Issue #53: Europe vs the United States Retail Edition

As I write this newsletter, I am currently in the air over the big pond we call the Atlantic Ocean. After two amazing weeks in Europe, I am headed home to NYC. To catch the latest retail trends breakdown from my perspective, that will have to wait until next week. Instead, this issue will be focusing on the top five (out of the many) takeaways I have comparing retail in the United States and retail in Europe. On this trip, we were solely in Italy and Switzerland, but I have spent time across many other countries in Europe, so these takeaways I would say generally apply there too, from my past experiences.

Before we dive into the takeaways, I think it is super important to set the table with the fundamental difference in Europe, not just in retail, that lays the groundwork for how all retail in the continent operates. In Europe, everything is denser. The EU has an average density of 112 people per sq km compared to 36 per sq km in the USA. People are living closer together, working closer together, and shopping closer together. Now, a big part of that discrepancy is that a ton of land in the United States is unoccupied/farming/national parks. However, take Los Angeles, the second biggest city in the United States by population. It has a density of 3,206 people per square kilometer. Moscow, the second largest city in Europe, has a density almost 1.5x that of 5,080 people per square kilometer.

1,800 more people per kilometer is a lot to fit into a space, which is why you see smaller format stores rise to the occasion. Let’s look at the supermarket comparison example below:

In cities, that difference in size is exacerbated further. Most of the grocery stores I saw in the city were a couple of thousand square feet, at most. Compare that with a place, like New York City, where the grocery stores are smaller than their suburban counterparts, but still at least 7,000-10,000 square feet. Which leads to the most fascinating part in my opinion, the supply chain. When you have a smaller store, you can’t store as much, if any, extra stock in the back. You require daily deliveries and more stores throughout the area so that the demand can be satisfied. The model is totally flipped on its head. More stores in an area with smaller square footage, fewer items, less labor, and more frequent product deliveries. This ethos, combined with the focus/customer demand of more local items in seasons when they are best, also means a shorter supply chain, traveling short distances via truck or van, and less of a reliance on a major cold chain. Now that we have covered the supply chain and store size ethos, let’s dive into the takeaways.

Takeaway #1: Purchasing & Customer Experience Is Very Different

Right from the start, many things stood out in the customer experience as different, so I decided to lump them into one takeaway. With regard to how you purchase, omnichannel is still there, but in different ways. Delivery is less present, and as a result of that, the delivery apps themselves are less dominant. Part of this is due to the culture I will touch on in #2, and part is due to the fulfillment modality. Compared to NYC, e-bikes were much less prevalent, which is the main way delivery gets fulfilled. E-bikes help drive down the cost of delivery because you can batch more deliveries in a given time period, which leads to cheaper delivery. The other difference was the widespread presence of vending machines, which help fill in the gaps of shorter opening hours of stores. These vending machines hold your typical beverages and snacks, as well as coffee, sexual wellness products, healthcare products, and even phone products (like SIM cards).

On top of the omnichannel differences, the in-store experience is wildly different. In non-touristy stores, partially due to having less labor in a smaller format store, no one is greeting you and asking if you need any help, like Walmart famously does with its greeters. Simply, there isn’t enough purchase volume to spread out that labor cost. Similarly, for bagging the items you purchased, you are on your own. Finally, the United States has come a long way on this front, but in Europe, purchases are almost exclusively tap-to-pay, via tapping a card or mobile payments (Apple Pay, Android Pay, etc.). Compared to when I returned from study abroad in 2019, almost all places now take tap-to-pay in the United States. In Europe, this payment method caught on between 2010 and 2015.

Takeaway #2: Retail = Public Space

While not exactly the same, it was very interesting to me, especially in Italy, to see retail function as the public space. This ethos was clearly ingrained in people’s day-to-day lives. Bars, which serve coffee in the morning and alcohol at night, still had that small inside format with limited seating, but seating still spilled into the sidewalk, streets, and parking. In the morning, these were filled with people catching up, having meetings, etc. The same at night, filled with people experiencing retail. Retail has filled the gap where a Central Park may have been utilized in NYC. On the positive side for retail, it allows many more retailers in the food and beverage space to succeed because there is increased demand from customers.

Takeaway #3: Digital Pricing On Most Shelves

Subject to much scrutiny and backlash over fears of surge pricing/dynamic pricing, retailers in the United States have not really rolled out digital price tags, except some Walmarts. For retailers in a smaller format, with less labor, updating price tags is a timely, costly, wasteful endeavor. For instance, see a European retailer below, which has updated its price tags to digital.

Takeaway #4: Simple Discounting & Loyalty Programs

In the United States, most companies with a loyalty program, not just in retail. Whole industries have popped up breaking down how to use your airline rewards. In Europe, retailers have opted to streamline rewards systems, if they offer any. Many of the discount chains purely focus on getting the lowest price for the customers, with no gimmicks. Those that opt for a loyalty program typically offer simple points/cashbacks/rewards. On the discounting side, there are not many strikethrough discounts on individual items, or buy more items and save. Instead, retailers often focus on everyday low pricing and discounts to sell items before they expire. Very much the Walmart/TJs method (can you tell I just finished reading Sam Walton: Made In America and Becoming Trader Joe on my trip?)

Takeaway #5: Convergence Of The Same

In Rome, there were many places to buy a hamburger, but only one had mini-billboards plastered across the city: McDonald’s. In fact, there were not really any advertisements throughout the city like it, just McDonald’s.

Throughout Rome, not only did you see the golden arches, but also many other American brands and celebrities: Sephora, Lady Gaga, Ralph Lauren, Starbucks, Nike, Foot Locker, Marriott, Hyatt, Amazon, and more. This also applies to many of the trends that mostly originate on social media. However, this goes both ways. There is a convergence of what is popular, trending, and in demand. More of the same across the world. In the United States, it is the same. Swedish candy stores have started to expand via virality on TikTok. Clothing brands, like Zara and H&M, continue to see popularity due to their affordable prices and fashionable styles (interesting connection here to the struggles of Forever 21 and the growth of these stores). There are countless examples in both directions. It suffices to say was an interesting trip to start reading the book, Filterworld: How Algorithms Flattened Culture, which is diving into this topic, but on social media/algorithms.

For retailers going forward, the opportunities will be there to expand quickly across the globe, but on the flip side, competition will be higher. The smartest retailers will act like global brands from the start, utilizing social media to their advantage.

• Summary: Flying Tiger Copenhagen/Tiger/Tiger Copenhagen is a Danish variety store with 923 locations operating across 42 countries. It sells various non-perishable items - home items, beauty items, gifts, knick-knacks, and more!

• My Take: A location with 923 locations has yet to appear on this startup section. However, in the spirit of takeaway #5, I thought I would choose the retailer I would like to see in the United States, in this case, Flying Tiger Copenhagen. It briefly operated in the United States from 2015 - 2020, but never took hold. However, the products in the store seem perfect for social media, and I could easily see this store going viral on college campuses and big cities!

• Founder(s): Lennart Lajboschitz, Suzanne Lajboschitz

• Funding: EQT Partners

• Number of Locations: 926

• Social Media Following: 497k on Instagram, 249k on TikTok

Additional Links:

1. Crumbl is testing out dirty sodas, which are the soda version of a milkshake and no alcohol (read more here

2. A deep dive into the camping real estate market - who knew it had a $20B market size? (read more here)

3. Lil Sweet Treat opens its fifth store worldwide, located in Philadelphia (read more here)

4. A deep dive into California Burrito, a 103-location burrito chain in India (read more here)

5. Disney partners with Gopuff and Shopsense to launch digital concession stands where people can purchase products while watching streaming (read more here)

6. NikeSkims launch pushed back due to product delays (read more here)

7. Lululemon to lay off 150 corporate employees (read more here)

8. Sam’s Club launches price cuts on 1,000 items as it (already?) starts its back-to-school push (read more here)

9. Nordstrom is resuming the growth of its Nordstrom Local locations, launching in SF and Brooklyn (read more here)

10. A deep dive into two retailers seeing success in retail furniture: Bob’s Discount Furniture and IKEA (read more here)

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