Article

Secrets of high-concept retailers

Retailers such as American Girl that forge their own path thrive, despite tough times.

May 11, 2009

With most retailers delivering their worst performance ever in recent months, the news is full of stories of stores cutting prices to the bone to lure reluctant consumers. But many high-concept retailers are doing well despite the recession. High concept, in film or in general, is considered easy to sell to a wide audience because it delivers upon an easy to grasp idea that is original, interesting, colorful, and sometimes humorous.

Here are the stories of three high-concept retailers, each aimed at a different target with a different business model and at a different stage of maturity. American Girl is a large well-established brand with seven stores and bistros around the country, Terrain is a startup with a single location near Philadelphia, and Knockout Haircuts for Men is a four-year-old franchise business with 323 stores in 20 states.

High-concept retail is alive and well, but requires laser focus on the customer and delivering a customer experience that exceeds expectations by a wide margin to succeed in today's environment.

American Girl

If you have a girl over age four in your life, you know of American Girl. For the rest of you, AG was founded in 1983 and was acquired by Mattel in 1998. It offers a line of dolls of all sizes, including its namesake line of American history-inspired "Girls" and age-appropriate books, magazines, TV shows and movies. American Girl Place is an immersive experience where girls and their families can spend an entire day enjoying live entertainment, a white linen restaurant with booster seats for the dolls, and shopping for dolls, doll paraphernalia, books, and more.

Interbrand Design Forum recently named American Girl to its list of the top 50 U.S. retail brands for 2008. With the smallest retail footprint on the list, this new status begs the question: what does American Girl do so well? On the surface, the whole brand experience is all about the girl. But behind the scenes, and in their hearts, they're as much about the parents as the girl.

To reach parents and tell their story, the company is careful about exposure and channels. "Countdown for Christmas" with QVC Network was a success when it launched last year, and according to Julie Parks, from AG's PR department, "we'll do that again this year. It's an interesting way to get our story out there (with moms) in a brand-right way. We can explain the product line, which traditional retail doesn't allow."

AG price points are high — too high to be an impulse buy. The dolls are a considered purchase, and that means parents are part of the decision. The products and entire experience ooze age-appropriateness, which is a relief to all who worry about the pressure girls feel to grow up too fast and wear makeup, high heels, and suggestive clothing at an ever-younger age.

The formula is a clear hit, with girls and their families. The company had sales of over $460 million last year, up seven percent from 2007. Driven by strong sales of products tied to the Kit Kittredge movie, and additional sales from two new boutiques that opened in the second half of 2007 in Atlanta and Dallas, American Girl is the bright spot, and the only retail concept, in the Mattel portfolio.

As Julie Parks reported, "last year, we stood out among our peers in the toy industry and among retailers in general. This year, our mantra is to preserve cash and focus on the core business with a sense of urgency." That's how top performers are staying on top.

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Terrain

Nurtured deep inside Urban Outfitters, this new concept is blooming. Tapping into several important trends of our times — like all things green, wellness, casual living and dining, DIY and more — the management team at Terrain is taking its time honing the concept before expanding beyond the one store in a Philadelphia suburb.

Different from gardening and outdoor entertaining store, Smith & Hawken, Terrain focuses more on wellness and offers how-to classes for planting and growing a garden and for cooking and eating from it, as well as selling the gardening lifestyle. As managing director John Kinsella put it, "ten years ago, they had the concept of being a mecca or destination store for people interested in the gardening lifestyle, but didn't really deliver it. Times have changed, and our 'locavore' customers see us as a destination for wellness, gardening, food and more — people want a place where they can learn about and experience what's great locally."

Zoning will play a big part in Terrain's expansion. The company's go-slow approach echoes Anthropologie's deliberate "walk-before-you-run" mentality. And creating an entertaining, unique customer experience throughout is the secret ingredient to hook customers and keep them coming back for more.

Knockouts Haircuts for Men

Our research with men a few years ago on behalf of a footwear client showed that men felt most shoe stores treated them like women with big feet. What they really wanted in a retail experience was to shop for pretty much anything in a place that felt like a sports bar where attractive, scantily clad women waited on them. In 2003, along came Knockouts Haircuts for Men. In a nutshell, Knockouts is the Hooters of men's grooming. It's a full service men's hair salon offering a lot more than just haircuts.

Knockouts stylists operate on a commission structure that encourages them to sell add-on products and services. All locations offer color services, manicures, pedicures, waxing, and six types of massage. Some locations also offer hair replacement, cigars and a shoeshine. As a result, while haircuts account for 85 percent of most men's salon revenue, at Knockouts haircuts are closer to 60 percent.

The essential Knockouts customer insight is that when it comes to grooming, men have been treated like extra large women when what really they want is a consistently personal, pampering experience that is tailored to meet their unique needs. According to CEO Tom Friday, "everything about our store — from the walls, to the flooring, to the type and placement of the treatment chairs — is based on research about what men want." One small example: Unlike women, men don't want to be on display when they're getting a pedicure. Knockouts took that into account in designing their store layout and services. Friday believes that this attention to detail helps explain why Knockouts' customer retention is nearly three times the industry average.

Knockouts also provides distinctive training and incentives to stylists. Friday reports that "customers want to be welcomed by the Knockouts girls, and we train the girls to run the store." As a result, stylists tend to stay with the company longer than average. There's even a program for managers who have been with the company five or more years to become owners of their own franchises. Friday clearly believes this stability in the salon employee base is good for business, helping to increase customer loyalty.

As Forbes recently reported, personal care and grooming are among the few categories people are still spending money on. Knockouts appears to be getting more than its fair share — after opening a total of 17 new franchised locations in five states in 2008, the company is on track to open a minimum of 40 in 2009. Impressive growth at any time, all the more so given the current state of the economy.