For many consumers, in many categories and locations, the store plays a valuable role as a source of experience and fun.
Author Jorge Velosa | Reading time 3 minutes
As Jerry Black, Chief Digital Officer of the AEON Group (a large Japanese retail group) commented:
“We have to make stores experiential, fun, inspiring and capable of providing entertainment. Omnichannel forces you to find a new purpose for the store” [1]
The physical store is able to deliver experiences that the virtual world is alien to, offering "Retailtainment". This way of generating a unique retail experience isn't exclusive to brands like Burberry or Apple. It also applies to food retail.
Eataly (fusion of eat + Italy) is the work of an Italian entrepreneur, Oscar Farinetti who, after selling an electronics retail chain, decided to create a new concept. Passionate about his country's food, he opened his first store in 2007, in Italy [2]. The concept has three components:
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a market, in fact, a replica of a traditional market, inspired by those of Istanbul or Florence, where we can enjoy and buy the best of Italian food;
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restaurants, with diverse offerings per store and with the particularity to be able to buy a product on the market floor and take it (eg fresh pasta, made to our taste) to be cooked and enjoyed at a restaurant of our choice;
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a culinary school, offering visitors the opportunity to learn how to cook from many of the offerings available in the store and even learn the basics.
The stores range from 4600 square meters (m2) to 17000m2.
The founder speaks about his stores as a “celebration of fantastic products that help people eat better” [3]. It is part of the slow-food movement, which as opposed to fast food, promotes foods that are "good, fair and clean".
The chain's success, with some aspects similar to American Whole-Foods in its food store component, is reflected in its quick expansion:
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in February 2017, Eataly has 18 stores in Italy and 16 in the rest of Europe, Asia and the Americas (two in New York);
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stores already had sales of € 300 million in 2013, a 30% increase over the previous year, with same-store sales growing between 4% and 10%;
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EBITDA (earnings before interest, taxes, depreciation, and amortization) of the operation varies by geography, but ranges from 20% to 15% of sales;
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New York's first store had more daily visitors than the Museum of Modern Art (MoMa).
The reasons for this growth are related to the brand value proposition. Beyond the history associated with Italian food, the offer is based on an experience, a moment of "Eatertainment", a complete show through a balance between information, training, flavors, and scents that convey emotions to those who enter the store. Eating at the store means that visiting becomes a socializing experience.
A supermarket has a different value proposition, based on convenience, variety, and price, generating in environments of low inflation and low economic growth significant price wars. Eataly, given its unique offering, achieves average prices 20% higher than other food stores [4], and a gross margin that can double that of a supermarket. The store's central location and design support this premium price. The large store is needed to accommodate restaurants alongside a market and a cooking school. Restaurants bring consumers and drive traffic to the store, which requires high investment but is quickly recovered by the additional margin. After openings in Italy, stores in other countries are based on franchising agreements with local partners, where the company provides know-how but invests with partners who provide a share of the necessary capital.
The store can be an experience and can be re-imagined.
[1] Alan Treadgold & Jonathan Reynolds 2016, Navigating the New Retail Landscape, Oxford University Press, cap.7
[2] The Economist, Eataly, Let them eat truffles, 30 November 2013
[3] Oscar Farinetti World Retail Congress, Rome September 2015
[4] Sunil Gupta, Michela Addis, Ruth Page, 2014, Eataly – case 9-515-708 Harvard Business School
