Retail Briefing: The North Face takes a stab at a ‘retail lab’

The North Face has thousands of retail outlets across the world – including third-party retailers, stores and outlets – but right now, all eyes are on just one.

The newest North Face store, which opened on Friday in Williamsburg, Brooklyn, is the first to check all the boxes of so-called modern physical retail. It’s “curated, personalized and fluid, meaning it won’t look the same way from one month to the next,” according to Mark Parker, The North Face’s vp of direct to consumer.

The merchandise in-store is localized to reflect customer interests from the surrounding area, and the brand will use heat mapping technology to further determine what installations and collections are resonating the most, judging by how long people spend there. The goal isn’t necessarily to get people in and out as quickly as possible — in fact, every piece of furniture and hardware can be rolled away in order to easily turn the store into an event space. But, for the first time, there will be no cash register. Customers can check out with store employees’ mobile point of sale systems wherever they are, and a local service offers same-day delivery to both in-store and nearby online customers.

“This is something we can test and learn in order to build new locations that better serve the customer in the future,” said Parker. “We’re looking at it as a retail lab. When we think about how we as a company can adjust to the changing customer, this store is going to help us do just that.”

With this location, The North Face is testing a new type of retail, that hopes to improve the experience of shopping in stores, but without relying on gimmicky and unreliable screens and other customer-facing technology to do so. Parker said including no screens in stores was intentional to not clutter the space, but added that the store is digitally empowered, thanks to the mobile POS and online-offline capabilities like buy online, pick up in store and ship to and from the store.

It joins other brands like Nike, which opened a new six-story store in Manhattan last week that ties in technology through the Nike+ app, a tool that can make in-store shopping faster and also drive Nike+ memberships. In September, sandal brand Birkenstock opened its first standalone store in the U.S., outfitted with a similar mobile POS to The North Face. The signal is clear: As brands that typically sell wholesale look to shift sales directly, improving (or opening) stores is high on the priority list.

“[Customers] will always shop in department stores or outlet stores. Or they’ll start their journey online and end up at a sports store. But what we’re trying to do here is get a holistic view of the customer journey, so no matter where they do touch the brand, the experience will be in the brand DNA,” said Parker. The North Face doesn’t break out direct sales from third-party sales, but reported that DTC sales increased by 13 percent in its most recent quarter. “This store is looking to take that experience to the next level, in line with how we look at our owned and operated experience as the touchstone of the brand.” –Hilary Milnes

3 questions with Scott Friend, managing director, Bain Capital Ventures
Where are you interested in investing in right now, when it comes to retail?
I’m focused on commerce-related technology — the tools that help brands and retailers work more efficiently. I also have a smaller focus on next-gen consumer businesses of various types. Prototypical examples were and Rent the Runway, which we’re still involved in.

When you say next-gen consumer, does that also mean direct to consumer brands?
I’ve had a strong belief historically, whether it’s right or wrong, that digitally native brands that sell a product are very challenging venture investments. While there are great companies being built in categories we all love, like dog food, furniture and apparel, it’s hard to see how those types of companies attract venture like returns for their investors. That’s a big part of the universe that falls into next-gen consumer bucket. But the smaller part of the universe are not brands, they’re retailers that give us new ways to deliver products to consumers that are flexible, easier, faster and cheaper. Companies like Stitch Fix, and also telemedicine companies like Hims.

Would you say that overall, venture capitalists are growing cold on digitally native brands?
I don’t know if I could say that, since there’s actually been a growing amount of dollars going into digitally native brands, and it will be interesting to see when that trend changes. But the big open question is exit valuations. We haven’t seen a ton of exits, whether public or M&A, with the notable exception being Dollar Shave Club. Until we see Warby Parker, Casper, The Honest Company — someone else that has raised money — I think the jury is out on whether or not the return is worth the investment. –interviewed by Hilary Milnes

Holiday Express
With Black Friday coming up, retailers are turning to mobile checkout in stores to make the shopping experience more seamless.

After a six-month trial with an employee-assisted mobile checkout, Walmart rolled out an Apple store-style mobile checkout called Checkout with Me this month. Instead of standing in line, employees with handheld devices can help customers settle up on the spot. Gap Inc. expanded mobile checkout to nearly all Gap Inc., Old Navy, Athleta and Banana Republic stores for holiday rush “line busting,” as well as added a mobile feature to help customers find items in stores. Meanwhile, Target and Kohl’s are launching similar features throughout the holiday season to curtail line traffic, while Sam’s Club and Macy’s rolled out a mobile scan-and-pay feature. For the latter two retailers, customers still have to verify their purchases with an agent before leaving the store.

“Rather than getting [customers] out of the stores quickly, it’s about giving them options whether it’s traditional checkout or other options in general,” said Walmart rep Ragan Dickens.

Despite the simplicity of customer or employee-assisted “scan and go” technologies, it still stops short of Amazon’s cashierless “just walk out” model. Some of these tools require customers to get their carts re-checked (for example, Sam’s Club and Macy’s) while with others, customers will have to chase down an employee in what could be a very crowded store environment. And while scan and go is an improvement on the legacy checkout model, it’s yet to be seen whether its rollout will prompt consumers to increasingly demand Amazon Go-style technology that eliminates the checkout step entirely.

“They’re not quite there yet with that process,” said Bill Friend, vp of Fluent Commerce, a consultant for companies such as Target and Nine West. “The whole idea should be dead simple – boom boom, drop [the item in your bag] and leave.” – Suman Bhattacharyya

What we’ve covered
Office Depot is hoping to find another use for its 1,400 store locations by turning them into co-working spaces.

  • The company is testing the concept through a Los Gatos, California-based “Workonomy Hub” it opened in August. Inside it, a 5,000 square-foot co-working space includes open “hot desks,” closed offices, a lounge with a Starbucks kiosk, and an online-order pickup and shipping area.
  • Office Depot, which has seen services as a portion of its Business Services Division revenue grow 28 percent year over year, sees co-working spaces as a customer acquisition channel for its services offerings.

Allbirds, the sneaker company known for its popularity among the startup tech scene, is breaking out of its Silicon Valley shell thanks to an aggressive international expansion strategy.

  • The company, headquartered in San Francisco and launched online in 2016, now sells its products in New Zealand, Canada, Australia and the U.K., giving it one of the more extensive shipping footprints among digitally native brands based in the U.S.
  • To land in new countries, the brand launched localized websites in those markets and then built out a mixed media strategy around it with an agency partner experienced in marketing globally. Physical retail also figures, with pop-up and permanent retail.

Amazon’s move to New York is an indication of how serious the company may be about its burgeoning ads business — and may lead to a new talent crisis for agencies.

  • The Seattle-based company, which announced that New York City and Arlington, Virginia, will be its new locations this week, will invest $5 billion and open 50,000 new jobs across the two cities. This follows a new office in Manhattan that opened under a year ago that brought 2,000 jobs, mostly in advertising, to the city and closer to Madison Avenue.
  • Amazon has made a lot of improvements in the business lately — ad buyers have reported that Amazon has consolidated and simplified its platform. On Thursday, it introduced a new agency certification program. The program asks employees to participate and showcase their abilities to complete specific courses and assessment, including sponsored ads optimization, reporting, strategy and targeting.

What to watch for
It’s not the holiday shopping season in the U.S. until Best Buy opens its doors in the middle of Thanksgiving dinner. With Black Friday and Cyber Monday coming up this weekend, here’s what to expect.

  • In total: This holiday season (defined as Nov. 1 through Dec. 31), total retail sales will increase 6 percent over the same period last year to $1,002 trillion, according to eMarketer.
  • Online: eMarketer predicts that U.S. e-commerce sales will jump 17 percent this holiday season to $124 billion, representing 12 percent of total holiday retail sales, the largest ever.
  • Amazon rules: According to holiday data from Bain & Company, Amazon could control between 45 and 50 percent of all online sales this holiday season. On high-traffic days like Black Friday, Amazon has a 16 percent online conversion rate, which is nine times that of other major retailers surveyed.
  • Sitting out: REI is continuing its tradition of closing its doors on Black Friday. Other retailers, including H&M, Nordstrom and Barnes & Noble, will stay closed on Thanksgiving Day.
  • Fun facts: According to data from 2.4 million customers, Viant claims that Black Friday shoppers are 36 percent more likely to eat at a Golden Corral and 71 percent more likely to shop at JCPenney.

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