Issue #14: Urban vs. Suburban Retail

Fast food chain Chick-Fil-A, which specializes in chicken Quick Service Restaurants (QSR), opened its second innovative restaurant concept this week. Located in McDonough, Georgia, this new digital-focused concept is a two-story drive-thru equipped with four lanes for cars. This new design allows for 75 cars to be serviced at once, in contrast to the typical 4-6 cars most other drive-thrus can handle at once. The bottom story of the building has areas to take orders and give customers the food. In the second story, the food is prepared. The two levels are connected by a custom conveyor system. The goal behind the system is to maintain a strong customer experience, have employees work more efficiently, and improve the bottom line. Chick-Fil-A is hoping this can have a significant impact on the bottom line. However, I wonder how they get all the raw materials up to the second floor efficiently.

This location represents the second new concept Chick-Fil-A is testing this year. In March, they opened a mobile pickup-only location on the Upper East Side in New York City. You cannot order in the restaurant from a cashier or kiosk, which seems like a slight mistake. They should add kiosks from Bite. To get food, you can order it to be delivered via the Chick-Fil-A app and the traditional third-party delivery apps or order a pick-up order in the app. Unlike many other restaurants, the food is made to be timed with the arrival to ensure the freshest food and optimal efficiency. Boards in the location show customers which orders are ready. All in all a totally different experience than a drive-thru focused concept, but meeting what UES customers want.

Despite the differences, across both locations, a couple of things are similar. The focus is on a great customer experience, while meeting the customer in a modality where they want to be served. Also, the food is the same. In McDonough, customers want a drive-thru, on the Upper East Side, not so much. The Upper East Side prefers delivery and pick-up quickly, not in their car. So, the location was adapted to meet that need. Chick-Fil-A is a huge company, so they have the resources to launch multiple types of restaurants based on the consumer behavior of the area. Regardless of resources, it shows an elevated knowledge of their customer’s preferences to be able to add this level of customization. This lesson is an important one for retailers, especially those that are growing brands. How people want to experience retail and consumer behavior is so different by location and type of environment (urban, suburban, rural). Retailers need to keep that in mind when building out concepts. Emerging retailers should focus on similar populations across geographies to conserve resources and then as they grow roll out additional models based on geography.

Viral Olympic Muffins Make It to NYC

With the Olympics just having wrapped up, some athletes made their mark on the court and some made it off the court. For Norwegian swimmer Henrik Christiansen, he represented the group making headway off the court, despite not medaling in any event. Henrik, aka the Olympic Muffin Man, was obsessed with the Chocolate Muffins in the athlete cafeteria and catapulted the muffins to an internet sensation with his TikToks on them.

Last weekend, all of a sudden, these muffins showed up at a NYC cafe, Isshiki Matcha, out of nowhere. I saw this pop up on social media (@sistersnacking was one account to hype it up) and while I wasn’t able to attend, I was fascinated with the concept. Capitalizing on a viral social media trend and delicious muffins, what a great opportunity to drive foot traffic to your retail store. This is something more retailers should be trying!

Luckily for us retail nerds, the person who organized it, kelin_online, created a Twitter thread breaking it down (highly recommend giving it a read). The tl;dr, Kelin was able to import them from France, find a retailer willing to partner, get creators to promote the event, and sell out all 13 cases of the muffins, despite many hiccups along the way. The thread is a rollercoaster and I highly encourage a full read. For retailers, the lesson here is sometimes you have to do things that don’t scale to capitalize on viral trends, but they can really pay off with a line of 100s of people. Isshiki Matcha may not have made a lot of profit from these muffins, but their brand awareness has skyrocketed. The thread with them in it has tens of thousands of likes, retweets, and bookmarks. What are some other examples of retailers capitalizing on viral trends?

Logistics Market in Transition

Prologis is the largest industrial real estate company in the world. It focuses on building warehouses in areas close to consumers, which are typically areas hard to acquire land in. Given all the involvement in the logistics space, they are in a thought leadership position and regularly publish content on the space. In this month’s issue, they highlighted that the market for logistics space is shifting/rebalancing. Demand for logistics space is cooling down, which means there is a greater supply of open warehouse space. Less demand could mean the market is rebalancing, but it also could signal a slowdown of economic activity as companies aren’t expanding as rapidly as they once were and new companies aren’t starting. Overall, this will be a key metric to monitor going forward. Is the slowdown due to rebalancing or is there a broader economic indicator at play? Regardless, if you need a warehouse space, now is a good time to search as rents are falling.

Youtuber Adam Ragusea Launches Pizza Shop

I consume mostly content about food. I love cooking and going to try new restaurants, so that content is what dominates my social media feed. In the past, I have written about creators monetizing in short-form video and leveraging unique monetization strategies based on trends I saw. One unique strategy a creator I followed did was launching a pop-up bakery. Recently, a creator I follow has taken it a step further with a permanent location. This week, Adam Ragusea, a long-time food Youtuber and podcaster, announced he was partnering with a local doughnut shop to create a pizza restaurant. The entire process will be documented on his channel and it does not seem like the concept will necessarily scale to the entire country, rather just be focused on his local market. I think this a great lesson for creators and retailers alike. Adam lives in Tennessee not far from the location and while his audience may not exclusively be there, they still all get to see the behind-the-scenes content. Plus, Adam gets to control the quality and not worry about the blowback other creators have faced from attaching their names to quality products, like Mr. Beast. On the doughnut partner side, they get to blast their brand to millions of people and help grow the chain (currently at 4 locations). More local chains should partner with local creators to do behind-the-scenes content and grow the chain’s brand.

Restaurants Struggle During Olympics

I may not have talked about the Olympics much during the event, but from a retail perspective, the aftermath has been just as interesting. This week, news has come out that restaurants were reporting losses year over year of up to 80% less revenue during the Olympics. These restaurants blamed the security, which made certain areas hard to access, and encouraged residents of Paris to leave the city. Now, a commission is being formed to investigate the issue and maybe even compensate restaurants for lost revenue.

Eli Feldman from Elided Opinions wrote an excellent breakdown with some anecdotes from Chef friends in Paris on what caused the issues. I highly recommend giving it a read for further context on what caused the issue. Big events happen all the time in large cities and often pose roadblocks to restaurant retail. Here are some ideas for how to capitalize and adapt during that time.

1. Catering - large events and places need food, can bulk prepare in off-hours and bring in large amounts of revenue per order

2. Grab and Go - people are on the go but still need food, why not offer healthy salads and sandwiches for a quick bite and less cost

3. Hotel Partnerships - not all hotels want to take on the cost of food, so why not combine points 1 and 2 and partner with them, or alternatively partner to have them drive traffic to your restaurant

4. Modified Hours - Consumer behavior shifts during big events, so maybe open early or stay open later than normal

5. Meal Kits - Customers may not want to leave the house, but still need to cook, why not make their life easier with pre-prepared ingredients

What would you recommend a restaurant in Paris do during the Olympics do sustain revenue?

BONUS: PopUp Bagels x Two Friends

PopUp Bagels is frequently mentioned in this newsletter. Why? They are one of the companies at the forefront of commerce truly doing retail and they keep doing cool stuff. This week was no different with PopUp bagels partnering with DJ group Two Friends to host a concert in PopUp’s Greenwich Village location. For those unaware of Two Friends, this DJ duo rose to popularity in the late 2010s across Gen Z and college campuses releasing hour-long remix mashups of popular songs, called “Big Bootie Mixes.” Two Friends had their Madison Square Garden debut on Saturday, so this Thursday night concert at PopUp was a lead-up to that event. The concert was a great way to mutually promote brands and it ties in perfectly with both brand’s audiences. I wonder if this will be a regular event at PopUp a la Tiny Desk Concerts.

• Summary: Leap offers RaaS (Retail as a Service) - a turnkey solution for eCommerce brands to add and scale retail locations

• Founder(s): Amish Tolia, Jared Golden

• Amount raised & investors: $90M from Hyde Park Ventures, Costanoa Ventures, Equal Ventures, lightbank, and Tribeca Venture Partners

• How this will shape the future of commerce: Once you hit a certain threshold, all eCommerce brands need to launch a retail location, but that is costly and labor intensive, so why not centralize/outsource to someone focused on this

• Why should you use this technology?: For a lot of products, customers want to try the product in person and once you hit a certain eCommerce level you will need retail to truly accelerate growth

• Notable Clients: ASTR the Label, True Classic, Thirdlove, Sugarfina

• Pricing: Monthly fees

• My take: Every eCommerce brand needs a retail strategy and vice versa. This is a great eComm → retail tool. What are the best retail → eComm tools?

• Interested? Book a demo here

Additional Links:

1. High Street (aka Main Street) is dying, what is going to happen? What will the rebirth look like? (read more here)

2. Telehealth is all the rage, but physical clinics need some attention too (read more here)

3. Cava announces earnings, is generating net income, and same-store sales are up (read more here)

4. The rise of canned beverages and their connection to sport (read more here)

5. eCommerce continues to grow (see chart here)

6. P.C. Richard & Son, an electronics and household goods store, opens massive 30,000 square-foot location on the Upper West Side (read more here)

7. Consumer behavior is more than just buying the lowest price item (read more here)

   • My take: Starbucks’s new CEO take note!

8. Squid Game launches an IRL experience in NYC based on the TV show opening on October 11th with games, food, and an H-Mart partnership (see more here)

9. Pura Vida Miami opens a cafe in NYC (read more here)

10. Angel Reese Signes deal with Reese’s candy and launches apparel (read more here)

    • My take: It just makes sense!

11. A grocery store in Nigeria take basic materials (shipping containers) and turns them into a super elevated design (read more here)

12. Chick-Fil-A launches a streaming service with original content, game show, and animated projects (read more here)

    • My take: Unfortunately, the streaming wars continue - but for Chick-Fil-A could be a good way to stand out and further build loyalty

13. What makes brands like Chipotle and Cava have such huge value per location - their robust loyalty programs and the repeat customers those programs drive in (read more here)

14. Bonside, a retail financing startup, announced that they have financed 25 brick-and-mortar locations (read more here)

15. Subway adds a value menu with $6.99 subs to try and win back customers (read more here)

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