As Jerry Black, Chief Digital Officer of AEON Group (a large Japanese retail group) commented:
"We have to make shops experiential, fun, inspiring and able to provide entertainment. Omnicanality forces us to find a new purpose for the shop." [1]
The physical shop can deliver experiences that the virtual world is oblivious to, offering "Retailtainment". This way of generating a unique retail experience is not exclusive to brands like Burberry or Apple. It also applies to food retail.
Eataly (a conjunction 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 the first shop in 2007 in Italy [2]. The concept has three components:
1. a market, in fact a replica of a traditional market, inspired by those in Istanbul or Florence, where we can enjoy and acquire the best of Italian food;
2.restaurants, with a wide variety of offers per shop and the curiosity of being able to buy a product on the market floor and take it (for example fresh pasta, made to our taste) to be cooked and enjoyed in the restaurant of our choice;
3. a cooking school, offering the visitor the possibility to learn how to cook with many of the offers available in the shop and even learn the basics.
Shops range from 4600 square metres (m2) to 17000m2.
The founder talks about his shops as being a "celebration of great products that help people eat better" [3]. It is part of the slow-food movement, which as opposed to fast food, promotes food that is "good, fair and clean".
The success of the chain, with some aspects similar to the American Whole-Foods in its food shop component, is reflected in its rapid expansion:
- in February 2017 Eataly has 18 shops in Italy and 16 in the rest of Europe, Asia and the Americas (two in New York);
- shops already invoiced €300 million in 2013, a growth of 30% against the previous year, with same-store sales growing between 4% and 10%;
- EBITDA (earnings before interest, taxes, depreciation and amortisation) for the operation varies by geography, but ranges from 20% to 15% of sales;
- New York's first shop had more daily visitors than the Museum of Modern Art (MoMa).
The reasons for this growth are related to the brand's value proposition. In addition to the history associated with Italian food, the offer is based on an experience, on a moment of "Eatertainment", a complete show through a balance between information, training, flavours and aromas that transmit emotions to those who enter the shop. Eating in the shop means that the visit becomes a socialising 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 shops [4], and a gross margin that can reach twice that of a supermarket. The shop's central location and design support this price premium. The high size shop is required to accommodate restaurants alongside a market and a cookery school. The restaurants bring consumers and generate traffic to the shop, which requires high investments, but which are, however, quickly recovered by the additional margin. Following the openings in Italy, shops in other countries are based on franchising agreements with local partners, whereby the company provides know-how but invests with partners who provide some of the capital required.
The shop can be an experience and can be re-imagined.
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[1] Alan Treadgold & Jonathan Reynolds 2016, Navigating the New Retail Landscape, Oxford University Press, ch.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
