Shopping, with a side of coffee? Retail brands gain from expanding into F&B within shops

SINGAPORE: Some retail brands are seeing a slight jump in revenue, after expanding into food and beverage services within their premises.
They told CNA that this has helped them to diversify revenue streams and even defray rising rental costs.
The move comes as they face lower footfall amid competition with e-commerce, and with consumer behaviour shifting to focus more on immersive experiences.
Fashion brand Pazzion, for instance, expanded its shop in Takashimaya Shopping Centre to include a cafe two years ago with the hope of bringing in more footfall.
“We are trying to offer more than just a one-dimensional shopping experience for our customers,” said its director Tom Ng. 
“We are able to engage our customers on a different level, offering a space for them to unwind, relax and indulge. And we see that as a nice complement to the brand direction.”
The chain, which sells women’s bags, shoes and accessories, had to rethink its finances and operational model, including sourcing quality ingredients and maintaining a consistent dining experience, he added. 
“The learning curve was steep. We learnt along the way, and I think we made a lot of mistakes as well. But I believe it was worthwhile. The cafe has strengthened our brand awareness… and added a layer of customer loyalty and brand engagement.”
So far, these efforts have paid off, with the business attracting a new demographic of male customers, he said. 
Branching out to offer dining services has also raked in about 10 per cent increase in revenue, which has helped to offset rising rental costs, Mr Ng added.
For Japanese lifestyle brand Muji, the popularity of its cafe concept spurred the brand to include more of such offerings in its other outlets.
“Food plays a big part in the lives of Singaporeans,” said Mr Katsushi Onishi, managing director at Muji Singapore. “This presented a clear opportunity for us to expand into the F&B industry.”
The brand has a few Cafe&Meal MUJI outlets in Singapore, including at Raffles City and Plaza Singapura. 
While the bulk of its revenue still comes from retail – and not its dining services – it believes that offering such experiences has helped it gain an edge over e-commerce competitors.
“We see the importance of maintaining face-to face-customer interactions, and this cannot be done through e-commerce, which is why it is worthwhile for us to expand our Cafe&Meal MUJI business and connect with customers through food,” said Mr Onishi, adding that the cafe concept has helped to increase its customer touchpoints. 
“Some customers come back two to three times a week to have a cafe meal. And after customers enjoy their meal, they can continue to shop in our retail store. This builds customer loyalty.”
One retail analyst told CNA that there is an increasing need for retailers to develop an emotional connection with consumers. 
This would help them to create new revenue streams so that they are not just dependent on retail, and position their brand to appeal to the younger generation.
“Especially among Gen Z, they want to belong to a community. They want to belong to a brand,” said Dr Samer El Hajjar, a senior marketing lecturer at the National University of Singapore’s Business School. 
“That’s actually very important, because that’s how we can strengthen brand loyalty. Retailers know this very well, and you can see how immersive the experience is.” 
He believes consumer behaviours have changed, especially after the COVID-19 pandemic, with more looking to buy into a lifestyle, rather than just a product. 
Since the start of this year, retail sales momentum has been slowing down across the board. 
But some observers believe retail brands expanding into F&B may well be the much-needed boost that the sector needs. 
Yet there could also be risks, including to finances and brand image, said Dr El Hajjar. 
“If there is misalignment (between the F&B venture and the brand’s values), I think consumers would not like it and the risk will definitely be much higher.”