When the defunct Toys ‘R’ Us opens two new retail stores for the holiday season, it will mark the imprint of San Francisco-based company b8ta, which seeks to democratize the process of how new product innovation gets into the hands of consumers.
Through its “retail-as-a-service” business model, b8ta offers a speedy on-ramp to retailing, putting new products where consumers can discover, touch and test them — without all the requirements, costs and prolonged time frames associated with opening a store or securing shelf space inside an established retailer.
“The vision is to make retail accessible for all,” said John Kennelly, head of partnerships for b8ta. “Whether that is small, up-and-coming brands looking to get their product into stores — or brands looking for scale in hundreds of stores — we want to make physical retailing as easy as setting up a Shopify site.”
Kennelly, who spoke last month at the IRCE@RetailX conference in Chicago attended by CO—, drew the comparison because both Shopify and b8ta offer turnkey platforms for setting up retail — Shopify for e-commerce and b8ta in brick-and-mortar. The b8ta software-powered platform uses in-store cameras, machine learning and data analytics to give brands near real-time visibility into how consumers are interacting with their products.
Retailers rarely share such data with product manufacturers, Kennelly said. “If you get a spreadsheet, you are lucky. Most of the time you are not getting any clue about how that physical presence is performing.”
The vision is to make retail accessible for all.
John Kennelly, head of partnerships for b8ta
Retail Ready?
B8ta's business model capitalizes on consumers' desire to "try before you buy." Still unsure if your business should go brick-and-mortar? Read more here.
A new way to showcase product innovation
B8ta’s founders, former co-workers at smart home brand Nest Labs, opened their first b8ta store in 2015. The Palo Alto, Calif., store showcased internet-of-things-based consumer electronics such as a neuroscience wearable that eases anxiety, a solar-powered bikelock and a self-flying camera drone. Manufacturers paid b8ta a flat fee for space inside the b8ta store, where their products were removed from protective packaging to encourage shoppers to “try before you buy,” an experiential retail concept pioneered by direct-to-consumer brands like Warby Parker.
Kennelly said early response to the model was mixed. “It was not popular in 2015 to open a new brick-and-mortar retailer,” he said. Indeed, Credit Suisse reported more than 5,000 U.S. stores closed that year. “Most people assumed we were an e-commerce site so we had to work to explain we were building a physical store.”
The model evolved and spread to big retail: b8ta brought its experiential shop featuring smart home products to 70 Lowe’s stores. Next, b8ta’s platform helped Macy’s expand its popup concept called The Market @ Macy’s, whose 12 locations showcase a rotating mix of new and established brands. In 2018, Macy’s acquired a minority equity stake in the b8ta.
This coming holiday season, the platform will power the second coming of Toys ‘R’ Us, which in 2018 liquidated its 800 stores. Twonew Toys ‘R’ Us stores will open in New Jersey using b8ta’s experiential retail model, whereby brands will showcase their merchandise in an interactive, playground-like environment.
Today there are 17 b8ta-owned flagship stores with more to come, Kennelly said. “By the end of this year, we will have every major market in the U.S. covered,” he added. “There is definitely demand and we are opening locations as fast as we can.”
Built by b8ta, a retail-as-a-service platform b8ta unveiled last year, is key to that momentum. The service covers staffing, point-of-sale, fixturing, merchandising and logistics for a store-in-store format or flagship location, Kennelly said. Brands determine how their products are presented, receive performance metrics and keep 100% of the sales revenue, a departure from the traditional retailer-wholesaler model in which the host retailer dictates pricing, margins and merchandising along with the customer experience — all while withholding crucial data about product performance a brand needs, Kennelly explained.
“You really are giving away all the control you are used to having on a website once you are selling inside a third-party retailer,” he added.
By contrast, the Built by b8ta model is based on a flat monthly fee paid by a product manufacturer to a retailer, much as a tenant pays rent to a landlord, Kennelly said. Both parties benefit: The brand controls the experience surrounding their product; the retailer monetizes excess space through a guaranteed revenue stream while taking no inventory risk.
A key component for brands, Kennelly said, is access to qualitative and quantitative data about product performance, something third-party retailers rarely provide. In-store cameras equipped with machine learning technology track metrics around foot traffic and dwell time while in-store associates called “b8ta testers” collect information from shoppers.
“The custom hardware and software that we developed to run this business model allows brands to have a dashboard they might be used to seeing in a digital ad or media setting — for the physical world.” For instance, Kennelly said, a brand receives data about whether a product demo led to a sale — or a reason a purchase was not made.
B8ta is not the only company tapping turkey solutions to reduce barriers to entry for products and brands, Mortimer Singer, CEO of Traub Capital, told CO—. “There are many players from macro to micro offering these services,” he said. “On the larger side, Backing Brands Solutions, a division of [Ann Taylor and Lane Bryant parent] Ascena Retail, is helping power third party brands’ retail, and then b8ta and even Orchard Mile, which is powering a cooperative opportunity in Martha’s Vineyard, are allowing smaller players to leverage opportunities that otherwise might not be available to them.”
“The typical brick-and-mortar retailer needs to change,” Kennelly said. “We are looking at retail from a brand’s perspective. We are aligning incentives. We are not taking a margin on sales,” he added. “It’s the way we’re encouraging other retailers to run their brick-and-mortar businesses.”
- Barbara Thau contributed to this story.
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