Next month, Tommy Bahama is opening a restaurant at its new flagship store in Manhattan. Shoppers will be able to buy one of the chain’s signature tropical print shirts and then order the Macadamia-nut encrusted snapper.
More and more retailers are following the Tommy Bahama model these days, using food and drink to lure customers into stores as sales increasingly migrate online. Urban Outfitters Inc. (URBN), known for selling hipster threads in college towns, has served lamb merquez and striped bass at its Terrain home-and- garden store in Westport, Connecticut. J.C. Penney Co. plans to add juice bars and coffee shops. Gap Inc. (GPS)’s Banana Republic has served cocktails to debut new clothing collections, while Ann Inc.’s Loft brand held Friday happy hours.
Tommy Bahama has become a model for other retailers because its restaurant-stores generate two-and-a-half times the sales per square foot of the apparel chain’s regular locations, Chief Executive Officer Terry Pillow said in an interview. Fellow CEOs often ask about the food-and-beverage business, he said.
“They’re fascinated first of all that we have it, and the second thing they’re fascinated about is we run it ourselves and we’ve chosen not to license it,” Pillow said.
Putting restaurants inside stores has a long history. In the 1900s, many U.S. department stores ran restaurants and tea rooms. Some even achieved iconic status and continue to serve customers today, including Chicago’s Walnut Room at Macy’s Inc. and the Zodiac restaurant at a Neiman Marcus Group Inc. store in Dallas. More recently, Nordstrom Inc., which has offered food for many years, has tested a contemporary diner concept called Sixth & Pine and added espresso bars. The department store has seven restaurant concepts.
Retailers are looking for ways to attract customers to their brick-and-mortar locations as the National Retail Federation forecasts online sales may rise to 16 percent of $586 billion in holiday revenue this season. Food is an opportunity as U.S. consumers show more interest in farmer’s markets and amid the popularity of such cooking shows as cable network Bravo’s “Top Chef.”
Eating is a memorable experience “and a lot of lifestyle retailers have been exploring it,” said Aaron Spiess, co- founder and co-head of Big Red Rooster, a brand consulting firm based in Columbus, Ohio. Spiess says he has spoken with three specialty brands about incorporating food into stores.
Tommy Bahama, owned by Atlanta-based Oxford Industries Inc. (OXM), is renewing the bet on its retail-restaurant “Island” locations with the 13,000-square-foot Manhattan flagship. While the retail part of the store debuted this month, superstorm Sandy pushed back the restaurant opening until December.
The bar will have a sugarcane press for cocktails and the menu will feature such vacation-style New York dishes as pineapple cheesecake and grouper Reubens.
The first Island store, which opened in Naples, Florida, in 1996, generates about $2,000 per square foot, CEO Pillow said in an interview. That’s similar to the productivity of a Coach Inc. or Lululemon Athletica Inc. store, which are industry leaders, according to RetailSails, a consulting firm.
Tommy Bahama says the restaurants generate about 12 percent of its $452 million in annual revenue.
With $18 grilled steak salads, $12.50 seared scallop sliders and $12 cocktails, Tommy Bahama’s restaurants aren’t cheap, at least compared with the fast-food at Wal-Mart Stores Inc. (WMT) and Target Corp. (TGT), and neither are the brand’s $98 polos and $118 shorts. The food and service are in line with the brand’s messaging and Tommy Bahama executives have made a point to oversee it themselves, Pillow said.
Farm to Table
The two Urban Outfitters Terrain stores — in Glen Mills, Pennsylvania, and Westport — offer a trendy farm-to-table spread. In Westport, the dinner menu in July included $36 striped bass, $39 ribeye and a $19 vegetable plate.
Customers typically spend 1.5 hours browsing Terrain, and that can double to three hours if they’re visiting the café and shopping between glasses of wine or lunch, Wendy McDevitt, president of Terrain, said in a telephone interview. The menus at each restaurant are different because the food is sourced locally, said McDevitt, who is a fan of the Stonington scallops and Brussels sprouts at the Westport location.
Decades ago, the first Urban Outfitters and Anthropologie stores originally had a restaurant and a cafe, respectively, McDevitt said.
“The one thing you can’t get in the cyberworld is the tactile experience and that won’t go away,” she said. “Food is becoming bigger and bigger in terms of entertainment value.”
J.C. Penney, based in Plano, Texas, plans to replace cash registers with coffee and juice bars and add tables and chairs, so “no one has to leave the store if they want to refresh,” Chief Executive Officer Ron Johnson said in an Aug. 10 earnings call. A Caribou coffee café and a gelato shop were shown to analysts in a September tour of the company’s prototype store.
Some retailers are holding shopping events featuring food and cocktails to draw shoppers in, adding the dining component without a dedicated café or restaurant.
Banana Republic has served hors d’oeuvres and cocktails at loyalty shopping events and to introduce new collections, such as its Anna Karenina line this month. Loft held Friday happy hours this summer at its New York Rockefeller Center store.
Tommy Bahama plans to open another Island in Tokyo next year and is assessing locations elsewhere.
“You have the opportunity to lose a guest with every single meal and they’ll look at that meal as an extension of every product you sell, so to fail is to fail big,” said Doug Wood, the chain’s president. “It’s the difference between ‘‘I just bought this Tommy Bahama shirt and I don’t like it as well as the other ones I have,’ versus ‘I just had a meal and I got sick and I’m never going to go back again and I’m not going to buy their clothes,” he said.
“It’s challenging to operate but if you execute it right it’s magic,” he said.