Part 1 - The Sticky Problem and Opportunity for Systems Change
Typically when we think the future of retail, it leans towards creating better digital experiences in many different forms that ultimately engage shoppers (and their new online lifestyle shopping preferences) to continue buying more products and goods that have been softening as online retailers like Amazon have been dominating with the newer generations of shoppers.
Among that news, the biggest announcement for June of 2017: Amazon, the largest online retailer buys Whole Foods.
Amazon (and also much like online retail platforms like Shopify) provides an opportunity for anyone who produce goods to manage their own online business and store. With this acquisition, it's a signal that the sweet spot of retail is a balance between both a digital and in-store experience. I believe this allows for better actionable innovation and re-envisioning how a supply chain can potentially re-question the narratives between how local producers and suppliers can optimally tap into a network of physical locations.
Even where I live in Canada, big boxes like Loblaws are launching their Loblaws Digital Click and Connect experience to enable a pick up service for users to shop online and pick up their goods at 50 of their physical locations this year.
As part of the Phinklife Social Impact Lab, one of the social experimental projects the team had a chance to engage in, within the scope of the Future of Retail, was with a systems design intention of: "How can we create a new thriving convenience store ecosystem that deeply (re)-engages it's local communities"
We came from the lens of Retail for Social Good, and with an additional key design requirement to better enable the local mom-n-pop convenience store owners to financially retire within another 5-10 years of service.
The "sticky" problem scenario started as follows: About 25-30 years ago, many Korean families had immigrated into the Greater Toronto Area, starting a community "network" of convenience stores as a traditional small business that help these families establish themselves, build a home and ultimately pave the road to support their children through higher education into professions like doctors, lawyers, engineers and accountants. At the time of the project, there was about 6500 convenience stores in the network within the design scope.
They had ran into two major problems:
- The free market problem: Big Box retailers were putting a big squeeze on convenience stores, leaving their main profit source with the distribution of tobacco. The industry was naturally shrinking without innovation. Customers began to flock to online channels like Amazon. The tobacco industry meanwhile was looking at other means to distribute their goods as neighbourhood stores began slowly closing down.
- The human problem: They had a legacy challenge. First, they had to work the stores and if they didn't, they couldn't make money. Secondly, no one wanted to take on the future responsibilities of the store. It's similar to the "farmer's dilemma". Convenience store owners had little retirement options, only with those who have saved and invested well by chance.
As social change-makers, we began our journey of collecting narratives across all the different touch points within the ecosystem. Suppliers, distributors, shop owners, staff, consumers and surrounding community organizations were all among the mix.
From a consumer perspective, the message was pretty clear: Convenience stores were home to unhealthy quick-fix conveniences like candy, chips and soft drinks and the prime go-to access point for tobacco. Generally barred up and sketchy looking, stores did not offer a clean and welcoming experience that you might get from a community-hub found a decade ago where kids could leave their bikes outside and pick up groceries.
Informal cash-preferred practices also left these stores ripe for crime, often depicted as a general narrative as a hot-spot for adolescent and at-risk youth shop-lifting.
Strategically, convenience stores had presence; about a 5-10 minute walk for anyone living in a surrounding community. Mom-Pop stores by nature had community-central real estate and access to the community, which made it a ripe opportunity to establish a shared peer-to-peer network to service consumers with goods and products.
Our proposed solution: WE-Food, "Opening the Door to Local" as a beginning access point for convenience stores (as-a-distribution-point) to begin offering what consumers were looking for.
This opened up a big market opportunity that would differentiate itself from big-box retailers; the ability to curate and customize products that was aligned with local preferences, and create a deeper community-based human connection, as an experience both online and in-store.
side note: this was the year big-box retailers like Walmart and Metro here in Toronto just launched their online service for drop-ship delivery.
Reaching out to local producers, starting with farmers via farmer's markets opened up a channel to dive deeper into the farmer's narrative. Successful farmer's could choose the mass-grow the same produce for the big-boxes route, or for those who have smaller plots of land and wanted to grow passionately, more variety and connect their produce with local communities could engage with this peer-to-peer network as an alternative source to farmer's markets.
This helped local convenience stores offer healthier options and shift the world-view of unhealthy junk food. This also applied for other agri-related producers (Ontario being a fertile place for Agriculture) from dairy, eggs, and meat, now centered on principles of sustainability and circular economics to better economically distribute goods while lower the burden on the land from the typical industrial mass-extraction practices.
Next was looking at locally produced goods and staples: convenience stores became a channel for the local pop-up-shop feel, with community-based social profiles, offering different producers the chance to connect their products with targeted consumer and community needs.
Different government agencies and NGOs found the social innovation fascinating; especially by enabling better access for at-risk or under served communities to better product options that the big-box retailers couldn't offer as easily. As an example, donation based food banks could focus on their core value of community building and re-vitalization, and allow local convenience stores to offer a VIP experience to community members in need; especially access to more healthier options.
For owners themselves, it opened a channel to access new curated consumer-products. First, it saved the pain point of figuring out what to stock their stores, as the traditional route was to buy products from a distributor or their local Walmart, and secondly consumers would walk-in for pick-up, similar to the Ritual app for picking up prepared food at restaurants. For a premium, there could also be eco-friendly delivery given the community proximity.
We found costs for distribution improved dramatically as well. Instead of each store owner making two weekly trips to their local central distributors, there were options of a drop-ship service and pick-ups at other larger convenience store-grocer locations that had storage to help out their neighbour stores.
Lastly, putting selected qualified stores on an upgrade path was a safe bet for government programs like Canadian Small Business Loans, with proven business track records, and expenditures on physical assets that can be liquidated (unlike building software). This way of distributing the risk will allow an opportunity for future small business owners to buy the store in line with the owner's retirement path, while offering a legacy profit share as a retirement package for the original owner for taking on the upgrade risks.
... and aligned to our mission to create a more passionate world, local stores are an easy learning ground for entry work of future leaders... Starbucks style on steroids, WHY? convenience stores are like mini-community centers, and developing the skills to create a genuine relationship that animates a community (great skills from the social impact space by the way) reinforces at a very transaction level the awareness around community needs. It's a chance to experience the empathy to recognize our deeper needs and higher values put into action. (if you haven't known by now, higher values, passion and making impact is what we stand for... we designed an entire school around it...)
If you liked this post, stay tuned for part 2: Rethinking Retail, Technology for Social Good, where I discuss how technology can catalyze the way to shop and connect with our communities.
#KeepthePassionAlive #UnleashYourPassion #FutureofRetail
P.S. And as always, feel free to connect with me on LinkedIn and share your thoughts and feedback! I am always happy to meet talented people from around the world. If you find that I have overlooked an issue of importance to you, or that you want to share some of your experiences, I welcome your feedback.
P.P.S. I like the idea of sharing knowledge, therefore, please share this post with your network.
A little about me... Hi! I'm Duncan So, the Founder & Chief Catalyst of Phinklife, a Systems Change Agency, and the Head of Global Education at the Phinklife Institute for Social Impact empowering leaders for social impact.