Retail Role Reversal: Grown-Up Retailers Act Like Start-Ups, And Vice Versa

“We’re moving fast, we’re innovating, we’re having fun.” The words of a start-up retail entrepreneur, right? Well, no, it’s actually an exec from Walmart – Marc Lore (President and CEO of Walmart eCommerce, U.S.).

“All (our stores) are doing way beyond expectations…we can have a really large brick-and-mortar experience.” That’s got to be a legacy retailer, correct? Wrong again. It’s Philip Krim, co-founder and CEO of online mattress retailer, Casper.

Casper store, SoHo, NYCJON BIRD

We’re experiencing a “Freaky Friday” moment in retail – where grown-up retailers are behaving like start-ups, and start-ups are acting more like grown-ups. Perhaps it’s a sign that we are reaching a new level of market maturity after a disruptive couple of decades, post that first fateful headline in the New York Times in 1994 – “Attention Shoppers: Internet Is Open.”

Legacy retailers such as Walmart and Target are swapping big box thinking for a start-up-in-a-garage mindset, with striking results.

Walmart’s latest earning release saw comps up 4.5%, and online sales increase 40%, on the back of a buoyant economy, and innovations like grocery pick-up expansion(now 1,800 stores), new “Pickup Towers” (700 by end 2018), new website, new interactive digital installations in store and new brand acquisitions. As CEO Doug McMillon said: “We are pleased with how customers are responding to the way we’re leveraging stores and e-commerce to make shopping faster and more convenient.”

Target SoHo, New York CityJON BIRD

Competitor Target is also investing heavily in its future, with hundreds of “reimagined” stores, new small-formats, a new drive-through service, the acquisition of grocery-delivery start-up Shipt to facilitate same-day delivery, and the launch of a dozen or more new private label brands in the past year. All that has contributed to good momentum in the second quarter, with “unprecedented” traffic growth of 6.4%, comp sales growth of 6.5% and digital sales surging 41%. According to CEO Brian Cornell, “(we are) putting digital first and evolving our stores, digital channels and supply chain to work together as a smart network to deliver on everything guests love about Target”.

Meanwhile, the start-ups are going old-school as their brands develop and business models mature. JLL Retail Research released a point-of-view last week observing that “E-commerce Retailers Plan 850 Physical Stores in the Next 5 Years.” Among them, Casper is set to open 200 stores in the next three years, lingerie retailer AdoreMe will launch up to 300, and cult sneaker brand Allbirds will continue its physical expansion beyond its recently opened 4,800 sq. foot SoHo flagship*.

Allbirds flagship store, SoHo, NYCJON BIRD

Online pioneer Warby Parker now does more than half its sales in physical stores. And as noted in Retail Dive, most of these new stores are not showrooms – the vast majority are highly productive spaces.

We’re even seeing hybrids of old and new. Both Macy’s and Lowe’s are incorporating b8ta tech discovery centers in store. Macy’s invested in the start-up, as they did in concept store “Story”.

So, on the one hand we have Walmart’s Marc Lore saying that “established companies need to act more like startups”. And on the other hand, The Atlantic reports on the “throwback revolution” of start-ups recognizing the “value of storefronts”. Ultimately this will play out to a new retail reality where there is a singular kind of retailer – one with an “obsessive compulsive focus on the customer” (thanks Jeff Bezos), and one that grants access to its products and services wherever, whenever and however the shopper wants them.

*We need to put the store openings in context, however. According to Coresight Research, there have been 4,799 stores closing in the U.S. year-to-date, and 2,644 openings. So even with e-commerce retailers opening new physical locations, retail real estate is shrinking overall.