The Socialization of Real Estate

Diva has a theory about the role of real estate in retail that, if correct, could really change the way we view our retail spaces.  We call it The Socialization of Real Estate and we see this as a very critical, future trend.

Last year, iTunes became the 7th or 8th largest music store in the United States.  Think about that.  They have no real estate, at least none dedicated specifically to iTunes, and carry no inventory.  They don't have to pay for sales staff or worry about returns.  And if you look at the typical Apple store, a great deal of its space is dedicated to social functions, not traditional retail functions.  Now, if you're a large record store chain, this has got to be a huge challenge.  You've got all of this real estate dedicated primarily of the inventory management of music and yet more and more people are buying their music online. 

But, there’s still potentially a great role for music stores, but only if they become more about the music and less about the inventory.  Just think about the indie record stores (like Bleecker Bob's here in NY or the movie High Fidelity from a few years back).  No matter what happens with online music, stores like this will always play a very unique role in music distribution.  Why?  Because it’s not about the single act of purchasing — it’s about the social experience of going to a store like that.

Additionally, we’ve now trained a fairly large audience into buying and not getting the item right away.  They shop online and they expect to see the items they’ve purchased in a few days.  Or, they’ll buy online and, if they really need it right away, they’ll pick it up in-store.  But this too changes the role of the retail location.

So, Diva wants to know.  Raise your hand if you’ve ever gone to a store, taken up a great deal of the sales persons time, only to go home and buy online because you could find it cheaper?  Come on, you know you have.  Everyone does it.  And this helps to turn the retail space into a showroom, rather then a place to actually purchase.  Worse, technologies like ScanZOOM let you check the price on something by using your camera phone to take a picture of the bar code and then finding the best price.  And that’s before we start talking about AI shopping bots!

So, if the retail space might become more of a showroom and if people don’t mind shopping and having their purchases drop shipped, then what’s the impact on the real estate itself?  We see it becoming a much more vibrant and alive social space.  A place for people to gather and share their experiences through the brand, rather then sharing their experiences of the brand.  Look at the Apple store.  Lots of people talking to one another.  The theatres where you can learn together as a community.  Even the Genius Bar.  It’s much more of a social space.

We’re talking to a number of our clients about this issue right now, to see what would be different about their retail environment if it was based more on a social design and less on an inventory management design.  It’s a big change in thinking for most companies.  It means a lot more then just making the space pretty.  In fact, for us, one of the most critical issues of creating a great experience is often the first one cut—the staff.  Building a great experience means having great staff who knows how to engage people. 

And, of course, it means having a brand story that’s worthy of the social experience.  That's the biggest challenge for most retailers today.  Too many retailers are commodities.  American Girl knows how to create a story that’s worthy of a social experience.  Or stores like Wild Rumpus, an independent bookstore in Minneapolis.  Here’s what Robert Spector had to say about Wild Rumpus in his book Category Killers: The Retail Revolution and Its Impact on Consumer Culture:

"In 1992, Morgan, a veteran of the book business, decided to open a store that would be 'something a corporate mind would never dream up and that a large company could never sustain; a place that would sell children a good time along with their reading material.'

Morgan is often asked to speak to fellow owners of small bookstore owners. 'I tell them to stop bitching and complaining and get out there and do something different. Too many of them want to do things the same way as the big-box stores; then they’re dead in the water. We do things they can’t do or wouldn’t dream of doing. B&N guys in suits would come into the stores with clipboards taking notes. They were obviously trying to copy things that we were doing but they couldn’t pull it off. They are too corporate minded. We try to do the opposite of what a B&N would do.'

Wild Rumpus is two thousand square feet of bookstore—and zoo. While borrowing its name from a phrase in Maurice Sendak’s book Where the Wild Things Are (the character of Max declares 'Let the wild rumpus start'), the store design was inspired by Anne Mazer’s The Salamander Room in which a boy transfigures his bedroom into a place where his salamander would be comfortable. The lad gradually brings into his room trees, frogs, and birds, and opens up the roof to the sky.

The front of the store conjures up images of an English neighborhood bookstore. The front door of Wild Rumpus is really a door-within-a-door—one for big people and a four-foot-high purple door for little people. The ceiling opens to expose the sky above the garden. Children can settle into a little shed where they can curl up to read scary books. Resident animals are all over the store: four cats and two chickens (Dalai and Elvis) roam the floors; a half-dozen occupied bird cages are scattered throughout the store; gray rats are confined to a clear Plexiglas-covered cage, which doubles as the creaky floor of the Haunted Shack, where little boys come to play and to watch the rodent entertainment. Separately caged tarantulas and ferrets hang out by the counter. An aquarium of fish can been found in the bathroom behind the one-way mirror, so that they can only be seen in the dark.

By creating an inviting place, Morgan has found a way to create traffic and make Wild Rumpus a destination store in the urban Linden Hills neighborhood of south Minneapolis, where, within ten miles, there are six Barnes & Noble stores, three Borders, a Target, and a Musicland. On Saturday afternoons, Wild Rumpus regularly hosts a wide variety of typically quirky in-store events to attract its loyal audience of young customers. Drop in some Saturday, and you might see the shearing of a sheep, and a display of books on how to raise sheep or how to card and dye wool or how to knit."

It makes me think of how often we eat at Burger King just because they have an indoor playground. And it's not just about the actual playground. It's Sydney's (my 5 year old daughter) desire to play with a group of other children her age and the social aspect of that experience. It's not about the food there (sorry Burger King!), it's about it being a Third Place  for Sydney.

So, what is the value of real estate for retailers today? Does a record store really need to exist as it's been for the past 40+ years? Or banks, grocery stores, fashion retailers? If, thanks to the internet, people are much more comfortable getting their purchases sent to them, rather then getting them right away, do we need that much space dedicated to merchandise? So, if we can do away with the inventory portion of most retail spaces today, what else would you do with the space? How could you make it a much more social environment, rather then being a retail environment? After all, this is exactly why places like Starbuck's or the Apple stores have boomed -- they created a social space, rather then a retail space.

But, while companies look at Starbuck's or the Apple stores and say "Yea, that's great for them, but it doesn't apply to me," I think that they're missing a huge opportunity today.  And the more we try to use the space for our purposes rather then our guests (see my previous post about the Kroger In-Store Network, the more they'll stay away. We'll be tracking this trend in the future, so look for updates in the future!

--David Polinchock