Introducing an interesting new online-goes-offline case, one which could benefit from the changes in retail landscape accelerated by Covid-19
Covid-19 keeps changing the retail landscape, and will probably do so for a long time. In my previous post I wrote about this changing retail landscape and its effect on commercial, social and cultural life in our city centers.
Questioning if there are alternatives, and if these could be the first glimpse of light at the end of the tunnel.
One of my thesis is that due to increasing availability of affordable retail space in good high street locations, more and more pure online players will invest in brick-and-mortar stores.
Online-Goes-Offline Becomes an Opportunity for Smaller Brands
Online-goes-offline is not a new Corona-specific phenomenon. But in the past couple years it was mainly big online players like Zalando, Amazon, Mr. Spex and the likes who did invest into high street and mall stores. And indeed it was a limited financial risk for those big players.
That looks entirely different for small online brands. If the fix cost for operating a brick and mortar store make up 10 % of your online turnover you should minimum generate a 10 % profit pre tax in order not to risk the entire business should the offline experiment fail.
The reducing rents for vacant high street stores will help especially those small players to manage their offline risks.
Introducing EDEL KRAUT: a Modern Example of Online-Goes-Offline
Today I would like to introduce you to one of those promising online-goes-offline cases: “EDEL KRAUT”.
EDEL KRAUT was founded in 2016 starting as a pure online player: selling an assortment of organic herbs, fruits, berries, seaweeds, herbal infusions, teas, coffee, individual and mixed spices and salts, superfoods, food supplements, plant based wellness cosmetics, and books about use and application of its assortment.
The importer and manufacturer balanced this with an ethical philosophy: 100 % certified organic raw material, using sustainable packaging and banning the use of additives, preservatives or any ingredient of non-natural origin in their factory near Munich.
In summer 2008 their success led them to expanding to a physical store in Schwabing, becoming the first and only offline store so far. Schwabing is a district of Bavaria’s capital Munich that stands for alternative lifestyle with a high preference for organic and sustainable products. The community spirit of the district gives it the highest share of small, independent retailers, the highest density of organic supermarkets and stores selling sustainable fashion, and other products in the borough.
The approximately 50 sqm store is located on Hohenzollernstraße, the main shopping street in Schwabing. It opened before Covid-19 existed, but the crisis will boost the demand for health, immune system and wellness enhancing products. As more and more consumers discover the positive effects of organic, plant based food, herbs and spices: we see growth in potential customers of EDEL KRAUT.
Origins of the Brand Name: EDEL KRAUT
In perfect fit, directly translated to English it means NOBLE HERBS. For German speaking people “EDEL KRAUT” is phonetically reminiscent of an old German female name: “Edeltraut”. It is not a common name anymore, but was until the 50s of the last century. Hence it reminds of an elder women who could be your grandma: a symbol of love and trust, in relation to healing and well being.
The term Krauts originated during World War II, being used from the allies for the Germans in general. Although it didn’t always have positive connotations, Kraut grew to be a nick-name for Germans in general. Younger people however, still associate KRAUT with something German, and not necessarily something negative, as “made in Germany” has become a mark of quality over time.
The Store Design
The store’s look and feel is laid-back, relaxed, functional and not made to impress with exciting store design: but rather with the display of its quality products. Displayed on wooden shelves in a common, unbleached paper packaging with differently coloured letters on its labels, the assortment dominates the room. Alternatively, you can buy any product in multi-use mason jars. On the ground floor spices, salts, infusions, food supplement, superfoods and books are presented. A spiral staircase leads to the 2nd floor which is designed as an open gallery. There you can find single variety herbs and teas.
The coffee bar features a black board and high quality equipment for preparing coffe, tea and infusions. You can have your coffee or tea on two tables outside the store and (pre-Corona) inside as well. All the while enjoying the expert consulting of the professional store staff. All this helps to communicate the brands’ DNA: 100 % organic, natural ingredients, sustainable packaging, trust and honesty regarding product quality, manufactural production, made in Germany, and fair pricing.
German Competition Protecting Legislation
German legislation concerning marketing messages with regard to health benefits is tough. Any health related marketing message has to be proved by scientific studies. Hence, communicating health benefits that can be achieved by your products is tricky. Often ending up with a warning letter from one of those companies specialised in profiteering from warning letters sent to companies who don’t 100 % follow German legislation. This makes it difficult for a small company like EDEL KRAUT to communicate the effects and use of the herbs and spices they sell. The offline store can help to close that gap in the brands’ communication with its fans.
The Customer Experience
The majority of the consumers I observed stayed for more than 15 minutes in the store. The crucial factor clearly is the limitation of the single store staff who can only serve and consult one person or group at a time. People who enjoyed the experienced, knowledgeable, professional and friendly service of the staff – who answered any question about any product – ended up purchasing products: clearly a sign encouraging for the online to offline movement. People leaving the store without buying did so because staff were busy with other clients. Thus, it would make a lot of sense to have a second person during high traffic times – e.g. on Saturdays. On the other hand – the store is so small that it seems difficult to host a second sales staff member. As a young business with social distancing measures, it’s certain time should be able to fix this minor detail. But with decreasing high street rents – maybe EDEL KRAUTs second store can be a bit bigger.
Due to the difficult legislation regarding communication of health benefits that can be expected from EDEL KRAUT’s products, the company sells books from well-known authors with an excellent reputation when it comes to healing with plants – historical persons like the famous Hildegard von Bingen – but as well actual experts for alternative or plant based healing methods. Unfortunately, this does not help when being in the store during a busy period, having a question about e.g. the Hart’s tongue fern, but no chance to ask store staff busy with other clients.
Possible Solution: An EDEL KRAUT Compendium
Thus, a company-specific compendium like Biogenas’ Micronutrients-Coach (which is ready-to-be-consulted in each Biogena store) could be part of the solution. It should explain origin, effects and instructions for optimal use of each EDEL KRAUT product! Yes, it is quite an investment as each and every word has to be checked by a specialised lawyer and/or scientist: but it would especially make selling the not so well known products a lot easier – not only in the store – but online as well.
Future possibilities for Online-Goes-Offline, EDEL KRAUT and the consumer.
Amazon did close 90 pop-up stores until April 2019, starting the expansion of its two brick-and-mortar store formats “Amazon books” and “Amazon 4-star”. Mr. Spex started its offline expansion in February 2016 and 4 years later already operates 20 stores in Germany. Zalando accelerated its expansion as well, and plans now to operate 13 outlet stores in Germany by 2021. mymuesli.com – a former pure online player now already operates 28 stores in Germany, Austria and Switzerland.
Online goes offline will clearly be accelerated by current developments in traditional retail landscapes. Lets cross fingers that EDEL KRAUT’s first store proves successful as well – opening chances for further expansion. Maybe one day you’ll be able to find an EDEL KRAUT store in your neighborhood. I am conviced that in near future we will see a lot more of those interesting new online-goes-offline formats – in my opinion a positive trend that might help to make our uniform city centers a bit more attractive and interesting.
About the Author:
Heike Blank has worked for big organisations such as VF Europe and s.Oliver but also for niche brands such as Ecko Unltd. and Zoo York in top executive positions. Her extensive experience with opening and managing own retail, partner stores, concessions and shop-in-shops in 23 countries in Europe, the Middle East and Asia make her an expert in expansion and brand building. Read more of her work here and connect with her on LinkedIn.