Retail’s “Last Mile” problem (and how to make the most of it)

A few weeks ago the New York Times ran a piece about near-record vacancy rates at shopping malls around the country:

“Malls, over the last 50 years, have gone from the community center in some cities to a relic of the way people once wanted to shop. While malls have faced problems in the past, the Internet is now pulling even more sales away from them.”

A lifetime ago in internet time (~15 years ago in actual calendar time) I ran several product lines for outdoor retailer Patagonia and also led the creation of the company’s first online retail presence. Even then — in the earliest days of e-commerce — I remember lively discussions about the need for location-based retail to reconsider its reason for being.

Once upon a time, retail stores served as valued curators, merchandisers and local points of distribution for national brands. 

Slowly at first, and now in bigger and more decisive bites, each of those roles is being replaced by digital intermediaries:

  • Online megastores like deliver more assortment and convenience than any local store can possibly match;
  • Curation platforms like Pinterest, Polyvore and make product discovery effortless and fun (especially for iPad owners); and
  • Peer-to-peer commerce platforms like Etsy, Storenvy and Shopify have enabled an explosion of “indie” shopping experiences that even the most artful local boutiques struggle to match.
So what’s left for location-based retail to own?
Fifteen years ago the futurists in retail were all talking about “shopping as entertainment” — thinking about the retail experience not in terms of merchandise (or even merchandising), but as a fundamentally social and sensory experience that occupied the same mental + economic space as eating in a restaurant, going to a bar or coffee shop, or attending a movie.
As the internet continues to undermine the traditional foundation of retail, this insight — — wrapping merchandise sales in social + high-touch experiences — feels more valid than ever. The only part of the retail experience that the web can’t take away is the social and sensory layer (which is a big part of the reason people — especially women — choose to shop in the first place).
There will always be a “last mile” problem — and opportunity — in retail, not to connect people with stuff, but to connect them with each other.
If I were creating a location-based retail concept today, it would include some combination of the following elements:
  • Subscription Commerce — Like BeachMint, BirchBox or ShoeDazzle do for online sales, organize groups of local shoppers around tightly-defined lifestyle + merchandise segments, and offer them an ongoing stream of benefits that make them feel like members in a club.
  • Group Buying — Give the group a reason to stick together, and invite others, by delivering more value to them as a unit than they would receive as individual shoppers.
  • Flash Sales — It doesn’t have to be the core of the value proposition, but artificial scarcity and time urgency are incredibly powerful intermittent reinforcement mechanisms to maintain engagement and keep response rates high.
  • Curated Experiences — Remember, it’s not just about stuff. As with flash sales, members will show up more often for one-off “exclusive” experiences — all pivoting around your selected lifestyle theme(s) — that take them out of their ordinary lives and make them feel special.
I don’t know of any existing or insurgent retail brand that’s running this exact playbook today, but bits and pieces of it are certainly visible among both online and the more forward-looking location-based retailers.
By pivoting around people and experiences, and not stuff, this approach turns traditional retailing on its head — which is exactly what’s needed to survive. It’s only a matter of time before all these elements come together in a single offering — and when it does it’s going to kill.