Earning Back Its Spot: Offline Stores Makes a Comeback as RaaS Strategy Redefines Retail

Written by: Nichakorn Prateepsawangwong on January 30, 2019

What does the FMCG giant Unilever have in common with grocery retailer The Kroger and a luxury watch brand Audemars Piguet?

The answer is Retail-as-a-Service (RaaS).

Unilever worked with JD.com to distribute goods to both online and physical stores in China, while Audemars Piguet launched its pop-up store on WeChat. In the US, food store The Kroger partnered with Microsoft to increase the level of personalization and productivity in their stores.

The term ‘RaaS’ has clamoring over the headlines over the years, but what exactly is Retail-as-a-Service?

What Is Retail-as-a-Service and Why Is It Becoming a Trend?

An analyst from Kantar Retail, Stephen Mader, defines the Retail-as-a-Service model as when “retailers build open platforms and toolkits that enable brands and third-party sellers to connect with shoppers directly through a physical store”.

Having an abundance of data in hands, these retailers bundle up services, customer data, technology, and its expertise to offer brands a service.

The emergence of ecommerce has reduced the in-store retail visits by billions in the US and part of the reason is because the experience offered by a traditional physical store is no longer enough for the savvy consumers. Besides shopping for products, consumers are slowly and surely seeking an experience when they’re out visiting the store.

“Nearly 3,800 stores are expected to close their doors by year’s end, and the brands that do survive will have done so by creating engrossing experiences.”

In order for the brands to maximize the potential of offline stores effectively, they need to provide engaging experiences to keep the consumers hooked. For example, Sephora combined activities that are completely unrelated to making a purchase into its app, while Samsung’s pop-up store was set up to allows consumers test its technology and experience rather than to focus on sale.

The trend also drives the growth of RaaS platform startups that provide an easy, cost-effective solution to brands wanting to launch physical stores.

In the US, a “Retail as-a-Service” startup b8ta has helped retailers such as Macy’s, Lowe’s, and 15 other consumer brands to set up pop-up stores and physical shops, incorporating technologies and cutting-edge gimmicks to traditional physical retailers.

Chicago-based Leap recently secured $3 million in funding to offer an end-to-end service — that ranges from staffing, experiential design, tech integration, and day-to-day operations — to help digital brands to launch a brick-and-mortar store.

Meanwhile, Fourpost is focusing on providing a ready-to-use retail space for digital native brands looking to open a physical store in the US, lowering the barrier of entry in terms of both capital and time. Each of these companies is tackling the problems that usually came with setting up an offline store and elevate the consumer experience.

“If you shop in one of our stores, you will feel different because we have gone to such a great length to remove the idea of your visit being about buying a product.” – Vibhu Norby, the co-founder and CEO of b8ta.

With over 70 locations, B8ta’s store allows brands to place their merchants and train shop assistants while gaining revenue from space rental and subscription fees from brands; Retail Dive

JD.com spurns the growth of RaaS in Asia

Chinese ecommerce giant JD.com is a big advocate of the strategy.

One of JD.com’s latest initiative to establish RaaS is the partnership with Chinese retailer Better Life. JD.com was also one of the first retailers to develop a mini ecommerce program on WeChat. To date, JD.com has developed and bundled up its marketing, logistics, financial services, and big data as a service and leverage these capabilities to help over 2,000 brands and its merchants.

JD.com also partnered with Google to develop next-generation retail infrastructure solutions by combining JD.com’s supply chain and logistics expertise and Google’s technology strengths.

All of these were the result of JD.com’s mission to go forward by scaling its technology in order to outsource its developments to third-party retailers around the world. Chen Zhang, Chief Technology Officer at JD.com says that making money is not their priority at this stage as he believes that:

“With Scalability, comes profit”

Taking the burgeoning amount of investment coming from China to the region into consideration, it’s only a matter of time for RaaS to kick off in Southeast Asia.

In Indonesia, JD.com has already started the concept on its unmanned store JD.ID X Mart. The store collected data that can be used to understand shopping behavior and optimize inventory, product displays, and other aspects of store management and marketing.

With JD.com’s joint-venture in Thailand, it’s fair to assume that the market will be the next destination for the innovation. And although Alibaba’s Lazada has been quiet on the front, looking at the fierce competition between the companies in the mainland, it seems like a matter of time until Alibaba does so.

Inside JD.ID X Mart in Indonesia. It is JD.com’s first unmanned store outside of China and it is a demonstration of JD.com’s mission to implement RaaS; Pandaily

With the ‘offline is the new online’ trend carried over to 2019, we can expect to see more traditional retailers offering their service and retail space to help online brands expanding their reach and getting more foot traffic in return.

A win-win strategy for the ever-changing landscape of retail.

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