Searching for the Moon

Shannon Clark's rambles and conversations on food, geeks, San Francisco and occasionally economics

Two models of retail – the Dollar store vs the Apple store

Posted by shannonclark on December 14, 2008

DUDES + DOLLAR STORE = VISALIA 07'Apple Mini Retail Store - Stanford Shopping Center

I contend that there are two primary models of reatail, at least in the US (there is a third model I’ll mention at the end which is rarely seen in the US).

In the title I called these The Dollar Store and the Apple Store but more accurately these are the “everything and the kitchen sink” versus the sparse and mostly open. 

In the first model, call it the Kitchen Sink model the buisness model is to have everything that someone might possibly be looking for, to have a surplus of choice and options, to fill most available space with products for sale and to, in theory, sell a lot to everyone who comes through the door. Typically these models combine having everything (or trying to appear to have everything) with a lot of emphasis on price. 

The logical extreme of this model is the Big Box Retailers such as Walmart, Costco, Home Depot, Target and countless others overwhelming the suburban malls of the US (and occaisonally making inroads into he urban centers as well). Typically these stores attempt to have most active inventory right on the store shelves with the customers pulling their own products as they shop. Employees restock the shelves, sometimes help guide customers to the right aisle, and only in select departments of the store (if at all) have a direct customer service role, often taking custom orders for those products which the store does not keep in stock. 

Though in many of these models the store deemphsizes such products in favor of products which can be kept in stock on the stoor “floor”.

In contrastthe other model of retail is the Curated Experience, of which The Apple Stores are a fantastic example. In this model the emphasis is less on keeping a wide selection of products in stock, but rather on highly currating what is avialable for sale. 

Typically these stores have displays which highlight the products which are available but the full inventory of the store is not on the main storeroom floor but rather is kept in the back in a storeroom, off limits to the customers. Most (non-Payless) shoe stores operate in this manner. As do most higher end designer clothing stores. But the Apple Store is an example which many more people have likely experienced directly.

In many ways this is a very old fashioned retail model, this is how, for example, the old fashioned grocery stores operated in the days before the grocery cart and customer self service. Speciality food shops occasionally still operate in this manner, with all the products behind displays and cases and only available via a direct interaction between the customes and the shopkeepers. 

This model of retail is labor intensive, most of the staff has to be able to inteact with and literally serve the customers. It is also built upon the taste and curatiatorial skill of the store’s buyers. In place of trying to have everything that anyone might possibly want this model of store posits that they can choose between those goods (or services) people should want and those which they should not. 

It is the model of a bookstore which instead of cramming every available inch with books stacked upon books (and often barely if at all sorted) is highly seletive with what they buy, turning away more books then they choose to purchase (here I’m describing mostly a used bookstore but the same model also holds for new bookstores to a lesser degree). 

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In my experience though I occasionally will suffer the cramped, overly full bookstores, it is the stores such as Aardvark Books here in San Francisco which I return to time and time again, and from whom I buy many books over the course of a given year (in 2008 I’d guess around 100+ books perhaps). What often draws me into the store is a carefully currated window display of the latest used book purchases of the store – almost always hardcovers, in perfect (or nearly so) condition, and not infrequently books which I had recently read reviews of in national publications (I’m fairly certain that they buy books from a number of locals who receive review copies as nearly every book which is getting active reviews ends up in their store window within a month or so of publication). 

The curatorial model is not limited to physical retail stores, if anything it has even more value online. It may seem paradoxical, as online it is technically possible for many stores (especially any store selling digital goods) to have nearly infinite inventory. And I’m not arguing that there is not a place for such mega stores (call them the Amazons of this world) but there is equally a great deal of value in culling away the cruft and of practicing great curation to only highlight a select group of pruducts.

Buyers will then shop such stores less on pure price comparisions and more on an appreciation of the service offered in making them (the buyers) aware of products that they should own and enjoy. 

A short sidenote here. A few days ago I was at a local seasonal market, the Mission Market, which was an experiment where a number of local vendors (many without physical stores) had a booth at a converted Armory in the Mission district of San Francisco. One of these merchants sold music, mostly CDs. Now I have not bought a lot of physical CDs in the past few years (though I have bought more music in the past years than ever before). But I ended up buying two fantastic CDs from this man, entirely because he had a very select collection of works for sale, all clearly curated with care. And of the works he had in genres I enjoyed (which were nearly all of the genres of music he stocked) I already owned a pretty large portion of the works he was selling. 

And not just owned the works, but these were among my favorite albums of the past few years, music which exactly defined what I like.

So I was immediately favorably inclined towards him and especially towards the works which he had for sale that I did not already own – assuming, correctly as it were, that since clearly our tastes overlapped considerably, the works he also chose to stock would quite likely also be works I would enjoy.

And indeed that was exactly the case.

And that, in short, is the Curatorial Retail model. 

At the start of this post I mentioned that there is a third retail model, but one which is rarely seen in the US. That model is the Bazaar Model which can be a variation of either the Kitchen Sink or the Curatorial model but with the addition of a highly variable price. In many parts of the world this is the dominant model, where price is nearly infinitely negotiable and most (though not all) goods and services are subject to rounds of bargaining before a price is agreed upon. 

In the US this is not a common retail model, though to a degree the proliferation of discount codes (especially online) and complex sales at larger stores (Macy’s for example) combined with loyalty cards/store credit cards sometimes creates an environment which feels like every price is variable and subject to many factors. Online the purest form of Ebay historically was intended to be this exact model with the buyers competing to offer the best price to the seller. 

However what the pure auction does not capture in the true Bazaar model is that most of the time the negotiation is not multiparty (i.e. an auction with many buyers and only one seller) but one-on-one. One buyer, one seller who negotiate between themselves about a transaction which can either happen at a price, not happen at all, or be modified (expanded to include other products, shrunk to be something smaller).  The buyer always has the option of walking away (and the seller of simply not agreeing to sell).

With the exception of most tourists to such markets (who usually get the worst prices in part as a result of my next point) buyers and sellers who have a history with each other, who expect to do additiona business in the future (sometimes with the roles reversed) have more complex incentives in the negotiation process than just maximizing revenue/minimizing expense on a given transaction. 

Instead when there is an expectation of repeat business many other factors come into play. 

It is here, in part, that curation can add value, considerable value in fact, to even the Bazaar model of retail. A buyer who trusts the tastes and instincts (and fair dealing) of a seller will often value that the seller put something aside for that buyer over getting the lowest possible price for the product. 

It is my view that in the long term success will depend more on curation than on stocking the kitchen sink. 

And I mean this for both online retailers and for physcial stores. 

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