Physical Store Channels, Online Marketplaces & Brand Plays
As has often been said, retail stores, physical stores, are now Media. Actually, they always were.
A way to entertain, dazzle, engage. Online retail is no different. It’s all about traffic and attention; brands need to get found, and they often need to pay to make that happen, online and off. And has also been stated ‘Retailers (online and offline) have two things to offer brands: consumer mind-share and shelf space.
As a consumer brand marketer, you need to play both in the physical and online store space; and you need to know how retail channels work to allow you access to both.
This eBook covers key types of physical store retail, as well as their equivalent online – digital ‘real estate’. It’s for brands seeking insights into their go-to-market strategies and hopefully will illuminate how you can best bring your product in front of shoppers.
In the current era and going forward, there’s really no difference between attention online and offline. The same type of thinking can apply to both. And in fact, should be applied to both, to optimize your brand’s reach.
Physical Retail Channels & Locations
Let’s talk about physical store locations first.
There are a few different types.
These are locations ranging from, say, a cornfield on the outskirts of a town to a store-front in a big city where a retailer can simply buy land and build a store; or in the case of a city, rent space from a building owner.
They are unplanned in the sense that they are not part of a shopping center or other larger intentionally planned development.
In the case of a Walmart, in the cornfield case above they simply purchase farmland on the outskirts of a small town to build one of their superstores. Another typical type of unplanned location is a store on small-town main street, with its usual selection of diner, drugstore, hardware store and bank for example.
These would be rented from the owner of the building, usually a small local entrepreneur or real estate player. In larger cities, there are a couple of typical types of unplanned locations. Downtown, in the city center, where the street levels of office or apartment blocks are usually rented out to retailers and restaurants.
Urban gentrified locations are another type of highly desirable unplanned location where the likes of a Warby Parker or Casper mattress store, for example, may rent space. These are the main thoroughfares of apartment-dense areas that attract younger, more educated, affluent populations. Think Brooklyn, NY or Cambridge, MA. As in the main street example above, there is no one central landlord; individual buildings are owned by small-time real estate owners, for example.
After World War II as people moved out of cities, and car ownership increased, and highway interstates were built, many people starting families moved to the newly developed suburbs, surrounding major cities. So, for shopping, real estate developers created what were essentially imitation main streets; planned retail developments to serve the new suburbs. These are planned locations.
These are the different types:
- Community Centers
The most numerous types of planned locations are called community centers. These are usually developed, owned, and leased by a commercial real estate company. The anchor, or key tenant that brings such a center to life, and generates the essential element of traffic, is usually a grocery store. With other additional, frequently used services like hairdressers, banks, pet stores, and dentists, surrounding the store and its central parking lot.
- Power Centers
Power centers are larger than community centers and are less numerous. They are defined by their anchors, usually a grouping of several big-box retailers, like a Target, Marshalls, Home Depot, or Best Buy. The combined pull of several popular big-box retailers guarantees high traffic. And then smaller stores in-between the Big Box names offer other services; restaurants and local retail offerings.
- Enclosed Shopping Malls
Finally, enclosed shopping malls are very large, usually completely enclosed malls, anchored by 3 or more department stores. These malls’ smaller tenants are usually focused on fashion, shoes, gifts, and other services. These malls are made viable by the drawing power of several department stores.
However, as eCommerce has impacted the relevance of department stores, many of these enclosed malls are losing traffic and tenants and are becoming less viable. They are being impacted by online shopping far more than the community and power centers described above, which are anchored by more e-commerce resistant retailers, like grocery stores, Targets, and Best Buys.
Read more about the history of the enclosed shopping mall, and why so many of them look the same, in my blog post here.
Going back to our theme of location, attention, and proximity (remember, retail is about mind-share and shelf-space), alternate locations, while not suitable for larger retail formats, are highly suitable for the right product or service niches.
By leveraging proximity to consumers, in high-traffic locations, (who are often also primed to buy the right products; in a good mood, relaxing) by locating in these alternative locations, brands can gain consumers’ attention and build brand and mind share, while also making sales. If these brands can also sell online, there is a brand-multiplier effect – exposure in high traffic venues – builds sales now, while also catching attention for future direct-to-consumer e-commerce sales.
Alternative locations are simply locations, such as airports, train stations or sports stadiums, or large co-working spaces, where unlike, say a shopping center, retail is not the primary goal but can be a great secondary purpose.
- Travel Venues
Take an airport. The primary purpose is to catch a flight. But as airports around the world have discovered, these are great places to offer affluent people with time on their hands, waiting for a flight, or in a good mood, on their way to a vacation, luxury branded goods, and high-quality dining.
Consequently, airport stores now make up 6% of global luxury goods sales – read more about this in my blog post here.
Large urban train stations also offer many branding and selling opportunities to retailers and services of all kinds, too.
- Leisure and Entertainment Venues
Other alternative locations include tourism; one of the top activities of people on vacation is shopping.
And large entertainment venues such as sports stadiums offer secondary attractions such as selling sports apparel and food and beverages, as do concert halls, museums, and the like.
Finally, workplaces where thousands of workers congregate can also offer significant advantages for the right retail or service concept. Restaurants, but also services like dry cleaners or banks can be co-located in or near large office complexes. This includes places like hospitals, universities, and government buildings.
These are not so much locations, as their own form of micro-retail channel; short-term Pop-Up shops, kiosks, and a store-within-a-store can be placed in or around any of the planned, unplanned, or alternative locations described above.
Often short term, taking advantage of a seasonal event (Halloween stores) or a regular timetable (Saturday farmer’s markets) these locations can be great brand-building and marketing opportunities for both smaller companies and larger ones. Even Amazon has operated temporary mall kiosks to promote their Alexa and Kindle devices for example.
Micro-retail can be an opportunity for Direct-to-Consumer, e-commerce brands to test physical retail, at a low investment, but in high-traffic, high-attention locations.
So, what’s the tie-in to online channels, then?
Well, what I’m proposing is that we need to look at online channels; where consumers go to discover, research, and buy products, in a similar way to how we look at physical store locations.
The common theme is attention.
The attention economy, as a concept, was first theorized by psychologist and economist Herbert A. Simon, in 1971. He wrote about the scarcity of attention in an information-rich world.
Using our earlier concept, that the main assets retailers own are consumer mind-share – meaning that when a consumer has a need, you, as a retailer, are who comes to mind first for that category. You are the resource their attention gravitates to. And secondly, shelf-space; meaning, in the case of a physical retailer, the actual real estate in your store; on center aisle (grocery store) shelves, in dairy cold cases, produce aisles, and bakery departments. And brands need your shelf space.
So e-commerce players and any online platform seeking users and traffic, like Facebook, want the same things as physical retailers, shopping mall operators, and the like. They want attention. They want traffic.
Pre-e-commerce when a consumer thought of a need, like, ‘I need a new jacket’, they thought of a particular department store, say, Nordstrom. Or their local mall, where there were several department stores and specialty clothing stores where they could expect a good selection. Now, they might think of that, or they may think of an online brand store, first. Or Amazon.
So, let’s talk about E-commerce retail channels.
With Amazon being the most obvious example, and Walmart following, marketplaces are the classic three-sided platform. Consumers on one side, brands on the other. Facilitated by the marketplace itself, which takes a % of sales and often, ad fees. Even retailers like Walmart and Target are offering their platforms to third-party brands. This is because it is sometimes more profitable for them to take advantage of the consumer traffic that comes to their platform and charge a % to their merchants, than to stock and own all the inventory themselves.
The analogy here is with, say, a high-traffic urban downtown. There is already traffic (Facebook, Instagram). People are coming there, with their attention, to socialize with friends, share pictures and updates. Ads with a shopping feature are right there. Consumers notice an online store, ‘walk in’ and buy. The primary purpose is for something else – keeping in touch with your friends, posting your vacation pictures. Reading the news.
Shopify being the prime example, followed by other players like Big Commerce and WooCommerce, these players, you might say are analogous to a shopping mall kiosk program. It’s a ready-to-go commerce platform. With Shopify, you can set up your online store, process payments, facilitate shipping.
These are the support systems for a brand’s direct-to-consumer retail play. They don’t drive traffic or attention – you have to do that – but they make all the aspects of e-commerce easy to set up and manage for an online merchant. Many of the ‘stores’ on Facebook and Instagram are facilitated by Shopify, for example.
What the physical retail and online retail aspects have in common then, is the desire to be first in mind for different shopping needs. Or to gather the traffic (Facebook) through other means, to sell access to consumer’s attention. Many physical retailers, especially in the grocery category, because they have mind-share – they are first-in-mind when a consumer needs to plan, say, dinner, can sell access to their customers. Through various in-store advertising programs, or charging for shelf space (slotting) or seasonal merchandise displays (end-caps), etc. This is no different than Amazon charging merchants for ads to rank high in an answer to a consumer’s search term.
Again, the common themes are traffic, attention, and proximity – catching a consumer’s attention while they are searching for a product, or while they’re doing something else.
These dynamics are nothing new; attention and location (online and off) are the critical factors in consumer branding and retail. Brands that want to be in the lives of shoppers can use multiple ways to introduce their products into the minds, hearts, and shopping baskets of consumers. The more you know about the similarities and differences of how these physical retail and online channels operate, the more nimble, relevant, and ultimately, successful, your brand will be.