Paco Underhill

About Paco Underhill

Paco Underhill is the CEO and Founder of Envirosell, a behavioral research and consulting firm with 10 offices globally. Paco and Envirosell’s work has been featured in The New York Times, 20/20, National Public Radio, Smithsonian Magazine, Wall Street Journal, and other major news media. Paco is also the author of What Women Want, which was published in soft cover edition by Simon & Schuster in July 2011; Call of the Mall, a walking tour of the American shopping mall; and Why We Buy, the bestselling book about retail in history. In addition, Paco’s columns include regular features in major trade publication DDI Magazine, as well as Goldman Sachs’ in-house publication.

A Parking Lot Story

A Parking Lot Story_2Joni Mitchell wrote the line “They paved Paradise and put up a parking lot.” How much of our lives are defined by parking. Call it a tangible ramification of the invention of the wheel or perhaps an odd cultural addiction to smooth hard surfaces.  For global retail it is the apron, in whatever form it takes. Visit a new urban shopping mall in Tokyo: the model is a conceptual Ferris wheel, an elevated spinning parking lot where each car has its own compartment. Drive your car into the cube, it gets lifted and stored away in the sky.  In Seoul, many shopping malls have cameras focused on each space and a software package that reads license plate numbers; through an interactive screen in an elevator bank or a phone app, you are guided you through a dimly-lit maze to your vehicle. For all the innovation across the world, parking is still mostly flat asphalt and concrete, accessorized with a little paint.

Parking lots are the historic starting and ending point for retail. They are often barren and windswept, especially on a winter weekday inside a garage at Mall of America. They are sometimes scary; who ever loved a parking lot? No one ambles; everyone rushes to unlock their cars. More accidents happen in parking lots than on the highway. They are laid out by engineering teams trying to fit in as many spaces as they can. Outside of Seoul and Tokyo, parking lots have not conceptually changed since the invention of automobiles. Until now. [Read more…]

Birth, Life and Death: A Retail Cycle

murraysRob Kaufelt walked into Murray’s Cheese on Bleecker Street in New York’s Greenwich Village in the early ’90s and noticed a sign saying the store was closing after a 50-year run. The owners were tired, the neighborhood was changing, and the lease was up. Rob came from a family of grocers. He was a deli man who was used to getting up early and, at that moment, was out of work. His latest store had failed. On a whim, Rob made an offer on the business and was shocked when it was accepted. He moved it across the street for cheaper rent and started cutting cheese.

One thing led to another: Cheese classes, catering, wholesaling to restaurants, an e-commerce business, an outpost in Grand Central Terminal, a Murray’s Cheese Bar restaurant, and a deal with Kroger. By the end of 2015, there will be some 250 Murray’s Cheese outposts in Kroger stores across the country. Rob and Murray’s are evangelically getting Americans past Vermont cheddar and Wisconsin flavored Jacks. Whoever Murray was, he probably couldn’t imagine cheese becoming so chic, and his family is likely regretting not keeping at least a piece of the action. Rob, needless to say, is doing very well and has more grown-up toys than any man I know. [Read more…]

A Tale of Two Malls

Paco6Fifty meters off Nanking Road in Shanghai, behind the Apple Store, you still have remnants of the early 20th century city. The alleys are narrow and you can stare into homes lit with cold fluorescent lights. The dirt, the smells, the noise and the life are visceral. Although it isn’t the dark side of the moon, the impulse is not to linger. It isn’t from a sense of danger, but rather the dawning realization that you are an alien – a stranger in a strange land. It’s an unsettling time warp, where in the space of a few dozen paces, the 21st century fades and the 19th century seems just around the corner.

This juxtaposition makes Shanghai an unlikely battleground for modern luxury shopping. Each year, new malls open in a very crowded marketplace with a fresh proposition. The older the mall, the more it gets pushed down-market. Commercial properties are not aging well in a city of 24 million people where construction fever floats on a bloated financial system desperate for just a modest return on their cash.

For jaded shoppers bored with last year’s hot spot, the attraction is no longer about scale, but about the proposition. While it is not quite as simple as the 2013 holiday decorative stars, the 2014 goats continued to try to reinvent the retail thematic proposition. But in a mall where five years ago you had to stand in line to ride the escalators, today it is startlingly vacant. [Read more…]

Around the World with Paco Underhill

cooking_oilWhat We Can Learn From Emerging Markets

Merchants have a temptation to move up-market. We suspect this is a reflection of their desire to seek higher margins. While we can applaud the successes of luxury categories at the upper tier of the market, it is at the other end of the spectrum where we find insightful examples of merchant innovation. For many of the world’s consumer product goods companies, future earnings and sales growth are anchored in their ability to not only move up, but also to more effectively cover the down-market. But we may be missing some very special lessons in this traditional marketing strategy. We can learn from what’s hidden in plain sight in emerging economies by recognizing the transformation of our ideas and the ingenuity of adapting our concepts to local solutions. There is also a new wave of clever entrepreneurs who are retooling conventional retail and marketing in novel grassroots ways.

Sumba: Rethinking Trust and the Pragmatics of Third-World Recycling

The Indonesian Island of Sumba has the peculiar distinction of being the world’s southeastern-most home of the horse. Its equine culture is unique to the archipelago, and adventurous tourists invade the island for its horse festivals that involve ritual battles on horseback. Its welcoming villages are dominated by tall prehistoric megaliths, not unlike Easter Island. But in Sumba, these giant icons are made all the more startling by the vibrant human life that continues on the island, in contrast to the abandoned statues of Easter Island. Sumba has a few resorts that tend to be patronized by glitterati looking for places where the tabloids can’t find them. It is, in its way, paradise lost and found. [Read more…]

Lessons in Luxury From the Middle Eastern Souks

Gold_SoukWhy is buying fine jewelry in the Western World such an intimidating and utilitarian experience? A beautiful piece of jewelry is sensual, romantic, seductive. Why do we feel like we’re purchasing expensive light bulbs instead of a circlet of dazzling diamonds? We can learn a lot from the bazaars and the souks in the Mideast.

Two of the most magical places in luxury retail are the Gold Souk in Dubai and the jewelry section of the Grand Bazaar in Istanbul. The window displays are opulent. There is nothing restrained about the presentation, unlike the minimalist Tiffany windows or vitrines at Bulgari. These Middle Eastern bazaars are the meeting grounds of testosterone and estrogen, resulting in a unique mercantile representation of desire. There is a sheer physical smell of the power to buy here, and there is a visceral joy in being the retail host for luxury and craftsmanship. Contrary to Western stealth wealth, the souks exhibit a certain sensuality; part dress-up, part princess-complex; and an explosion of both insatiability and satisfaction. The whole experience is wrapped up in life’s emotional punctuation marks. Acquisitions from the bazaars celebrate milestones, even those as simple as adding another gold bangle to the collection for no reason at all other than the ability to do so. [Read more…]

Touch Screens: Innovation or Distraction?

electronic-superhighway-namjunepaikOur visual language continues to evolve faster than our spoken or written word. That evolution sits at the confluence of disruptive everything; from the viability of broadcast media to the science of visual merchandising. It also circumscribes a generational shift in how and where we access information.

If our screen owning habits are changing, how has that affected our screen watching habits in retail and other places outside our home? Ten years ago, our measurement data suggested that a television-based image attracted twice the number of eyeballs as a static paper-based image. Remember the video walls in stores and shopping malls that were some weird commercial rendition of a Nam Jung Paik art installation? It was brilliant the first, and maybe also the second time you saw it, but eye-straining thereafter.

[Read more…]

Lessons from Offshore

paco1Lesson #1 – Returning Turtles

“Organized retail” is the term we use to describe modern trade in the emerging market. It is an explosion that has quietly been transforming access to goods across the planet. In most emerging markets, the first intrusion of organized retail is the modern grocery store or hypermarket; however, it has stretched beyond big boxes, to specialty retail, foodservice and how malls are built.

paco2Local merchants that have ventured to the United States and Europe are behind much of that transformation. They have left home to get educated, observe and process, and then return to to reinvent. One early example is Thailand-based Lotus, an agribusiness broker that saw organized retail as a way of vertically integrating in the early 1990s. During the first Asian money crisis of 1997, Lotus sold its first attempt at retail, a grocery chain in Thailand, to Tesco and then made the decision to bet on China. In 2014, Lotus not only operates nearly 60 retail superstores in China (which sell the food products they produce), but also owns many of the shopping malls (such as Super Brand Mall in Shanghai, pictured) where their stores are lead tenants. [Read more…]

Your Local Fruit Stand is a Bellwether

IMG_0139On the corner of 7th Avenue and 12th Street in Manhattan is a fruit and vegetable cart. Others just like it are scattered across New York City. They tend to be run by hardworking immigrants willing to stand up all day and put up with whatever weather comes their way. I’ve passed this stand thousands of times as I walk to and from work. Last fall, I stopped for the first time noticing that the same blueberries and blackberries that have now become my breakfast staples were cheaper than in the grocery store down the street; the same box and brand, but 25% less.

In retrospect, it makes perfect sense since my grocery store pays more in rent than the street vendor does. It wasn’t just that the berries were cheaper; when I actually compared the other fruit and vegetable prices, everything else was too. I started buying avocados, eggplant, onions and melons. Not only was it cheaper, but it was more convenient. Yes the selection was narrow, but it met my needs. The vendor was friendly, and his name was Ali. [Read more…]

Three Dirty Little Secrets

Alexander Mcqueen London, Old Bond Street, London, W1, United Kingdom Architect:  Pentagram Alexander Mcqueen, Showroom, Pentagram, London, 2002, Overall View Of ShowroomGlobalShop, the retail design expo, had its three-day extravaganza in Las Vegas the middle of March. Like Euroshop, its continental counterpart, it is a gathering of brick-and-mortar assets: flooring and mannequin companies; fixture and signage manufacturers; point-of-purchase display companies … and more. There are receptions, cocktail parties and lunches, and lots of meetings to imbibe in adult beverages. VMSD and Design:Retail, the two trade magazines covering the industry, put aside their differences and celebrated the occasion enthusiastically. Still, however happy the gathering was, it is hard to avoid the dark clouds looming on the horizon. [Read more…]

The Meaning of Time

SONY DSCAll of us move through our lives with a clock ticking inside our heads. Even in troubled economic situations, time, rather than money, is our most important commodity. That clock tends to tick at relative degrees of loudness. You can meet a friend at Garden State Plaza Mall for the afternoon, and the clock ticks softly, a kind of shopping therapy. At the same mall another time, you want to get in and out as fast as you can. In other words, the meaning of time can change.

My mother was relieved when a 7-Eleven opened a location close to our suburban home in the 1950s. The idea of buying milk for a young family any time of day was a godsend, even if she did have reservations about both the price and quality. Ask a Millennial today where they buy milk, and you get an eclectic list; the drug store, the grocery store, the convenience store, the mass merchant, even the office product superstore sometimes stocks milk. In parts of Europe, you can even buy milk at roadside vending machines. [Read more…]

Field Notes on the New Face of Affluence, the Migration of Wealth and Changing Cityscapes

Paco-Final-imageThe most frightening story of 2013 that reverberated across the retail world was the terrorist assault on the Westgate Mall in Nairobi, Kenya. More than 70 people were killed. One of the key premises that have driven the expansion of shopping malls and the growth of organized retail across the world has been safety. Malls provide a secure, climate-controlled and clean environment, and for both old and new money consumers. In emerging markets like Kenya, it is a leap from the 19th to the 21st Century in one self-contained property. The mall has a suite of interchangeable parts, from brands to food courts, which makes it as close to a global vocabulary as you get. Where it gets different is security.

In Brazil, some mall security services are linked to boxing schools. The guards are well dressed, but have scar tissue around their eyes. In malls in India, your trunk is inspected and the undercarriage examined with a mirror. In Israel and Turkey you pass through a metal detector, like Checkpoint Charlie at the airport. By comparison, North America mall security is window dressing. [Read more…]

Darkness at Dawn

iStock_000012485261SmallThe closer you get to the Equator, the more dawn and dusk become switches rather than transitions. It’s dark, it’s light.

I’ve learned as a global traveler to keep the curtains open at night, my goal to be in bed shortly after sundown and up at first light. Recently, I had a corner room at a hotel with floor-to-ceiling windows on two sides. The view of Paulista and the rest of São Paulo turned on a little before six; the cell phone towers, the park below and the high-rise buildings looked like uneven stubble on the contours of a Brazilian chin.

I was picked up at 7:00 AM by my colleague, the CEO of a publicly traded shopping mall company, in his Land Rover and we headed across town to the private airport to catch our turbo-propped Sky Master. We were headed for Brasilia. The traffic was heavy, and as we inched our way around a traffic circle, I lowered the window on the passenger’s side to stick my hand out and help get us to the outside lane. The driver gasped and I realized the window was almost two inches thick. Bulletproof. I struggled to get the window back up. The stupid Yankee had comprised the moving security perimeter. It took two security guards at the airport to tease the window back to its original position. [Read more…]