This store looks like a dump! Awesome!

There is a post on the Economist Free Exchange Blog where the poster (probably Megan McCardle compares Indian retailer Pantaloon to Starbucks.

As the WSJ article it links (subscription only, but I found it on ProQuest, which the college I work for subscribes to) explains, Pantaloon is an Indian retailer that operates a chain of supermarkets called The Big Bazaar, which are aimed at what the founder calls "Indian Two" - basically, the people who work in domestic-help positions for the wealthy in India. They have some disposable income and are upwardly mobile, but are used to shopping at bazaars and to haggling. So the stores are designed to mimic this experience - bulk bins instead of packaged items, crooked congested isles instead of busy ones, and bad produce salted in the bins so people feel like they are getting a deal when they get good ones.

I think this is a brilliant idea, and I think it's more common than people realize in the American retail market (I'm American, and I buy a lot of shit, so I feel like I'm an expert on the American retail market). I don't think Starbucks is a good example, though, despite the occasional long lines. The Big Bazaar wanted their customers to feel at home - wide isles and bright lighting were something they weren't used to, and it made them feel uncomfortable. Starbucks goes for the opposite - I think they want newbies to feel a little out of place, a little intimidated by the stylish decor, by the drink menus with difficult to pronounce items, by the cup sizes that don't actually relate to the size of the drink (a tall is a small?). The first time you go into a Starbucks, you feel out of place - you feel like everyone is cooler than you. But if you keep going back, eventually you feel like you are one of them, you are an insider.

Sure, Starbucks has long lines and sometimes bad service, but it's not part of the design. In fact, the reason Starbucks has so many locations - often right accross the street from each other - is to cut down on lines while still preserving the small coffee shop atmosphere. That, and because people are lazy - they often want a coffee, but not enough to cross the street or make a left turn.

But there are plenty of stores that have a run-down, bargain-basement atmosphere by design. I read a book years ago on Home Depot - when they opened their first store, they were really going for the warehouse atmosphere - and decided that the concrete floor of the store was too clean. So they took a forklift and drove it around so it would scuff it up.

Ironically, Lowes went with the cleaner layout and a more female-friendly orientation, and Home Depot has since tried to move away from the warehouse layout. Part of this is a change of target market - instead of just do-it-yourselfers and contractors, the home-improvement stores are catering to everyone who owns a house - and offering installation for those who aren't handy enough- or don't have the time - to actually, you know, do it themselves.

But I can think of plenty of other stores with a carefully cultivated aura of crappiness. Aldi - the German chain that is expanding in the US - comes to mind. Their stores have an unusual layout, much of the merchandise is sold directly off pallets, you have to pay extra for bags, most of the stuff is their own brand, you have to put a quarter in to get a cart (which you get back when you return the cart). Many of them are located in bad neighborhoods, in sites that were something else that closed down. Shopping is an experience, but much of the products are really good, and the prices are good, so you feel like you are getting a deal. While some of the choices obviously relate to keeping prices down, part of it is probably that it makes you feel like you are being rewarded for going out of your way.

A similar environment exists in warehouse clubs - BJ's, Costco, Sam's Club. There, you actually have to buy a membership, which adds to the sense of belonging. The less than pleasant environment is part of the experience - huge warehouse, concrete floors, stuff dumped around, giant packages, limited selection - but low prices, and combined with the atmosphere, the feeling that you are getting a better deal than those suckers who shop at Safeway.

I could think of a ton more examples - factory outlets, Nordstrom Rack, Filene's Basement. Part of this is that these stores are meant to be cheap, and that they want to discourage the customers who are willing to pay full price from going there. But this is no accident - those cracked asbestos tiles are their by design, to make bargain shoppers feel like they belong and wealthy people who can afford to shop at the retail store feel they don't. The racks full of clothes instead of better displays is so you feel like you are getting a deal when you find that one nice designer shirt buried in a rack of stuff that makes you wonder "what was the designer thinking" or "who would actually wear this crap?"

I think the ultimate example of intentional suckyness to make customers feel like they are getting a bargain is Black Friday - the day after thanksgiving, when most retailers open stupidly early (often 5 or 6 AM) and have very limited quantities of very cheap stuff ($300 laptops, $30 hard drives, and the like). People camp out overnight, in the freezing cold, so they can find out what they wanted was sold out. Now, I'm a faithful Black Friday shopper - it's not like I have anything else to do the day after thanksgiving, and I usually make a couple hundred bucks reselling stuff I buy. But stores could make it a lot more pleasant, and they don't, because it 1)gets them publicity 2)gets people in the store and 3)gets people feeling like they are getting a screaming deal (sometimes they are, sometimes not so much).

While the Indian market is interesting, I don't think Panatloon's plan of crappiness by design is all that abnormal for retailing - but I don't think Starbucks is crappy by design, just by execution.