Issue #8: The Rise of Services & Experiences

Trend of the Week:

Ace is the place with the helpful hardware folk. An iconic slogan that may be more forward-looking than focusing on the present. This week, Karen Bloomfield, the VP of marketing of home services at Ace Hardware, sat down with Retail Brew to discuss the future of Ace Hardware and there were some fascinating insights for any type of retailer going forward. In the interview, one of the key points was Ace has seen their customer’s age demographic shift and is expecting that to continue going forward. Currently, most of their customers are people who want to do services themselves, but those customers are getting older and will not be able to continue servicing the issues themselves. Additionally, Ace feels that younger generations, despite the data showing millennials and Gen Z are into DIY, will not replicate the same tendencies to fix home issues specifically themselves. Betting on the trends reversing directions, Ace launched a Home Services business that offers painting, plumbing, electrical work, and other services at 400 of their locations. Regardless of where the trends go, if the younger generations do try and do things themselves, they rely on YouTube and other platforms to learn, which Ace should continue to invest in like they do with their Youtube channel, and leverage that to remain a market leader.

Why is this investment in services interesting? As marketplaces further expand and commodity goods, like many of the products Ace sells, become available everywhere, what differentiates Ace and makes you want to buy from them is the helpful hardware folk they have. Walmart, Amazon, Target, etc. will never build up the knowledge Ace has. Additionally, now Ace generates revenue on the product purchase and the service. This type of added value is something all retailers should explore. Similarly, I believe that other types of businesses that may not be able to offer services, can offer experiences. For instance, you may not hire a restaurant’s chef to come cook in your home, but you may be willing to go to make pasta in the restaurant on a slow Monday night. Retailers should incorporate services and experiences into their business to differentiate from the pack. It will be really exciting to follow along what Ace’s plans are.

News of the Week:

Positive:

1. Walmart Updates Perishable Distribution Centers - Shafter, California; Lancaster, Texas; Wellford, South Carolina; Belvidere, Illinois; and Pilesgrove, New Jersey. What do these places have in common? Walmart announced that new automated perishable distribution centers would be built in those locations. These new perishable centers will focus on grocery products and serve as the go-between of the stores/end customers and the suppliers. Additionally, these centers will have robots and algorithms to determine optimal product placement, which is key to minimizing waste and maximizing the customer experience by providing the freshest food.

2. Innovative Outdoor Dining - With the updated rules of New York City, part of the deal is that the outdoor dining structure can no longer be permanent. That is a lot of work to take up and down, so many restaurants have been declining to participate in the program and not have outdoor dining. The cost of bringing the structures up and down is too much relative to the revenue. Some restaurants were able to generate substantial revenue. Recently, I came across a shipping container that had been converted into an outdoor dining structure and was impressed by the concept. Shipping containers are very sturdy and also easily transportable. Whether the costs is worth the benefit due to the need to move to storage is unclear, but it could be an interesting business for someone creating and managing these shipping containers.

Negative:

1. Subway Retail Struggling - Despite subway ridership continuing to climb, albeit not where it was before the pandemic, the retail locations are still struggling. This week it was announced that 75% of retail storefronts remain empty. A couple of issues are at hand here. First, there is less foot traffic. Second, the rents are very expensive. However, my belief is the core issue with this type of retail is they often don’t match the occasion people want when they are rushing to and from their busy day. People don’t want to shop and browse a shoe store then, but food and other convenience items may be of interest. I think the right type of business, like a large coffee chain with an app, could succeed in the subway but other than that this type of retail seems destined to fail given the high cost structure.

Startup Feature: Madison Reed

• Summary: Omnichannel (retail and D2C subscription) hair color services and products

• Founder(s): Amy Errett 

• Amount raised & investors: $273M from Marcy Venture Partners, Comcast Ventures, True Ventures, Norwest Venture Partners, Sandbridge Capital, and more

• How this will shape the future of retail: The combination of retail and D2C subscriptions is a great growth plan and strategy for ecommerce startups going forward

• My take: Just like with Ace, experiences can be a real differentiator and give people a reason to shop with Madison Reed compared to other options

Job Opportunities:

New York Shuk | Brooklyn, NYC - Sales & Operations Associate

Gregorys Coffee | New York, NY - Chief of Staff

Additional Links:

1. Flexport launches new fulfillment center (read more here)

2. Paramount and Skydance merger (read more here)

3. Graza launches in Erewhon (read more here)

4. True Classic partners with Leap to launch additional stores (read more here)

5. Mike Hot Honey & Dunkin collaborate on new menu items (read more here)

6. Nantucket Crisps launches retail storefront (read more here)

7. Black Sheep Coffee expands to the US (read more here)

8. Van Leeuwen and Hello Kitty partner to celebrate Hello Kitty’s 50th anniversary (read more here)

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