Why Specialty Retailers Are Getting Into the Restaurant Business

Dining options invite consumers to come in and stay awhile

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We’re used to getting coffee with books and meatballs with Swedish furniture, but not so much avocado toast with wedding rings or hot chocolate with cellphones. Nevertheless, thanks to online competitors and the preferences of younger consumers, dining options are expanding among specialty retailers as they seek to create welcoming spaces where consumers will linger and they can casually foster relationships.

“Roughly 80 percent of a retailer’s total sales are coming from the store. … Retailers know they need to use their physical stores to create an inviting, engaging and differentiated customer experience to attract customers, introduce products and create an overall affinity for their brand,” said Joanne Joliet, research director at research firm Gartner. “This further supports a retailer’s online offering, as customers will leverage a retailer’s online offering for pure transactional needs once they are familiar with the products.”

Consumers are also eating out more. Per Joliet, in 1955, the restaurant industry comprised 25 percent of the family food dollar. By 2017, that figure was 48 percent.

“Retailers recognize customer demand for convenience, including the escalating rate of fast, fresh, prepared food,” Joliet added. “It meets their customers’ daily needs and is beneficial for retailers as it drives traffic to the physical store, fostering retention and creating an engaging customer experience.”

That includes home furnishings retailer Crate and Barrel, which said it plans to open a restaurant in a Chicago-area store in spring 2019 with a “modern menu” from Bill Kim, the chef behind the restaurants BellyQ and Urbanbelly.

But Crate and Barrel is hardly alone.

Last month, luxury lifestyle brand Restoration Hardware opened RH New York, or what it calls a “90,000-square-foot experience” that includes retail alongside a rooftop restaurant, wine terrace, outdoor park and coffeehouse.

The Lounge by AT&T opened in Seattle as a place for customers (and non-customers) to relax and pick up purchases.

And on Sept. 29, telecommunications company AT&T opened The Lounge by AT&T in Seattle—a “3,000-square-foot space designed to be part retail store, part coffeehouse and part hangout space.” Not only that, but the coffeehouse—local business Ada’s Discovery Café—also features “sophisticated coffee robots” and is managed by the winner of the 2018 U.S. Barista Championship. And, of course, consumers can shop from a digital catalog and retrieve purchases from lockers.

“We want it to be a second living room for … residents, both AT&T and non-AT&T customers, to meet up, work and hang out,” said Jeff Bradley, West region president at AT&T.

Food and drink can be an effective way to draw traffic.

In November 2017, jeweler Tiffany & Co. unveiled its first dining option, The Blue Box Café, at its New York flagship to serve “customers who have always dreamed of having breakfast at Tiffany.”

Tiffany opened this cafe because who wouldn't want to eat breakfast at Tiffany?

Awash in Tiffany Blue walls, seating and decor, a Tiffany rep said on any given weekday, it has 1,500 to 2,500 table requests on its waitlist—and 2,500 to 4,500 on the waitlist on any given weekend. Tiffany allows customers to make reservations 30 days in advance, which tend to be booked within two minutes.

This ability to draw a crowd is no small feat in the era of one-click—or no-click—shopping.

“Retailers are looking to differentiate stores from purely transactional experiences, which you can get online,” Joliet said. “Why would I go in somewhere to do my shopping if I can just … have it delivered?”

Retail historian Vicki Howard, author of From Main Street to Mall, agreed that food and entertainment are attempts to provide something the internet can’t offer.

Decades ago, she said, downtown department stores offered everything under one roof, including services, dining and shows. “They were a central place you could go to take care of all your needs,” she added.

Then along came the 1980s and what Howard called the “make money at any expense kind of a climate” that led to bankruptcies and store closures—as well as consolidation under a few nameplates. “So you lost a lot of these specialty stores with local identifications in people’s minds and they were run in a more centralized fashion,” she said.

Now retailers are trying to recreate some of the in-store magic of that bygone era. But, per Howard, it’s just coincidence the pendulum is swinging back.

“I don’t believe they have a sense of history,” she said. “It just so happens that there were retail models in the past that mixed sales and sociability, and these were hugely successful.”

This story first appeared in the October 8, 2018, issue of Adweek magazine. Click here to subscribe.
@lisalacy lisa.lacy@adweek.com Lisa Lacy is a senior writer at Adweek, where she focuses on retail and the growing reach of Amazon.