The current retail market is undergoing its most significant transformation since the advent of mass digitisation. Hybrid models that combine retail with elements of dining, services, work and community life are gradually replacing traditional concepts focused solely on the sale of goods. According to experts at Colliers, this transformation is driven by changes in the economy, where physical spaces must justify their existence against the efficiency of digital channels.
“Retail is evolving toward hybrid concepts that can attract both investors and customers thanks to these setups’ ability to generate consistent foot traffic. The trend is toward expanding experiential concepts, which are bringing customers back to stores and strengthening brand loyalty,” says Blanka Sovová, director of the retail division at Colliers.
The psychology of space
In traditional retail, foot traffic was the main indicator of success. In the hybrid model, the focus shifts to the amount of time a customer spends in the store. The longer a customer stays in the store, the higher the likelihood of a purchase and the greater the average transaction value. A study by Path Intelligence has previously highlighted this fact, finding that a 1% increase in time spent in a store generates a 1.3% increase in sales.
“In practice, this means that if a retailer can extend a customer’s stay—for example, by offering coffee or a place to sit—the store owner then increases the likelihood of larger purchases. However, the length of stay isn’t just important for immediate sales; it also serves as an indicator of the quality of customer experience,” comments Blanka Sovová.
Coffee as a draw
A classic example of hybrid retail is the integration of coffee shops into bookstores. This model emerged as a response to declining margins in the book industry, where food and beverage components’ profits now subsidise the literary section.
Successful concepts, such as modernised branches of the American book retailer Barnes & Noble, have led to longer durations for longer customer visits, confirming that customers seek out spaces that allow for so-called “slow shopping.” Book sales, in turn, benefit from impulse purchases associated with extended stays in the café area, where bestsellers and new releases are placed near seating areas and close to beverage pickup counters.
“Coffee in stores is nothing new, though. Tomáš Baťa already used this idea in the 1930s. He offered coffee to men who were waiting for their wives to choose their shoes,” says Blanka Sovová, noting that today the fashion brand H&M also combines fashion and refreshments in its new ARKET concept in Prague.
Fashion and cosmetics
In the fashion sector, gastronomy is becoming a tool for bringing a brand’s DNA to life. Luxury brands such as Dior, Gucci and Ralph Lauren are opening cafés and restaurants that are not primarily intended to generate revenue, but rather to create a customer experience and strengthen the brand’s identity. Since 2014, Ralph’s Coffee in New York has served as an example of how coffee is becoming a gateway to the brand’s world, even for customers who cannot afford or do not wish to purchase luxury clothing.
In the cosmetics sector, the distinction between a retail store and a salon has practically disappeared. The integration of services such as makeup application, product testing and skin analysis is now standard added value that brick-and-mortar stores offer that e-commerce cannot.
Omnichannel approach
Hybrid retail, however, is not just about combining services in a physical space but also involves connecting with the digital world. The physical store is becoming a crucial link in both the customer journey and the distribution network.
“When a brand opens a physical store, digital sales in that area typically rise; when it closes one, they fall. According to a Capital One Shopping survey from this past June, as many as 55% of customers visit the retailer’s website before heading to the store. So, as the online world grows, so do sales in the offline world,” says Blanka Sovová. According to her, it’s also common practice for brands to first test their most popular products through their online store and then focus on those items in their brick-and-mortar store. This store usually opens shortly after the online shop launches. This way, the retailer opens the brick-and-mortar store with the certainty that customers are already familiar with their products and purchase them regularly.
Be aware of regulations
Establishing a hybrid business model in the Czech Republic presents specific challenges in the areas of regulatory norms, hygiene and building codes. An operator who, for example, combines the sale of clothing with serving coffee is considered a food business operator.
Food service areas must meet strict hygiene requirements, including those for surfaces, ventilation, washing facilities and the separation of areas designated for food handling.
When setting up hybrid operations, it is also important to keep in mind that if a space has been approved as a retail store, integrating a café requires a re-approval process that assesses new fire safety requirements—such as escape routes in the event of higher occupancy—and technical equipment, such as ventilation systems for vapours and odours.
“We recommend that property owners and retailers move away from rigid divisions of retail spaces and start thinking of them as dynamic ecosystems. Successful stores are no longer defined by the number of items sold, but by the depth of the customer’s engagement in the brand’s world. Hybrid concepts are a good tool for achieving this goal,” predicts Blanka Sovová.
