the factory was started, who owns it and it’s relationship to Everlane. What we love is really this transparent approach and to the point (as we mentioned above) that they educate the customer of what % they take as profit and where your money goes along the clothes creation journey. Very brave and definitely paying off.
Pirate Supply Store:
This is such a beautiful concept. What looks like a kids (or pirates) paradise from the outside and front of store – full of compasses, eye patches, books on famous pirates…and even with the slogan ‘San Francisco’s only independent pirate supply store’ – is actually a not-for-profit at the back dedicated to helping kids get into writing (they also work with schools to support and help build this discipline). The store popped-up for rent and was zoned as retail – so 826 Valencia (co-founder by David Eggers) decided to use the front as part of the experience. A place to ignite everyone’s creativity.
It’s interesting to note that this template (imaginative retail at front and area of run workshops at back) has been repeated again and again by the NFP with outlets in Brooklyn (called Superhero Supply Store), Michigan (Robot Supply Store), and Bostons (Bigfoot Research Institute) to name just a few. We love when retail gives back to the community and also creates spaces to engage with the community.
Apple (Union Square):
Sales per Square Foot US$5,546; Store size: 24,819; which means this store does atleast US$137, 646,174 pa. (aka AU$175M).
Ok, ok, ok it’s hard to go past the new Apple Store in Union Square. It’s not new new but it was the first of the new ‘template’ of more community focused stores they’ve designed and are now rolling our with their architecture firm, Foster + Partners. We don’t know if you’ve seen the news around their Federation Square opening but this flagship focus comes from this store. So why does it work – firstly it’s breaking down the barrier between street and store, the windows (which are huge 42 x 40 ft ) open all the way up and the store’s plants come all the way onto the high street footpath. Secondly, the second floor is dedicated space to ‘hanging out’ and lectures. It features a large screen and lots of chairs. It’s interesting to look at this store because it would have cost a bomb to refit but the level of productivity it gets it’s easy to see that, even through the whole store isn’t covered in product, they would recoup that cost pretty quickly. It’s also great to see brand following a leaders strategy which is to cannibalise yourself (and do it before someone else does).
We had heaps of other favourites, you can check them out on Instagram (@retailoasis) or emailing us at email@example.com to get information on coming along to our ‘Big Breakfast 2018’ in Feb (we’ll be doing on in Sydney and Melbourne). *Finally, if you’re interested in coming along with us next year register your interest by emailing us at firstname.lastname@example.org