[폴인인사이트] Starbucks without tables, a mart that has become a distribution center… Common sense in offline stores is overturned

※ This story Part of 〈Offline Business, Imagination Changes the Future〉is. It is recommended to read the previous information on the Pollin website first.

Protagonists such as’Toy Story’,’Thor’, and’Star Wars’ come to the Earth’s Wal-Mart to pick up items from outer space. What Wal-Mart emphasized through advertising is’Click and collect (pick up after ordering online)‘ Although online commerce is growing at a rapid pace, Wal-Mart is not online commerce, but is a link between online commerce and offline stores. Omni channelIt means that we aim for (Omni-channel).

Omnichannel is different from multi-channel, simply increasing your online sales channels. Multi-channel is a distribution method that increases sales contact by diversifying sales outlets. Since sales are priority, we do not consider the connectivity between channels. On the other hand, omni-channel is a concept that expands customer contact points and increases customer convenience by linking various distribution channels into one. From the customer’s point of view, we design distribution channels around the customer. So, unlike multi-channel, omni-channel enables a customer experience such as purchasing online and picking up at offline stores, or returning products purchased at point A at point B.

In this way, offline competitiveness is revived. Of course, offline retail without its own online commerce also has strengths. You can buy it right on the spot, you can see the product, and you have the pleasure of shopping. But in the confrontation with online commerce, online commerce actually won the decision. It seems difficult to overturn the market trend in terms of strengths versus strengths, but with the establishment of an omni channel, the strength of offline retail turns into a distinction that online commerce companies do not.

If omni-channel is the starting point for overturning common sense and driving change in offline business, what is the change made possible by omni-channel?

A store is a’place to sell things’. In Chinese characters, we use’palmae’ and’madangjang’. In the meantime, offline stores have lived up to this purpose. It served as a place to buy things. However, as online commerce infiltrated daily life, offline stores have turned into places that are not faithful to their name value. Because people bought things from online commerce. Offline stores such as Wal-Mart, Target, and Best Buy, which were struggling with online commerce companies, are changing their posture. ‘It was given the role of a delivery base by focusing on’the place to put the goods’, not the place where the goods are sold.

After upgrading to omni-channel, the role of the store is changed, which increases shipping competitiveness. This is because when an online order comes in, it is delivered from the store closest to the orderer, not from a distant distribution center. For reference, Wal-Mart has 90% of the population living within 10 miles (about 16 km) of offline stores, targets 75%, and Best Buy more than 70%. So, if you provide a delivery service in a store, you can deliver same-day delivery, which is difficult even for Amazon. For target, 95% of online orders were handled by each offline store on behalf of the distribution center.

The opposite way is also possible. Rather than delivering from an offline store, customers who ordered online come to the store to pick up the item. It’s called Click and Collect or Buy Online Pick-up In Store (BOPIS). It is standard to set up a pickup zone in offline stores, and some stores have kiosks for 24-hour pickup. In particular, after Corona 19,’curveside pickup’ has become common. Curveside Pickup is a service where the customer pulls over to the parking lot without having to enter the store and the staff picks up the item by car.

Not only that. Offline stores are starting to play a role in supplementing another weakness in online commerce. One of the disappointing things about online commerce is that you can’t see the real thing when you buy something. That’s why they often return after purchasing because they don’t like it. The online commerce return rate is around 25-30%, which is three times higher than that of offline stores. The problem is that the product to be returned needs to be packaged, and the need to apply for delivery service is subtly annoying to return.

Offline stores have entered this gap. A return corner is set up in the offline store, and customers who come to return can naturally flow into the store. To this end, we sometimes go beyond an omni-channel approach and join hands with competitors. Kohl’s, a mid-priced US department store, works with Amazon to accept returns for items ordered from Amazon. In the experimental Chicago store, the sales growth rate was 10% and the inflow rate of new customers was 9%, two and nine times higher than the US-wide average, respectively. As a result, Amazon expanded its return service to stores nationwide.

As such, the offline store has changed as it is organically linked with online commerce. We reduced the proportion of product display space in the store by using the back of the store as a distribution center, arranging a pickup or return corner at the entrance, or increasing the area of ​​the parking lot instead of the store. It put down the function of sales, which had been focused so far, and reinforced its role as a field to accumulate, store, and deliver items so that they can coexist with online commerce. The offline change doesn’t stop there. Another direction of experimental evolution is also taking place.

‘Starbucks’, which was said to sell space, not coffee, has changed. It opened a store that only sells coffee, not a space. After opening the first store of’Starbucks Pickup’, a pickup-only store in New York in November 2019, we plan to open about 300 pickup-only stores in New York, Chicago, and San Francisco by the end of 2022. Starbucks Pickup is a store that doesn’t have tables and chairs, and you can’t even order on-site. A model focused solely on ordering and picking up drinks via the mobile app. In the store, only the function of’hawk’ was utilized and the role of’jang’ was put down.

The advantages are obvious. The elimination of seats and counters reduces the size of the store by half compared to regular Starbucks stores. You can lower the initial interior cost and rent. It can also reduce labor costs. This is because it is possible to operate a store without staff to receive orders and staff to organize the store. It is a structure in which profitability can only increase on the premise that there is demand. So, is Starbucks giving up its own definition and management philosophy of selling’third space’ and coffee drinking experience?

Still, Starbucks values ​​space and experience. However, it is a quick response to changes in customer consumption patterns and market conditions. Before Corona 19, about 80% of customers in the U.S. were already placing take-out orders via mobile, and Corona 19 made this more common. That is why the original plan to slowly expand the pickup-only store was advanced by 3 to 5 years. Instead, we plan to expand’Starbucks Reserve Roastery’, which is an average of more than 1,600m2, and’Starbucks Reserve’, which is a premium store, to be faithful to the identity of pandas in space and experience. This means that we will reduce intermittent stores by reflecting customer needs and market conditions, and divide them into large stores focusing on space and experience and small stores focusing on needs and convenience.

Not just Starbucks. The fast food industry is also beginning to experiment with pickup-only stores. The most active is Chipotle, famous for its Mexican fast food. In November 2020, Chipolet launched the’Digital Kitchen’ in New York State. This is a store that specializes in pickup and delivery only. Thanks to the elimination of seats, the digital kitchen is 1/2 to 1/4 of the standard Chipolei stores. It looks similar to the shared kitchen, Ghost Kitchen, but with differences.

Ghost kitchens are only accessible to delivery drivers, while digital kitchens can be picked up by customers. Also, unlike Ghost Kitchen, which has only kitchen facilities and no branding, the Digital Kitchen has a lobby where customers can experience Chipolet’s food smell or the sound of cooking. In addition, the hassle was reduced by separating the customer entrance and delivery driver entrance. It is a model that can be operated at a high cost performance without compromising Chipole’s brand experience. Like Starbucks, it is a possible attempt because it has read changes in customer consumption patterns.

Similar attempts are taking place in offline retail. In 2019, Wal-Mart opened’Wal-Mart Pickup Point’, a store dedicated to Curveside pickups in Illinois. Customers are not allowed to enter this store. It’s a way to order online or via a mobile app, pull over to the parking lot, and the staff brings it to you. This is a model for customers who want to quickly and conveniently buy the items they want, not those who seek pleasure while shopping at the mart. As the customer utility is clear, the store’s advantage is clear. There is no need to consider product display or customer experience, so the store can be operated efficiently like a factory system.

Lee Mo, a retired student, thought it was necessary to keep an eye on the attempts of Starbucks, Chipole, and Wal-Mart. This is because the efficiency of offline business is expected to increase when Starbucks pickup, Chipole digital kitchen, and Wal-Mart pickup points become common. At the same time, he also had questions.

There was a small but big difference between the two models that looked alike. First of all, the origin and purpose are different. Brands whose experience in the field was the default try stores with no seats. Rather than using takeout as a business model from the start, it is an adaptation process that optimizes the offline store portfolio to match customer consumption patterns. They also have different ordering methods. Unlike regular take-out food and beverage brands, you can’t place orders on site. Since orders cannot be placed on-site, there are differences in space configuration, manpower management, and store operations. This model is possible only when online and offline are connected as one.

Even if it may seem like nothing, pickup-only stores are an evolution that shakes common sense in offline business. This is because it drastically eliminated the field experience that was considered the strength of offline stores. There is an evolution that eliminates the role of the’jang’ in stores, but there are also evolutions that overturn common sense in the opposite way. It makes the role of’hawk’ disappear from the store.

There are department stores in the United States that have become famous for refunding unsold items. This is’Nodestrom’. Here is the story. One day, a man brought a car tire to a department store and asked for a refund. After a brief internal meeting, the staff returned the tire price to the customer. Until this point, it seems like a story in any department store. But the reversal is that Nordstrom doesn’t sell tires. Of course, we do not refund all items that have not been sold. If I did that, I wouldn’t be able to afford a black consumer using raw herds. There was another situation in the story of the day.

This happened at Nordstrom, Alaska, Anchorage. This branch was converted to Nordstrom in the 1970s after Nordstrom acquired a local department store in Alaska. The customer who requested a refund of the tire had bought something at a department store before Nordstrom took over. Since it is in the same place, the customer was mistaken for the same department store, and the conscious staff took this into account and gave a refund. With one example, Nordstrom is firmly positioning itself as a department store with customer-oriented management and service mindset.

Of course, the anecdote of the 1970s is the future of the department store business at that time. It is difficult to be the future of the present. Nevertheless, the reason why Mr. Lee, who is preparing for leaving the company, contemplating the future of offline business, came up with the legendary customer service of Nordstrom, because the future of Nordstrom still incorporates the philosophy of customer-oriented management and service mind. . So, what will the future of offline retail as suggested by Nordstrom with the DNA of the past?

In October 2017, Nordstrom introduced a new model of department store called’Nodstrom Local’ in Los Angeles. This store is a store with no stuff, only staff. So, the space composition is also different from general department stores. We have some space for picking up and returning items ordered online, while others are designed for customer service. More specifically, it provides clothes repair service, stylist consultation service, nail care service, gift wrapping service, and beverage service.

In a way, Nordstrom Local is an attempt to deny itself the definition of a department store, which means selling 50,000 items. However, with a customer-centric approach, Nordstrom takes this change. The starting point for change is simple. Instead of letting customers come to the department store, the department store wants to visit the customer. To do this, department stores have to be built all over the place, but conventional models cannot. In the past, department stores had to be large because they had to own a variety of goods, and to cover real estate costs, they had to be located in major commercial districts like flagships to make a profit.

We had to get out of this structure to get to where our customers were. That’s why Nordstrom drastically eliminated the ability to sell goods and focused on customer service. This is possible because customers have become accustomed to buying things online. By providing services without selling items, you can drastically reduce the size of department stores. In terms of area alone, when you build one general department store, you can make 46 Nordstrom locals. In this way, it is lighter to launch a department store, so you can reach where your customers are. You can be close to your customers when they want to enjoy the feeling of shopping in a department store. After verifying customer response at the first store, Nordstrom Local is expanding the number of stores by opening 4 stores in Los Angeles and 2 in New York.

(Slim)

※ This story 〈The Future of Offline Business〉 Episode 4 of the storybook Some. For more details, check out the Fallin Storybook. (Free disclosure)