Duke Sherman, a managing partner at Diversified Media Design in New York City, was shopping at Barney's, a chic Manhattan department store, when a friend suggested he try lunching across the street at Nicole's. The suggestion wasn't simply a run-of-the-mill restaurant, but the namesake bistro located in the basement of British designer Nicole Farhi's New York flagship boutique.
First opened in 1994, the 4,000-square-foot establishment, with its 30-foot-long luminescent bar and fusion Mediterranean-Californian fare, is no shopping pit stop. Nicole's has a name-brand chef, it's been reviewed in The New York Times, and it has a clientele that comes in both for the latest ready-to-wear designs and the food, even after the store is closed. "They have a wonderful menu," says Sherman. "And a great sales rack."
Sherman is now a Nicole's regular. He frequently brings his clients for business lunches during the week and brunches at Nicole's downtown offshoot, 202, on weekends with friends. "When I bring clients, they tend to buy the clothes, too," he says.
Call it consumer cuisine. A number of retailers—from clothing to furniture—are introducing hip boutique cafés and restaurants inside their stores with fare that is just as enticing as the dresses, accessories, or sofas sold at the counter. "Retailers recognize the advantage," says Ron Paul, president of Technomic, a Chicago-based restaurant consultancy. "It provides a meeting place and an environment for customers to linger."
ORIGINS OF THE TREND. The in-store restaurants are aimed at attracting customers and increasing sales. Overall, according to the National Restaurant Assn., a Washington trade group, restaurant sales are on an upswing. This year, the industry will hit $511 billion in sales, up 5.1% from last year.
The trend began with department stores that introduced tea rooms and dining facilities to give customers a place to relax and recover before shopping some more. Shopping malls introduced the now ubiquitous food courts for much the same reason. Later the fad extended to big-box chains like Barnes & Noble (BKS), Wal-Mart (WMT), and Target (TGT), offering fast food and beverages to harried shoppers with in-store Pizza Huts and Starbucks (SBUX). Even Home Depot (HD) introduced upscale sandwich shops inside a number of its stores.
Not only did the eating places keep customers inside stores longer, in many cases they proved to be lucrative sales generators themselves. For instance, Swedish furniture giant Ikea's cafeterias are huge money generators, attracting customers with their meatball entrées almost as much as their Billy bookcases. While the private company doesn't break out figures, according to Nation's Restaurant News, an industry trade publication, the cafeteria at the Schaumburg (Ill.) location brought in an estimated $4.3 million in 2000.
BRAND BENEFITS. Recently, smaller boutiques have begun adding distinctive dining experiences. The new twist is that retail restaurants are destination dining. Unlike their predecessors, which were a convenient stop for a breather and a quick hot dog, these new restaurants have top chefs and regularly get reviewed by food critics.
"There's lots of empirical evidence that the trend is growing," says Neil Stern, a senior partner at McMillan Doolittle, a retailing consultancy based in Chicago. "There's lots of variations on the theme. For places like Ikea, it's a pretty foundational part of their strategy. The strategy is, the more time in the store, the more money you will spend."
For a number of high-end retailers, a name-brand restaurant is a lucrative brand-enhancer. For instance, RL, the Ralph Lauren restaurant, is located next to the largest Polo store in Chicago. First served seven years ago, the food, like Lauren's designs, is inspired by American classics. But the menu, with Australian lamb chops for $35 and crab cakes for $20, is more affordable than his couture. Giorgio Armani's Armani Exchange at the SouthCoast Plaza in Orange County, Calif., has an Italian restaurant, while the über-trendy Mauro's Café inside Hollywood (Calif.) retailer Fred Segal's is a regular stop for celebrity shoppers.
DEMO DINING. This year when Alessi, the Italian home accessories designer, opened a flagship store in Manhattan's SoHo, it added a coffee bar in partnership with New York City-based coffeehouse Joe The Art of Coffee where it serves double espressos on Alessi cups and saucers. Located at the front entrance, it sells lattes and cappuccinos in the morning before the store is open. According to the company, most prospective customers think of Alessi products as designs to put on a shelf—the café helps to show that these are designs people can actually use.
Perhaps one of the most successful in-store dining ventures has been inside New York City's ABC Carpet, a haute home furnishings shop. Currently there are three eateries on the premises, including Lucy Latin Kitchen. Ricardo Arias, Lucy's manager, says at first it was odd for the restaurant to be inside a furniture shop, but now he calls the location an advantage: "We get a lot of customers from ABC, and we contribute a lot to the store."
Arias says the restaurant adds 20% to 25% to the store's sales. And that's a two-way relationship. All of the furniture inside Lucy is from the store and for sale. Arias says every day a customer ends up buying something after dining. "Two weeks ago, someone came and sat at the bar for lunch," he says. "He loved our tables so much he bought three of them." They were $1,500 each. We can only imagine the tip on that bill.