Conventional real estate wisdom dictates that retailers should seek out a bustling CBD when setting up the store of their dreams, but some have the power to make customers come to them.
There’s something happening to shoppers around the world. It’s not that consumerism is less important than it used to be – anyone scrolling Instagram or tracking the growth trajectory of Amazon can see that the latest and greatest products still rule supreme – but there’s now a desire for shopping to be about more than just the product itself.
Consumers are no longer content with simply exchanging cash for goods.
As they access increasing purchasing power, Millennials and Generation Z are communicating that they want their purchases to mean something, and they want to feel that meaning while they’re making them. Enter the triple trends of personalisation, conscious consumerism, and experiential retail. It’s these that are driving a renaissance in destination retail.
Seeking an unusual environment
Destination retailers have stores so attractive that they can leverage the pulling power of their proposition to bring customers to them rather than depending on foot traffic. It’s not a new idea – both our case studies were founded more than 30 years ago – but in an age where traditional retailers are struggling for an edge, it’s become relevant again.
Massey University’s professor of retail management, Dr Jonathan Elms, confirms growth in experience retail is driving increased visibility of destination stores: “Consumers are demanding more in the way of experience.”
The growth in online retail means many consumers’ shopping trips are no longer primarily about acquiring needed items, Elms explains.
Many goods have now effectively become commodities to be casually purchased at the click of a mouse, so if a customer has come to your store, chances are they’re not simply seeking to be sold a product.
“They’re after something more, something different in the way of environment,” Elms says.
Shopping malls are changing to meet this. In the US, a phenomenon dubbed ‘mallmageddon’ has seen the closing of hundreds of mid-to-low end shopping centres; dozens of formerly-powerful mall brands like Wet Seal and Radio Shack filing for bankruptcy; and department stores such as Sears shutting branches en masse as consumers transfer their spending onto experiences and online.
The Wall Street Journal has speculated the last major new shopping mall, an 80,000 square metre luxury proposition built in Florida in 2014, will be the final iteration of its kind.
New Zealand isn’t vulnerable to the same kind of collapse as it has around five times less mall space per capita than the US, but the design of newer shopping centres such as 2015’s NorthWest favours natural light, entertainment and food and beverage integrations in a way that the older centres do not.
“The mall used to be this faceless, timeless environment,” Elms says. “People like natural light, people want to move between inside and outside.”
He says the retail mix draws consumers to any given shopping centre, but what will hold them there is its entertainment and the food and beverage offering.
A taste of something different
The June 2017 Retail Trade Survey from Stats NZ showed that the food and beverage industry had the largest increase in the series, up 4.2 percent, while retail sales only rose 2.0 percent. Retail is still earning a larger annual profit of the two at $351 million against food and beverage services’ $117 million, but while food and beverage is rising off a smaller base, it’s growing much faster than retail.
Elms notes that hospitality itself is moving with the times and becoming more experiential. Outside the shopping mall system, retailers big and small are moving to incorporate food and beverage into their offering with mixed-use spaces; branded bolt-on offerings like on-site cafes; coffee and more.
“There’s very much a blurring between hospitality and retail,” says Elms.
Elms says the café and shop at the Puhoi Valley Cheese company’s factory site is a great example of a successful Kiwi destination retailer. Like many of its peers, the Puhoi Valley outlet blends hospitality and retail – in this case, by selling packaged cheeses and other goods from a café-style venue.
Its chief retail skill, Elms says, is in how Puhoi Valley Cheese shows consumers where its product comes from, offers it for sale, and showcases what can be done with it in the café. There’s also attractive grounds which occasionally host events involving other local businesses and community groups, and award-winning icecream that’s hard to find elsewhere.
“It’s a really well-done, well-crafted place that connects all the dots together,” Elms says.
He also cites Kiwi menswear chain Barkers as “a brilliant example of a store that’s more than a store.” Each Barkers store differentiates itself from others by way of an unobtrusive theme, such as Whangarei’s The Boat Shed or New Plymouth’s The Bach, but all are aligned under the Barkers brand. Flagship stores like those at Auckland’s High St offer a slick café, barbershop services and custom suit tailoring from a single elaborately-fitted-out site.
“If you offer these things, yes, it’s an investment, but it will pay off,” says Elms.
Answers from our past
Elms says the trend of offering elaborate amenities as part of a retail store is not new, but in fact represents a throwback to the late Victorian to early 1920s era of retail when full-service department stores like Chicago’s Marshall Field’s dominated the scene.
“It was a place to hang out, a place to be seen, to socialise – it wasn’t just about the shopping,” Elms says.
Extravagant features like the ladies’ writing room that once occupied Marshall Field’s basement were gradually whittled away over time as consumers prioritised different elements of retail, Elms says, but now that retailers are under pressure from internet-based competition, “these old tricks are being pulled out again”.
“We’re going back to the basics of customer services and experience.”
The new generation of destination retail stores relies on technology to sustain the roll-out of Victorian-style premium extras to a mass market, Elms says.
They’re also more customer-centric and more relaxed than their Victorian predecessors. Great Gatsby-style fanciness isn’t necessarily a prerequisite for a successful destination retail store, Elms says – there just needs to be a stand-out product, environment or interaction between the two, plus the basics of good retail.
“I think it can be as simple as a good lick of white paint, keeping things tidy, making sure the toilet is clean and having staff who can communicate effectively with customers,” he says.
A specialised retailer selling hard-to-find products like Nelson mastectomy bra shop Little Boutique or baby goods store Global Baby can be just as much of a destination as a high-end retailer like David Jones in Wellington. Good design doesn’t have to cost a fortune, says Elms, who believes you can get away with “an awful lot” if the environment is clean and the staff are engaged.
“Stores can form a destination no matter their size, level of investment and offering.”
Bayleys national director retail sales and leasing Chris Beasleigh notes that a destination retail offering doesn’t even have to be one store. The community of outdoor goods retailers at Barry’s Point Rd on Auckland’s North Shore have formed a destination by clustering together, he says, also mentioning the group of marine businesses at Beaumont St near Auckland’s waterfront.
“It’s much cheaper to be in Barry’s Point Rd than to be on a high street, but because it’s become a bit of a hub, they’re all down there.”
Living the dream
As for destination retailers based outside city centres, Beasleigh notes that you don’t tend to get businesses based in central business districts relocating or opening branches well outside those areas – although individuals with expertise in fields like hospitality and retail often “get out of the big smoke” to open businesses in idyllic locations.
Typically, Beasleigh says, destination retail businesses are run by people with a connection to that business’s local area. Better connectivity and stronger transport links means it’s now possible to run very professional businesses at a significant remove from towns.
An obvious local connection is important for a business with a strong sense of place, Beasleigh says. He recommends destination retailers try to use local brands and show some support to their community.
A unique point of difference is also key.
“I think you do need to be a bit outside the square if you don’t have the traditional edge,” he says. “You need to be a little bit unique to draw people in.”
Customers are willing to travel for an exceptional experience, Beasleigh says, noting that huge tourism numbers are boosting foot traffic in areas of natural beauty such as Queenstown.
Retail spending is a key component of tourism expenditure. In the year ending March 2017, retail sales made up 38.7 percent of domestic tourism expenditure and 25.6 of spending by international tourists. Total tourism expenditure was $36 billion.
Opening a destination retail store is “pretty risky”, Beasleigh says, but the rewards are good if it’s done right.
“Do your research and say, ‘I’m going to back myself and go out here. There’s nobody there at the moment, but there will be.’”
Elements of a successful destination retail store
The day-trip destination: Morris & James
Pottery workshop and showroom Morris & James is located about an hour north of Auckland at Matakana. The area was predominantly farms and small-scale wineries until the late noughts, when the Matakana Village complex began to attract Aucklanders north to enjoy its farmer’s market, arthouse cinema and specialty retail stores.
Now, it’s a bustling tourism centre that’s probably got one of the highest concentration of artisanal goods and high-end labels in regional New Zealand.
Anthony Morris and his wife Sue James founded Morris & James in 1977 after acquiring the land it sits on at Tongue Farm Rd, which is a short drive from the Matakana shops. General manager Kieran Rice says there was always an intention to sell goods from the property, but in the early years, it was more of a cellar door-style arrangement than the engaging set-up now beckoning visitors.
Morris & James’ site houses both the pottery factory and the showroom, offering daily factory tours for visitors. Its landscaped grounds show off the company’s colourful outdoor tiles on fountains, paths and sculptures, and a kids’ play area is available to keep little ones entertained. Ringawera Café is not original to Morris & James - Rice says it’s been on-site for “only about 20 years”.
“Right from the start, the intention was to sell stuff here,” says Rice. “It evolved, and things like the café were one of those major evolutions.”
In the early days, Rice says Morris & James’ add-ons were especially necessary because the wider Matakana area had few amenities for visitors: “People would come up a fair way and there wasn’t much around at the time.”
Making the grounds attractive has been key to attracting customers and encouraging them to linger on-site, Rice says.
“We are a factory… but it’s about making sure your best face is to the road, and making sure services are to the rear.”
Introducing the public to the reality of Morris & James’ artisanal production through factory tours helps them understand how special each piece is and get them engaged in the business, says Rice. There’s also two screens on display which continuously play an introduction to the behind-the-scenes factory work, plus informational wall panels.
“It’s making yourself different, I guess, so when people come, they see a different thing to what they’ve seen elsewhere,” Rice says. “It’s all the little things that add value.”
He says good parking is crucial for any retailer hoping to lure shoppers out of town. If the only way customers can reach you is by car, then that car has to be safely parked somewhere while its occupants shop.
The key to converting curious browsers into buyers is to keep new product coming in frequently, says Rice. The nature of Morris & James means there’s always a wide variety of new products emerging from the factory: “We have creative people, there’s always some new pieces there.”
However, this endless variety also comes with challenges.
“Because we’ve got so much stuff, people can get a little overwhelmed,” Rice says.
He combats this effect by making sure that as well as freshening displays with new products frequently, products which are already on display are shifted several times.
“Putting it in a different location means that people will notice it for the first time when they may not have noticed it previously.”
Like its bricks and mortar shop, Morris & James’ social media and website also foregrounds the craftspeople behind its products. The website accounts for less than 5 percent of total sales, but Rice says shoppers do a lot of research before making the trip to Matakana – the site is intended to support this rather than drive sales from start to finish.
Rice says balancing demand from tourists with the needs of locals is less challenging than it may appear. While he’s noticed tourists prefer smaller, lighter pieces that are easier to transport, he’s come to realise their preferences are much the same as anybody else.
“Tourists like to do what locals do anyway,” Rice says. “Tourists want to go where locals want to go and see the best of the local area.”
Matakana’s rapid ascension to the top of both local and international ‘must visit’ lists has been a driver of change for Morris & James, despite its moderate remove from the village itself.
“There are more people coming up, but there’s also more competition for the dollar,” says Rice.
He says the barrier to entry for new retail operations is low, especially when it comes to hospitality, saying that having the personality-filled Ringawera rather than “a me-too café” has been important to Morris & James. Plentiful parking has also helped it stay competitive – Matakana village’s roads are often clogged and parking spaces are scarce. The company has invested in brown tourism signage to support its marketing.
Rice says accepting change and moving with the times has been the most important factor in Morris & James’ ongoing success as a destination retailer.
“It is a matter of keeping yourself relevant and responding to your customers, and having the confidence to do simple things like making your destination attractive,” Rice says.
“The big thing for anyone would be that you have to keep evolving, it’s not a static situation.”
Town versus country: Eyebright Country Store
Eyebright isn’t easily summed up in a single sentence. Based near the Tasman district town of Richmond, it’s a gift and homewares store specialising in wool, silk flowers and Christmas goods. There’s a show-stopping cottage garden around it, and on 10 acres of grounds, Christmas trees, sunflowers and vegetables are grown for sale and wholesale supply. And let’s not forget the Wendelton Guinea Pig Village.
Co-founder Peter Owen planned this experiential extravaganza as a destination retail store almost from the start in 1986. The beginning of Eyebright was a dried flower supply business started by Owen and his then-partner Adrienne Matthews out of an old cheese factory they rented in the area.
The switch of focus from supply to retail took place only a few months after the business got going, Owen says. At the time, dried flowers were a “white hot” trendy product that was in strong demand from consumers.
“The thing is, [dried flower production] creates an amazing visual effect,” Owen says. “You’ve got the full cheese factory just dripping with dried flowers.”
“Customers wanted to soak up all the ambiance of it.”
Owen and Matthews took notice of customers’ desire to spend time in their workshop and began selling dried flowers at retail. They soon added other strings to their bow, moving into selling silk flowers and giftware products like candles. It was the choice to diversify that saved the business when the dried flower market suddenly turned in 1992, says Owen.
“Dried flowers went off the boil as quickly as turning off the gas, it was a vertical descent.”
He estimates that within a year, around 11 other dried flower growers in New Zealand went under, leaving only Eyebright standing. It wasn’t unscathed, however – a store recently opened on Wellington’s Lambton Quay “bled to death within a matter of days”, and Owen and Matthews were forced to sell their house. A co-located store the pair opened some years later in central Nelson also failed to cover costs.
Since 2004, Eyebright has been based at its current premises. The store itself was built by Owen using materials salvaged from the former Nelson Apple and Pear Board building. As well as giftware, silk flowers, dried flowers, jewellery and Christmas goods in the main room, dedicated areas like The Woolshed and the Prenzel Tasting Room present a more targeted offering. The entire business is “completely given over to Christmas” when seasonally appropriate.
The store manager, Therese Phillips, is solely responsible for its merchandising and displays – Owen believes it’s crucially important to restrict this important work to one individual so as to ensure a coherent vision.
“She’s created something that’s got incredible integrity,” he says. “Flash fittings are totally wasted if the people putting together your displays haven’t got the x-factor, the artistic flair to make it beautiful.”
Keeping Phillips in control of the merchandising and displays also means that her understanding of what’s in stock and where those items are isn’t compromised by other people shifting items. Eyebright’s stock is so diverse that it often only has one of any given item – Owen estimates it has around 2,000 SKUs, and they’re rotated often.
“Our rule is, you’re welcome to replace something if it’s sold, but God help you if you start moving things around.”
The key to converting positive first impressions into sales is great service, he says. Staff should be sensitive, and not too over the top; they should do “plenty of listening rather than blathering,” and make everyone feel welcome while realizing that some people prefer to be self-reliant.
Owen also points out that the high standard of service expected in-store should be applied sitewide, right down to ensuring the toilets are kept spotlessly clean.
Like many destination retailers, Eyebright must balance satisfying the tourist trade with serving local customers. Owen says more New Zealand businesses need to realise that tourists are simply looking for a genuine experience.
“We do our best to just make sure that they have a wonderful time and if you do that, there’s a good chance they’ll reward you with a purchase.
“These are guests to our home. We should all treat them as guests, and certainly not try to exploit them or milk them.”
Hospitality is something Owen and his staff believe in on a personal level, and it’s another part of Eyebright’s authenticity as a country store, he says: “We don’t market that, we just are.”
This story originally appeared in NZ Retail magazine issue 756 June/July 2018
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