Part one of our two-part series on hybrid-retail strategies: A hybrid-retail strategy combines two or more types of businesses, often with a seemingly strange mix of offerings, within a single location.
For many years, retailers have changed their business models to account for market trends, customer demands, and where they see their business going. And while these adaptations have become the norm, what stands out are those retailers who have hit on the magic formula of combining two businesses, or simply adding new business lines to an existing retail operation, that not only increases customer engagement and revenue but also creates a strangely appealing hybrid-retail combination that customers love.
Some retail hybrids couple products with services, that’s the natural first step of a hybrid-retail strategy. Others, like department stores and clothing stores, have taken a step further to combine products with experience, like adding food services and other highly-profitable QSR models, to full-service restaurants. Then there are those few, who combine 2-3 businesses together that appear to make no sense at all, but somehow just “work” (look no further than LA’s Good Life Health Food Centre to get a sense of what we mean).
Why do hybrid-retail business models work?
Really, like most things in retail it comes down to customer experience and economics. Customers have become increasingly more driven by “brand” and the shopping experience than by simply grabbing what they need at a great price. And going hybrid with a retail business by adding diverse revenue channels that are outside your market, allows you to increase engagement and revenue opportunities with shoppers.
And that is a formula for strengthening your position in your local market. It means offering something different, unique, value-added, which can increase your market share within your niche. It out-paces the competition in creativity, customer experience, and creates a real destination shopping experience.
It’s you against the competition and customer loyalty matters.
The idea behind a hybrid-retail model is that you can simply do more. Bring in customers for one offer during the hours that are typically slow for another offering – you’re paying for your space whether it’s busy or not. Cross-selling from one customer group by introducing them to a new offering – uncovering new revenue opportunities with your existing client base. Or simply giving a stronger, more enjoyable, more convenient customer experience – building deeper relationships with customers.
The goal for any hybrid-retail business or a regular retail business is to provide customers with a destination shopping experience, build their love of the brand, and develop customer loyalty. This not only builds a stronger brand, which in itself is a benefit to the business, it increases dwell time and sale size, and it gives consumers something they cannot get on the web or elsewhere.
As you know, online businesses are transforming the retail industry. And amidst all the talk of omnichannel retail, the industry has given rise to the local niche retail economy. Where small retailers are able to establish a loyal local customer base by creating a clear niche. And in the shift, you’re given the creative and business freedom to let go of thinking of yourself as single-product-line sellers. And of course, converting to a retail hybrid model doesn’t necessarily have to be a permanent transition. This can be for a limited period of time or seasonal.
Common Challenges for Hybrid-Retail Business Models
Like anything worth doing, there are challenges in retail hybrid creation. There are potential issues in helping VC investors, lenders, and other prospective stakeholders see the vision for a hybrid business model. There’s the question of bringing prospective customers to see it too. And, marketing efforts must successfully draw in shoppers willing to give it a chance to make them love it.
There is also the challenge of identifying and bringing on board an experienced partner to lead operations in the new business. For example, if you’re an expert clothing retailer ready to open a café in your adjacent space, you’ll need someone with a track record of running a successful foodservice business. If you’re running a restaurant and want to add a retail storefront, you need someone with relative experience.
Taking the big step to roll out a new hybrid business model can be especially stressful, as startups go. It’s an unconventional business transition, so there’s a sense of embarking on an uncharted course. In the new retail era, many entrepreneurs have taken heart from witnessing the birth of such highly successful large-scale hybrid-retail businesses. Yes, there’s a risk in leaving behind the sense of security in the conventional model, but for many retailers today, there’s proving to be new and greater security in operating outside the box.
Standing out to bring people in.
The retail economy has proven it has room for just about any creative approach to building customer relationships. Fears of the decline of brick and mortar retail have spurred that exceptional entrepreneurial creativity and tapped into new levels of resourcefulness. And in truth, current stats show that retail isn’t in decline, it’s simply evolving.
So, while it seems contrary to the norm, the safe approach for today’s retailers is to in fact embrace the slightly odd. Discovering and developing a niche local customer base. Embrace hybrid retail opportunities. And give your customers what they clearly want — a fuller customer experience.
Thinking about hybrid development options for your niche store? At CBSF, our retail strategists and designers can help you realize your vision in creating a shopping destination for your customers. Contact us anytime at CBSF Store Fixtures Canada at (800) 535-2279, to schedule an appointment to discuss your ideas for your next store location.