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:
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 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.
Marie Wiere's Blue Sky Management Blog 