To combat economic pressures as customers increasingly migrate online, retailers continue to look for ways to entice customers to their brick and mortar stores. One such approach has been the rise of in-store dining. Back in the 1900s many U.S. department stores ran restaurants within their department stores, many of which have stood the test of time. With online retail sales expected to increase by 16% by the end of this holiday season, retail locations are looking to add an experience to their physical stores that the online space can’t offer.
Tommy Bahamas is a flagship example of how lucrative in-store dining can be. The tropical shirt retailer’s 14 (and counting) island stores with restaurants generate 2.5 times the sales of their regular retail locations. Furthermore, the company’s restaurants generate approximately 12% of Tommy Bahamas’ total annual revenue of $452 million. In the company’s new fifth avenue store there is a restaurant on one floor and a bar on another, perfect for that shopping break. Also notable is Tommy Bahamas’ focus on quality, delicious offerings, in contrast to the sub-par food court offerings you would find in the average mall. Check out this commercial of their Myrtle Beach in-store restaurant:
The idea here is that the restaurant is an extension of your brand and the quality needs to be consistent with your retail offerings. CEO of Tommy Bahamas, Terry Pillow describes the reaction fellow CEOs have had to their restaurant-retail concept:
“Fellow CEOs are fascinated first of all that we have it and the second thing they’re fascinated about is that we run it ourselves.”
Indeed in the rise of the hybrid restaurant-retail concept, the trend is for the retailer to run their own restaurant, rather than having it as a concession. One of my favorite clothing retailers Urban Outfitters, have followed suit introducing restaurants into their two Terrain branded home and garden stores. These restaurants play on the popularity of farmers’ markets offering locally sourced food, to give customers a different experience and menu depending on the locale. Terrain’s president Wendy McDevitt acknowledges the lure of the retail-restaurant concept:
“The one thing you can’t get in the cyber world is the tactile experience, and that won’t go away. Food is becoming bigger in terms of entertainment value.”
The in-store restaurant concept is also a great way to increase the amount of time each customer spends in the store. McDevitt estimates that if customers typically spend up to 90 minutes browsing, this can double to 3 hours if stop for a glass of wine or lunch.
Other stores increasing their restaurant-retail offerings include Nordstrom, who are adding contemporary diners and espresso bars to their current eatery options and JC Penney who plan to add juice bars and coffee shops to hundreds of their stores over the next few years.
I think the in-store restaurant concept if executed well could be very successful for a number of retailers, but what do you think? Share your thoughts in the comments section below.
Read Full Post »
CrowdSourcing is a collaborative open call approach to problem solving and idea creation. One such example is Google’s Project Glass, which involved the company sharing an idea for future technology and requesting feedback from the public to create consumer driven products. Recently I read a research paper from McKinsey Quarterly by Arne Gast and Michele Zanini on the idea of crowdsourcing corporate strategy, which I will discuss in this blog post.
Why consider this approach?
So often an organization’s strategy suffers from a lack of diverse perspectives and lack of leader understanding of the operational challenges their employees face. As a result strategies are often created that sound great in the boardroom but have the opposite impact in practice. Leaders that fail to consider the implications of their strategic decisions on front line employees, may experience implementation challenges from employees who do not support the organization’s strategic vision.
Benefits of this approach
By incorporating perspectives from front line employees, strategies are less likely to be flawed relative to those created in isolation. Crowdsourced strategies have the potential to be more insightful and actionable. Employees are likely to become more engaged as they learn that their opinions are encouraged and can make a difference. As a result of greater employee involvement, implementation is easier and employees are more likely to support the company’s strategic direction.
CrowdSourcing strategy in practice
Companies that have adopted this approach range from the obvious: Wikimedia to companies that were not founded on collaborative content creation such as 3M, HCL Technologies and Rite-Solutions. HCL Technologies rethought their business-planning process to create greater transparency and to generate more diverse feedback and insights on their business plans. In 2009 the company launched an online platform called My Blueprint and invited more than 8,000 employees to view 300 posted business plans. Interested individuals gave detailed, actionable feedback on the plans and quality insights were obtained. By including others in the process, opportunities for cross-unit collaboration were more easily identified. Overall crowdsourcing enabled the company to gain fresh perspectives to greater analyze their business plans and focus on specific actions to take to achieve desired results.
While the concept of crowdsourcing strategy is a very new idea, this concept has great potential to improve decision-making, avoid group think, eliminate ideas that would not work well in practice and to create visions that are more meaningful to lower level employees. What do you think? Would your organization be open to crowdsourcing their strategy? Share your thoughts in the comments section below.
Read Full Post »
This week’s edition (February 20th – 26th) of Bloomberg Business Week contained an article titled (in the print edition) ‘Would You Like Fries With that Title Policy?’ The article reported on the purchase of O’Charley’s casual dining chain by Fidelity National. On February 6, 2012 the title company agreed to purchase O’Charley’s 340 restaurants for approximately $221 million in cash.
Diversification into unrelated markets is not a new business concept, however it is unusual in the current economic environment. Given the economy in recent years many U.S. businesses have been very cautious with growth strategies even in related markets. While growth in general is risky, to attempt to grow through diversifying into unrelated markets has even more risks attached.
The purchase will provide Fidelity National access to three new restaurant brands: O’Charley’s, Stoney River and Ninety-Nine. The later two of the three brands are thriving, however the O’Charley’s brand has struggled in recent years to differentiate itself from other casual dining establishments. Thus the biggest challenge Fidelity National will face is how to turn around O’Charley’s. As Bob Goldin, executive vice president at Technomic, a food industry research and consulting company acknowledges:
“O’Charley’s has been a leaky bucket for years, I don’t know if there’s a miracle worker who could turn this thing around.”
Strategy expert Richard Lynch in his Strategy textbook says that when an organization moves into unrelated markets, it faces the risk of operating in areas where its knowledge of key success factors is extremely limited. However, in the case of Fidelity National its knowledge of the restaurant industry is not as limited as you would initially suspect. The company actually entered the restaurant industry in 2009 forming American Blue Ribbon Holdings in order to invest in two restaurant chains: Baker’s Square and Village Inn. In 2010, Fidelity National bought Ohio-based casual dining chain Max & Erma’s out of bankruptcy; adding it to American Blue Ribbon Holdings.
Fidelity National justifies such expansion as a way to grow and spread their risk across different markets. The company has a dominant share of the title market and little leverage to further expand in this market due to antitrust regulations. The restaurant market by contrast is very scalable with an indefinable amount of growth potential. Adding O’Charley’s to American Blue Ribbon Holdings has substantial cost benefits for the company, particularly in regards to economies of scale on the supply side. As Fidelity National’s Chairman William Foley explains:
“We have been seeking an investment in a larger, scalable, strategic restaurant operating company to complement our successful investment in American Blue Ribbons.”
Richard Lynch acknowledges that organizations can be successful through unrelated diversification if the holding company managing the venture uses strict but clear financial controls. Time will tell if Fidelity National’s purchase of O’Charley’s was a smart move and if they can turn the brand into a success that they could possibly sell for profit. Since the company also holds minority stakes in HR/Payroll system Ceridian and automobile alternator and starter maker Remy International. One thing is almost certain: Fidelity is unlikely to stop investing outside their core business any time soon.
What do you think? Please share your thoughts in the comment section below.
Photo Credit: Wikimedia Commons user: Cloudbound
Read Full Post »