New store concept breaks the rules of traditional retailing model

Four Silicon Valley veterans are looking to reinvent brick-and-mortar retailing with a first-of-its-kind experience built on an unusual business model.



The store, called B8ta, makes its debut on Friday, Dec. 11, in downtown Palo Alto, California. With 1,400 sq. ft. of selling space, the space is designed to give shoppers a hands-on demonstration of the very latest in innovative products — most of them from start-up tech companies that lack the resources and/or know-how for entering traditional retail channels. Indeed, most of the featured companies (or “makers” in B8ta speak) sell products directly on their websites or through crowd funding campaigns.



“B8ta was born out of our desire to create a much better consumer experience for individuals looking for innovative products in emerging categories, with a focus on consumer electronics,” Phillip Raub, the company’s chief marketing officer and head of retail told Chain Store Age. “There is all this new hardware being created via crowd funding or venture capital money. Our idea is to bread down the barriers that exist in getting these products into physical retailing, and bring them to the masses in a premium, high-touch environment.”



Raub, who along with the other three co-founders is a former employee of Nest Labs, explained that at B8ta, shoppers can touch and interact with the products on display in a warm and inviting environment. (Nest is the connected devices company that was acquired by Google in 2014.)



“None of the products are in packaging or a box,” he said, “so the consumer can touch, feel and use them in a real-life setting.”



The store associates are all highly trained by the makers on the details of the products on display, and equipped with mobile tools on which they can offer curated product tours and training to deliver the ultimate brand experience.



BUSINESS MODEL: One of the most unusual things about B8ta is the way it intends to make money. Instead of earning revenue from sales of products, the company is paid a monthly subscription fee from the makers of the products in its stores.



“We overhauled our business model so that it is not a traditional margin structure,” Raub explained. “The maker subscribes to the space and, in return, they have access to a beautifully curated retail experience, with full control over such details as the pricing.”



At the end of the day, Raub added, the maker owns the product. But B8ta has full responsibility for it while it is in the store. And the retailer handles the transactions. (Nearly all of the products are sold directly out of the store.)



Raub would not disclose the specific details of the pricing arrangement. But he said the subscription fees vary depending on the manufacturer’s in-store footprint and the amount of products it wants to display.



“The relationship between ourselves and our product makers is very amicable,” Raub added. “We want them to be successful. We are even ok if people purchase the products elsewhere.”



ANALYTICS: Along with store space, B8ta will provide its product makers with something else: insights into critical real-time selling metrics. The company is partnering with RetailNext on software that gives companies access to data that allows them to better understand how shoppers are interacting with their products.



“B8ta is taking analytics and reporting to a whole new level,” Raub said. “We are creating real-time dashboards so a partner will know at all times what is happening with their products in our store. A partner can go into its dashboard and see everything from the average dwell time in front of a product to conversion and sales data.”



B8ta gives companies complete control over pricing, messaging and inventory from the online dashboard. Changes are synched automatically through the store’s digital signage.



MERCHANDISE: At launch, some 50 different companies are represented in B8ta, with a total of about 70 products on display. The lineup ranges from a folding electric bicycle to an Internet-connected tea maker to virtual reality goggles to a drone.



“It’s an interesting product mix,” Raub said. “In terms of the product, it’s about innovation for us, not just consumer electronics. It’s about finding really unique and emerging technologies and bringing them to our consumer base.”



B8ta displays real-time information for every product, including reviews and in-store inventory. The founders expect the lineup will turnover on a regular basis and that some products will move into mass retailers.



“We are also taking reservations on about a half dozen prototype items that are not even in the production stage yet,” Raub added.



While B8ta has some venture capital backing, Raub declined to reveal any of the details. And while it’s too early to talk about expanding the concept, he did leave the door open.



“We are hyper focused on getting the store right,” he said. “But we do see this as a scalable retail business long term.”