Giving Away The Store — As A Business Model

The concept of giving consumers something for free — be it part of an order, the result of a refund or some other promotional reward — is nothing new to retail.

But for it to be a company’s entire business model? At a glance, that might conservatively be described as “unwise,” from a profit-and-loss perspective.

Yet, there stands SamplingLab in Portland, Oregon, a store that has been in business since late 2014 without charging shoppers a dime (the place doesn’t even have a cash register).

What customers of SamplingLab do pay with is opinions: In exchange for the full-size products — ranging in categories from food to beauty — that they take home (in addition to those that they sample onsite), shoppers, who register as members of SamplingLab, are required to fill out an online questionnaire. There’s a one-product-per-day (per customer) limit at the store, but as long as members keep sharing their opinions, they get to keep on sampling.

It’s the brands seeking that feedback that keep the lights on in the combination retail space and hangout lounge that is SamplingLab, paying about $2,000 to have their goods in rotation for 30-to-45-day periods, reports The Wall Street Journal.

What makes the opinions of the freebie-seekers that frequent the shop so valuable?

They’re millennials, of course.

SamplingLab Founder Jeff Davis — a marketing consultant — told WSJ that 75 percent of his customers are 34 or younger, putting them in the sweet spot of 18-to-34-year-olds that account for an estimated $1.3 trillion in annual spending.

With that kind of money on the line, brands are more than willing to put up some of their own for guidance as to how to tweak products to appeal to millennials’ desires. And millennials, it will surprise exactly no one, very much enjoy having their opinions validated in such a way.

“Consumers crave to be heard by brands and have their opinions validated, while, at the same time, brands need a way to hear them that actually means something,” Davis told PSFK (which featured SamplingLab in its “Future of Retail” 2016 report).

“Millennial consumers … live for the opportunity to co-create a product with a brand,” Davis continued. “When they know they’ve had a say in how a new product comes to market or how their feedback on an existing product impacts how it’s marketed, a remarkable level of brand loyalty, ownership and advocacy is instantly created. Brands that can listen at that level have endeared themselves to consumers in ways that social media reach simply can’t.”

In essence, then, SamplingLab stands as a youth-centric reboot of the retail focus group model that dates back to the 1940s. As the WSJ story intones, while a brand today would be hard-pressed to get millennials to gather in somebody’s mom’s kitchen to discuss the attributes of, say, the season’s swell new rolling pins, it’s far more feasible to successfully tweet those same consumers to get together at a chill spot for a beer or gourmet food tasting … and the end result is the same.

“Smart retailers need to push beyond their comfort zones to give consumers something unexpected that brings them back for more. The experience that brings them back also doesn’t necessarily have to lead to an immediate sale,” observes Davis in the PSFK story. “Retailers who make consumers feel welcome and comfortable in their stores will win in the long run.”

He told the outlet that, in under a year, SamplingLab — which does not share its members’ personal information — has “created a retail experience that members tell us has a coolness factor, which has resulted in a halo effect for the brands we represent.”

Given the success that Davis’ company has found to date (the member count reached 7,600 in SamplingLab’s first six months of existence and continues to rise), there is a case to be made that retailers can, over time, reach the invaluable millennial market more effectively through a little third-party-derived, stylish subterfuge, rather than coming at them head on.

As Davis put it in an interview with The Oregonian: “Millennials don’t dislike brands; they just dislike brands that don’t listen.”

Retailers that acknowledge that characteristic of millennials — as well as the cross-generational dislike of paying for stuff — might just have a chance to make some real money, paradoxically, by giving away their goods.