Clever retailers beat high rent with paper-thin stores

qr shopping mobile smartphone storeAbandon your hopelessly outdated 2011 ideas about what it takes to open a supermarket or retail store. Think you need products, shelves, and a cash register? Think again.

The British supermarket chain Tesco knows that road well, but recently started pursuing a new path. Its Home Plus supermarket chain had grown to the second largest in South Korea, but it faced a problem: It didn’t have enough stores to capture the number one position. 

mobile retail commerce smartphonesSo Home Plus plastered subway stations with full-sized images of supermarket shelves: meat, dairy and beverage sections materialized all around the platforms, and every product was labeled with a QR code. Commuters could browse the shelves just as they would in a real store, and fill a virtual cart by snapping pictures on a smartphone. Later, your groceries are delivered. Registrations for Home Plus’ online shopping increased by 76 percent, and online sales went up even more, 130 percent.

It’s a pretty customer-friendly idea; instead of wasting 10 minutes waiting for a train, you can get your shopping done instead.

Why do you need pictures on a wall, when it’s possible to simply shop online? Truth is, many people have an easier time walking down the aisles of a store, or a subway platform that looks like a store. Instead of navigating an interface, you just wander until you see the item you want.

Which would you rather see on the walls of subway stations, bus stops and the like: obnoxious ads or stuff you actually need?

On Main Street (yes, it’s called that) in my little town, there’s a passageway between the rear parking lots and the street. It’s about 200 feet long, covered from the elements, surrounded by stores that rent for $70 a square foot, or more. The owner should run, not walk, to start renting the otherwise wasted space as a virtual store.

That’s what China’s biggest food e-commerce merchant, Yihaodian, is doing. Last week, it announced plans to open 1,000 virtual supermarkets, each about 13,000 square feet, which is smaller than most American supermarkets but far bigger than many retail stores.

This isn’t Yihaodian’s first use of virtual innovation. It also just launched 1,000 virtual stores right outside the bricks and mortar stores of their competitors; each “store” is packed with discount coupons. Unlike the Home Plus stores in South Korea, there are no pictures or other indications in the physical world that each store exists. Customers must point their phones outside the competitor’s stores to find Yihadian’s coupons and gift vouchers.

smartphone shoppers mobile shopping Yuan Yong is managing director at Ogilvy & Mather Shanghai, the advertising agency that helped hatch the plan. “While traditional offline retailers are desperately trying to move their businesses online, we thought we’d do just the opposite… and give the game an interesting twist,” he said.

Let’s recap: Overnight, an online merchant opened up 1,000 location-tagged augmented reality stores outside the stores of their old fashioned competitors.

Perhaps this weekend Amazon will suddenly open stores outside every Best Buy store? It’s not an outrageous thought. Both Amazon and eBay are already experimenting with same-day delivery programs, inching their way towards direct competition with bricks and mortar stores.

So why hasn’t this happened in the United States already? It has. Online grocer Peapod opened a store last May in a Chicago train station, and earlier this month expanded the program to 17 Chicago-area stations. It also just bought ad space in 15 Philadelphia stations for ads and stores that, you guessed it, feature an assortment of products commuters can scan.

This strategy is likely to spread. You don’t have to be a mega-merchant to profit from it. For instance, an antiques dealer in my town recently had to give up her retail location because her rent skyrocketed, but she still has a warehouse in our area. Retailers in this position ought to consider virtual store billboards, to keep their merchandise in front of the public. Even better, other local merchants – say an ice cream shop or diner, could turn wall space into ad revenues.

In other words, maybe it’s time that you – yes, you – opened a virtual store.

Bruce Kasanoff is a speaker, author and innovation strategist who tracks sensor-driven innovation at Sense of the Future. Kasanoff and co-author Michael Hinshaw teamed up to explore more of the opportunities unearthed by disruptive forces in Smart Customers, Stupid Companies.