Vibhu Norby, CEO of retail startup B8ta, had muted expectations when he reopened two of his stores in Texas this month, but he wasn't prepared for how bad things would be. B8ta's Houston store had attracted around 1,000 shoppers on a typical weekend before the pandemic. During the first weekend in May, a total of 40 customers visited the same store. Likewise, B8ta's Austin store saw foot traffic decline by 98%.
"We knew it would be slow," Norby said. Still, with Texas imposing less stringent lockdown rules, and with Mother's Day just a week away, "I kind of expected there to be a bit more enthusiasm."
Founded in 2015, B8ta set out to reinvent retail as a service, build out a new generation of showroom stores, and help bigger chains with technology that would allow them to compete with Amazon. In recent weeks, the company realigned much of its workforce to respond to the current crisis: It gathered detailed data on the industry's COVID-19 safety efforts and put those insights to use in developing an elaborate protocol to reopen its own stores.
While some of Norby's plans have been scrambled by the crisis, his position has given him unique insight not only into the current safety issues confronting retail, but also the steep economic challenges ahead.
One-way aisles, constant disinfecting
Before reopening its own stores, B8ta's team did extensive homework on safety strategies across the industry, visiting major retailers to check on their precautions. Then, the company developed its own safety protocol: B8ta's Austin and Houston stores now admit one visitor or family group at a time. Aisles are one-way, and signage laying out safety rules is everywhere. Shoppers have to wear face masks, and are accompanied by a masked store associate at all times. "You can't just wander around the store without being assisted," Norby explained.
That store associate not only provides shopping advice, but keeps tabs on anything customers come in contact with. If a shopper picks up an item or touches one of the many screens across the store, the B8ta staffer drops a small plastic token next to it. "Once that customer leaves, the managers go around to collect the tokens, sanitize those areas," Norby said. "Then we can take the next customer."
That's a lot of work — too much for many big-box retailers. "It's impossible for them to do this," he said. In bigger stores, customers vastly outnumber associates, yielding inherently unsafe conditions. "Shoppers are putting their hands on everything," Norby said. "They're trying on lipstick samples. They're trying on shoes, rifling through clothing." Visiting major chains has left him baffled about the lack of response to those issues. "I'm really confused by that," he said.
Last week, B8ta decided to share its research more widely. The company launched Shopsafely.co, a website ranking major retailers by their safety measures. Some companies are doing a better job than others, wiping down carts and requiring shoppers to wear masks. Ultimately, Norby has one piece of advice for consumers: "In my opinion, people should be shopping in small businesses right now," he said. "Not only do they need the help, but broadly speaking, your experience will be much safer."
Retail-as-a-service: A bulwark against Amazon
That may sound like something you'd expect the CEO of a chain of smaller stores to say. But for B8ta, the situation is more complicated. In addition to operating 20 stores, B8ta has been working with some of the nation's biggest chains. Lowe's tapped B8ta for a connected home showcase in 70 of its stores. Macy's, an investor in the company, is using B8ta for its pop-up stores. Behind the scenes, B8ta has worked with around two dozen retailers to provide them with store-finder software, appointment-booking services and more.
When B8ta launched in 2015, its premise was to reinvent retail, while helping physical stores compete against online giants like Amazon. Norby previously worked for Myspace and met some of his co-founders at smart home pioneer Nest. With that background, the company not only embraced technology solutions, but looked to tech for new business models.
Traditional retailers buy products at wholesale prices and then sell them with a sizable markup. B8ta, on the other hand, functions as a marketplace for brands, which pay the company for placement in its stores but get to keep the sales revenue. B8ta also allows companies to quickly spin up pop-up stores to test and introduce new products under their own brand.
In pre-pandemic times, this retail-as-a-service model worked great for smaller consumer electronics brands, which often don't have the margins to survive in the cutthroat world of big-box retail and tend to get lost among thousands of competitors on Amazon.com. But those lesser-known brands rely on exposure, on curious customers who browse, who like to be surprised. "Our business model is built around discovery," Norby said. "That portion of our store experiences drops significantly. I don't think people are coming in right now for fun."
However, sales at B8ta's Texas stores have thus far been encouraging. "Transaction volume itself is bizarrely normal," Norby said. Before the pandemic, only about 3% of people who went to B8ta's Austin store actually bought anything. In the week after the reopening, the figure shot up to 67%. "It seems like the people that normally would come in to buy something don't have a problem coming in," he said.
Things are not going to be OK
Still, Norby is cautious about the future. "There is a trickle-down problem that is going to surface through the back half of the year," he said, predicting that 20%+ unemployment will take a massive toll on retail. "You're going to put a lot of stress on income and savings. Everybody is going to be affected by this."
The looming economic downturn could also be bad news for B8ta, which sells a lot of high-priced consumer electronics, including $3,000 smart speakers, wellness products and drones — items that aren't high on people's lists when money is tight. At the same time, major retailers could be forced to hunker down and give up on in-store pop-ups and future-of-shopping experiments, depriving B8ta of important revenue sources.
Norby isn't ready to throw in the towel just yet. He's thinking about tweaking B8ta's business model, about experimenting with appointment-only shopping, and even about opportunistically snapping up some cheap storefronts for an expansion during the downturn. He also believes brands could further accelerate change in retail, especially as they lose confidence in existing big-box chains during the crisis. "I've heard on the ground that a lot of vendors are extremely concerned about getting paid and being able to move inventory through those channels," he said.
Norby is ultimately hopeful that his company, and retail in general, will survive the current crisis. But he's deeply suspicious of anyone predicting a quick turn-around or envisioning massive opportunities ahead. "I don't get this bizarre optimism," he said. "Things are not going to just be OK."
Image: Plaid