As competition increases, “high touch” becomes a major way to differentiate any retail offering. As a way of contrast, let's first look at the rise of the Web, a “non-touch” environment. Web pioneers, such as Amazon.com and eBay, sell exclusively on the Web. Amazon and eBay have the powerful brand of successful retailers, but Amazon serves customers with the anonymity of a distributor and eBay functions as a middleman disguised as an invisible auctioneer. Web-only vendors are software platforms that enable commerce. They move products for others and serve as efficient distribution channels. They may be a new mechanism for supply chain management, but they are still evolving as merchants. They have not yet found a way to connect—in the pre- digital sense of the word—with their customers. They are the convenience stores on the information superhighway. Little brand loyalty exists. Price and convenience determine purchases. If a cheaper “candy bar” is being sold down the digital road, you will head over there, and probably soon. The generic and impersonal nature of the medium drives down prices, which is good for customers, but it makes differentiation difficult for businesses. This is why many Web-only vendors, despite siphoning sales from traditional retailers, have yet to make significant profits.

For all that they live in the virtual world, I have no doubt that Amazon and eBay would love today to have a physical existence to take advantage of their palpable brand identity. However, they can't. The minute an Amazon.com store opened, the minute an eBay-owned boutique opened, their valuations would collapse. The business model for Web-only companies is just too efficient, at least in theory. Their stock valuation is based on the idea that, without brick-and-mortar expenses, their potential for profit growth is exponential. To date, however, most Web-only companies have struggled to make a profit. The most successful company, eBay, does not actually sell anything—it takes a cut from what other people sell. Established brick-and-mortar companies have moved to the Internet to complement physical stores; the “real” and “virtual” activities reinforce the brand. You would think a Web retailer could go in the opposite direction to exploit another sales channel. Nonetheless, Wall Street would interpret the opening of a physical store as a sign of weakness for a Web business. The stock of Web-only companies would collapse, and none of them so far has risked that disaster. The smart ones, however, should be looking for ways to partner with brick-and-mortar companies, as Amazon has begun to do.

The second category of Web vendors is the traditional retailer who uses the Web to supplement physical locations. This group includes catalog vendors who use the Web as an enhanced version of what they have always done. By and large, these are existing national brands. Late to the Web, most major retailers do a good job today of enhancing their brand with Web promotions and with Web stores that complement their physical stores. Websites are valuable as an outlet for overstocks and discounted wares, and an electronic “mailer” is a power ful and inexpensive promotional tool. The number of companies that are a true blend of Web and brick-and-mortar—the clever “click-and-mortar” category—is small, but increasing. Barnes & Noble is one company that makes the physical and virtual realities interchangeable. Customers can order products at a store or online, and they can return them to a physical store or to the online store. The B&N Reader's Advantage discount card and various gift cards work at a store or online. Because the customer experience is integrated, the intangible Web experience and the tangible store experience reinforce a single “easy-to-shop” brand.

Web vendors provide items that are difficult to find, such as clothes in uncommon sizes or unusual designs. It is much easier to Google “sweater with reindeer,” to search eBay for Lord of the Ring swords, or to go to a retailer's website to find a size 44 pair of slacks than it is to cruise a mall or phone different retail outlets to find a particular style, model, or size you want. This is the one value-added proposition unique to the Web.

In the real world, only three general retail positions have any future. Each one involves different degrees of customer perception and “touch”—human interaction.

Between Web vendors cherry-picking the easiest sales, national retailers using the Web as discount outlets, and the price/value retailers dominating commodities, many traditional retailers are losing large chunks of business. Unless your concept lends itself to another Big Box approach—the number of opportunities are limited—some kind of specialty or lifestyle retailing provides the best way to create and differentiate a new brand. Neither a Web experience nor a price/value experience is “high touch.” You can be in the middle—neither highest quality nor lowest price—but only if your offerings are unique. When a category collapses to a commodity, when convenience and price are the only drivers, it is time to find a niche. Specialty retailing and targeted lifestyle retailing are the only places where most retailers—small or large—can expect to play with any success. If you are in retail and you are not a Big Box category killer, you better be unique. You must find a way to touch the hearts and minds of customers. Otherwise, your business will be short lived.

Figure 2-1. Only three retail positions now have economic viability: exclusive specialty retailers at the top of the price pyramid; targeted lifestyle retailers, who make a personal connection with consumers in some way; and price/value retailers, who compete on price. Representative brands are shown in each section of the retail survival pyramid. Target is one of the few companies capable of straddling the line between price/value and lifestyle, appealing to both segments.

Niche categories take advantage of the consumer's desire to connect on a personal level and to be treated in a special way. The more hours a person spends in a cubicle conducting business on the phone or staring at the monitor doing work over the Internet, or the more hours a person spends wandering the aisles of a Big Box store, the more that person needs to engage with others one on one and face to face. It could be in a coffee shop, a shoe store, a bench in front of the courthouse, or in the mall. The need to “reach out and touch someone” is more than a metaphor (and more than a marketing phrase for an enterprise that never has touched anyone). The simple concept of “high touch” provides great power. When you found the perfect garment at a department store and the salesperson tracked down the desired color and size at another store and had it delivered to you, that memory remains with you. Chuck Williams, the founder of Williams-Sonoma, once took a bus to deliver a cake mold to a panicked customer preparing for a dinner party. A Nordstrom's legend has it that a sales associate once graciously accepted a set of automobile tires as a return from a confused but insistent old lady. The department store does not sell tires, but the associate took the tires over to the store that had sold them and saw that the customer was properly credited. Providing a high-touch experience in this way changes the retailer as much as the customer. You will enjoy knowing you are providing something unique and interesting. You will enjoy your customers as more than an unending stream of tired faces at a checkout line. You will find that you like going out of your way to make customers happy.

It's not as if a Big Box vendor cannot provide a meaningful experience too. Sam Walton was a straightforward, no-nonsense fellow, and Wal-Mart's plain retail experience reflects his personality. To this day, Wal-Mart's success is built on an efficient purchasing distribution platform. To bring a human scale to the cavernous facilities (150,000 square feet and growing larger every year), Wal-Mart has three or four employees stationed at the front to serve as greeters. Greeters, who are usually older because seniors convey trust, direct customers to the right aisles, answer questions, and assist customers however they can. However, their overriding purpose is to individually welcome customers to provide a moment of community at the start of a potentially impersonal shopping expedition. Lowe's, a warehouse-style concept, seeks personable staff who are knowledgeable about home-improvement projects. Although often swamped, they are helpful when available. In such ways, a low-touch concept can provide a high-touch moment—if not a high-touch overall experience.

The best way to deliver high touch is through authenticity. A good example comes from Potbelly Sandwich Works, a rapidly growing chain of restaurants based in Chicago. In 1996, entrepreneur Bryant Keil purchased Potbelly Sandwich Works. At that time, it was a single sandwich shop on Lincoln Avenue in Chicago. The store had been founded by a local couple as an antique shop. They began selling sandwiches to supplement sales. Eventually the food became such a success that the sandwiches developed into the main offering. On his first visit, Bryant was charmed by the store's décor and atmosphere. He was also smitten by the toasted sandwiches made on fresh rolls. Bryant sought the owners out. Once, while the owner was stoking the potbelly stove, Bryant asked him if he had ever thought of opening more stores:

Eventually the owner decided he would rather not be involved in a larger operation and sold the store to Bryant for $1.7 million. “You bought a sandwich shop for what?” That is what all his friends asked—but I did not. Not when I saw what he had and what he wanted to do with it.

Although customers came in for the inexpensive, high-quality sandwiches, Bryant understood the need for something more, which is why the quirky atmosphere of Potbelly attracted him. He and I share a common view of the lack of character and charm of the typical quick-serve place. It seems as if all the thought put into them is to make the restaurant cheaper to build and easier to swipe clean. They reflect efficiency, yet they do not reflect anything about how they will be used: as a welcoming spot for customers. The way a typical quick-serve restaurant comes together feels contrived—from the big plastic signs and neon lights to the synthetic tables and chairs to the way the employees speak from scripts instead of thinking and acting on their own. “Anyone can sell a sandwich,” Bryant says. “You need to sell an experience.” I agree. Customers want to have a natural interaction, not an artificial transaction.

Bryant's goal with Potbelly is to make each store authentic—a real place where you feel you can pull up a chair by the big old stove and sit for a spell. As Bryant attracted investment capital and grew the company from one Chicago store to more than 60 in the eastern United States, he has preserved and elaborated on the atmosphere of the original site. Every Potbelly store has wood countertops rather than lamination, wood floors rather than manufactured floors, period light fixtures rather than cheap fluorescent lighting, eclectic antique furniture, and vintage signs and pictures. A few small stores lack the potbelly stove. Bryant does not duplicate the design mechanically. He chooses the layout, furnishings, and fixtures based on the unique aspects of each site. If a store is in a modern skyscraper with metal-framed windows, he might use some wooden millwork to soften the look. Rather than install a wooden floor as he would in an old brownstone building, he might use a terrazzo floor. Keeping it real is the watchword. He is the high sheriff of what he calls his “hokey police” to make sure designs do not go too far. On college campuses, for instance, he shows support without going totally rah-rah. At the University of Michigan store, touches of maize and blue, the school colors, are worked naturally into the décor; the University of Maryland store has touches of Terrapin red. No two stores look the same. They are true to their neighborhoods. They are different, but comfortable. They all have a common theme and the same warm atmosphere.

The point of high touch is to make your customers feel at home. This approach means you treat them with courtesy and respect, to make them feel more like a valued friend than a commercial visitor. Once again: Create an experience rather than a transaction. A real sense of personal involvement by the retailer with the customer creates a personal connection with, and trust in, the brand. Authenticity helps achieve this goal. Because authenticity is hard to fake or copy, by definition an authentic concept gives you a very strong point of differentiation. You must always ask, “What is the distinctive and intimate experience that you can provide for your audience?”

By the time you read this, more than half the population of the state of California will be of Hispanic descent. When I mentioned this demographic projection to a friend he said, “Boy, now's the time to open a restaurant specializing in local Mexican fare.” “You don't know Mexican foods,” I said. “You've never run a restaurant. And you don't know Latino neighborhoods. Other than that, it's a great idea.”

No one should rush out to open a business strictly because of a trend. However, to avoid being swept out to sea by a contrary tide, you also should not rush out to open a business without evaluating trends. Significant trends in population—the growth of one group or the shift of another—can override short-term economic issues, such as interest rates or inflation rates. Such trends may cause your town to grow when others are shrinking or stagnate when others boom. Trends provide context for your business concept, a reality check for whether the concept is likely to succeed, and an insight as to how it might best succeed.

Thus, it is unlikely that genetic engineering will have much effect on the fall rollout of your jewelry line, but the location of a new R&D science center might tell you which neighborhoods could be suitable for upscale shops such as yours. The Hispanic trend in the American Southwest and other major U.S. markets might be a major boost to your concept if you have the expertise to cater to that demographic. The influx might be detrimental if you want to open a restaurant featuring heavy German fare. Or it might be neutral, depending on many other factors. The primary thing is to learn to recognize change and exploit it when possible to your advantage. If you open a clothing shop in a Hispanic area, for instance, you might offer specialty clothing that appeals to young Latinas, or you might have employees that speak Spanish. Even better, you would offer clothing proportioned for Hispanic women. If your concept does not appeal to Hispanics, it must have a very strong appeal to another demographic in your area.

Of all the trends, the most important one to consider is the Baby Boomer generation, the huge group born in the decade after World War II. The sheer size of this population group, coupled with a large immigrant segment of similar age, creates an economic impact four times that of any other age group. In the mid-1980s this group bought houses in huge numbers, fueling the growth of suburbs, forcing up home prices, and sending overall consumer debt to unheard of heights. In their twenties they drove the expansion of skiing, tennis, and other outdoor sports. In their thirties they caused the explosion of health clubs. In their forties and fifties, they are accelerating the growth of golf. The cumulative buying power of this group drove increased consumption and the rise of the shopping malls, the growth in eating out and the proliferation of quick-serve restaurants, and most of the other elements we associate with today's popular culture. Clever businesspeople pay attention to them. Joe Nevin in Aspen, Colorado, noticed that these people—some 80 percent of all snow skiers—were now avoiding the more difficult trails and back-country for fear of injury. Joe created the Bumps for Boomers program, designed to teach older bodies how to engage the whole mountain safely, including moguls and diamond-marked terrain. By opening up the rest of the slopes to this demographic, he hopes to rekindle the interest of the sizable group that fueled the ski boom of the 1970s.

Today's most important economic fact is that these same Boomers are hitting their peak in discretionary income, the result of high income and relatively low expenses as the last of their children leave home. High disposable income implies luxury items, fine shops and services, travel and leisure activities. The Boomers are also starting to move to smaller houses. They are returning to urban condos from the suburbs to re-immerse themselves in city culture, or they are settling in resort areas or non-urban villages with active lifestyles. As they age, Boomers will create new opportunities in the area of senior activities, services, and care facilities.

For a good overview of this and other megatrends I recommend Harry Dent's The Roaring 2000s: Building the Wealth and Lifestyle You Desire in the Greatest Boom in History. Dent provides a solid grounding in the biggest long-term cycles involving population growth and movement, technology innovation, and economic patterns worldwide. You may not agree with all his analyses or predictions, but before you get into the construction of subdivisions or shopping centers, you might want to know when the last of the Boomer kids will leave the nest (2009). Or you might want to know which areas are likely to remain boomtowns that will see an influx of prosperous young families who will still need the big homes and malls. Beyond Dent's suggestions on particular locales and investment opportunities, the greatest value of the book is the way it will prime your thinking about the kinds of new goods and services this affluent decade will require, and where the affluent areas are likely to be. After all, a boomtown requires just as many traditional retail businesses as any other town, plus many new services suitable for a dispersed economy shifting more toward telecommuting and small-town business hubs.

From the overall economic context that trends provide you still have to extract some fairly concrete ideas of how to apply them to your situation. A large in-swell of working-class immigrants might bode poorly for a chic restaurant in a particular location, but it could represent a heyday for blue-collar restaurants and shops. All customers—long-term urban dwellers, recent immigrants, and well- established suburbanites alike—are historically very loyal to businesses that do right by them. So a bank might invest in a “lower demographic” location today, catering to hard-working immigrant or inner-city families in order to reap a future return when the families get established, trade up to bigger homes and get loans for their kids' college educations. American Savings Bank in the mid-1990s had created a “doughnut” of bank branches in Los Angeles—a ring of bank branches around the city but none in the center. When the bank responded to community wishes and opened a branch in central L.A., it became the highest-producing branch from its first month, and remains that way to this day. An automobile dealer could adopt the same strategy by selling older but reliable cars in such areas knowing that over time the families will move to more expensive transport.

But if you want to appeal to the high-end Hispanic families—the second or third or fourth generation families that have done very well—you may require a different strategy. The interests and needs of this group will likely parallel those of their non-Hispanic neighbors in the upper-class suburbs rather than those of newly arrived immigrants. The trend informs your approach, but it does not define it.

Many opportunities will emerge to service the Boomers, who are the upcoming “senior generation.” Right now about the most exciting “senior concept” in retail is the discount: the 10-percent markdown for seniors, the senior discount for movies, and the half-price, “early bird” dinner. Few businesses other than resorts have figured out that the new seniors-to-be—those turning 50 now—are much wealthier and much healthier than preceding generations. (This sub-group has been labeled the Zoomers for their active lifestyles.) Maybe you will open the first nationwide senior gym or an international senior dating service or a national chain of senior discos. Ideation on any concept should at least question how your concept might anticipate the upcoming senior boom. Merrill Garden Intrawest, which is building retirement centers in the American Northwest geared toward the well-to-do, illustrates the potential. People can move into an upscale cottage or condo at age 55 and have in place all the levels of assistance that they might need for the rest of their lives, up to and including assisted living. Personal service for all needs, whether hanging pictures or getting nursing care, is comparable in quality to a high-class hotel.

As Merrill Garden has done, you must funnel a trend down to an actionable level. Consider the current popularity of Altoids, the “curiously strong mint” that has become ubiquitous in convenience stores and supermarkets. A few years ago Altoids was a little-known item produced by a British company with a small but loyal customer base. Kraft Foods realized that the growing number of Thai and Mexican restaurants in the U.S. meant that more and more mainstream individuals were eating spicy fare, heavy on garlic and curry and cilantro. And the more coffee people drank, the more people had “coffee breath.” In general, the trend did not mean a lot. To Kraft, the trend offered a specific opportunity. In a genius acquisition, Kraft acquired the granddaddy of all breath mints and made it available broadly. Altoids is now part of millions of people's daily habit. Ten years ago, offering a breath mint would insult someone. Today, Altoids has made offering a mint a social courtesy. (Kraft later sold Altoids along with its Life Savers brand to the Wm. Wrigley Jr. Co. for a substantial profit.)

Make sure you read a trend going forward, not backward. As the Boomers entered the work force, some prognosticators predicted a collapse in casual wear and a boom in traditional business attire as young employees adopted their parents' coat-and-tie business style. Instead, the Boomers brought their casual preferences with them to the office. Now, even U.S. presidents make major appearances in “casual Friday” attire so as not to appear stodgy. As the Boomer children enter society, creating a Boomer echo, they will create similar changes in culture and taste—though it remains to be seen whether the bare midriff will reach the boardroom.

Being smart about applying trends applies to niche concepts as well as niche products. Say you are an expert bicycle mechanic thinking of opening your own store. You have read that Boomers are shifting from running to bicycling to reduce stress on their aging joints. Maybe you uncover a statistic that biking is growing by 15 percent annually in your state. If you live in Aspen, not only are Boomer statistics relevant, but local demographics reinforce them. Your clientele will be industry and movie tycoons who want only the best. Your business could be selling hand-built mountain bikes for $5,000 each. On the other hand, the Boomer trend may be irrelevant for a bike store in a blue-collar neighborhood in Oakland. The primary clientele here would be children and young adults. The right business model is probably high- volume, low-cost street bikes. The questions would be whether the particular area will support this business, and whether that business interests you. Figuring out your specific niche from the broad trend is where—with bicycles particularly—the rubber meets the road.

None of the previous examples are new concepts. They are extensions of existing concepts to take advantage of trends. McDonald's did not invent the hamburger joint, but McDonald's was the first quick-serve restaurant to perfect the science of affordable, consistent meals nationwide. Howard Johnson did not invent the motel, but Howard Johnson was the first motel to put together a chain of decent lodgings and restaurants along America's newly completed interstate highways. Starbucks did not invent the coffee house, but Starbucks was the first company to provide high-quality coffee in a high-quality setting worldwide. All three companies repositioned an old commodity or concept. The first two took advantage of the rapidly increasing mobility of the American populace. The latter took advantage of the urban worker's desire for a minute's pampering during a hectic day. Baby Boomers were part of the core audience for all three.

You could say that these companies expanded on an existing concept to create a trend, then rode the wave they created. Other successful concepts are likely to follow the same formula: expansions or variations on existing concepts, or the merger of two existing, related concepts. These success stories provide an important insight to a new retailer: Do not come up with a concept that tries to change consumer behavior but rather one that builds on existing behavior in some way. Elephant Pharmacy in Berkeley, California, for example, represents a cross between the depth and selection of a Walgreens Drugs and the high-touch human atmosphere that Whole Foods Market, the Austin, Texas, chain, has brought to supermarkets. As the name implies, Elephant Pharmacy is big: 12,000 square feet incorporating eleven different departments, from fresh flowers to organic toothpaste and natural cosmetics. The pharmacy quickly differentiates the customer experience. Instead of standing behind an imposing counter, the pharmacists come out to talk with customers. The pharmacy is complemented by a huge assortment of alternative health, beauty, and lifestyle products, including a full-service herbal pharmacy. About the only non-organic business is DVD rentals, and that product ties the store to the neighborhood.

In many ways, Elephant is a convenience store for healthy and educated people, but its primary mission is to educate customers about all their choices in health and beauty. Elephant has a bookstore with 3,000 titles on health-related topics. Every shelf display includes background information about the product for the customer to review. The section on Vitamin C has scientific data that shows that massive amounts of Vitamin C will not necessarily help to prevent a common cold. This information may not sell more Vitamin C, but it builds trust with the consumer, which will lead to greater sales in other areas over time. Every day customers can speak for free with a rotating staff of experts that includes registered nurse practitioners, dieticians, naturopathic doctors, and homeopaths. A classroom on site offers up to six free classes every day. My favorite is the infant massage class. Who wouldn't want to come back to a store where mothers and babies are smiling?

Elephant Pharmacy, so named in order to bring to mind an animal that is large, intelligent and gentle, is a perfect example of innovative retailing hitting an “on trend” niche: well-educated consumers who are willing to pay for the personal attention and care they can receive from a superior pharmacy. The goal of every company is to find such opportunities in an area of retail that's become static, to find a way to break out of a mold. Sometimes the solution is as simple as improving the design or aesthetics of a store or modifying the brand's position to raise the level of customer service. Sometimes the solution is to improve the location of stores. Other times it is to totally reposition the brand. Hip young women buying Burberry clothing or Coach purses would be surprised to learn that these were “old lady” brands a few years ago. Other times, you try even more radical approaches. Recently, a financial institution came to us for advice. They did not come to us and say they wanted to do something “on trend.” They did not ask us what the Next Big Thing was. They asked, “How can we logically expand our business? What hasn't been done before in our category? How can we continue to innovate in our retail category and build customer loyalty?”

We proposed that they redefine themselves from being a “financial center” to being a “community center.” We suggested that they provide areas for the following: tax preparation, copying and shipping, Internet access, eBay services (including packing and shipping products), and coffee and beverage service. In effect, we proposed a “category killer,” a concept that rolls up all related concepts into a new, bigger one. (Think Wal-Mart and shopping or The Home Depot and hardware.) Such new services might sound radical for a bank, but shortly after our proposal we learned that ING Direct, an East Coast bank, had opened three “bank cafés” featuring cappuccinos, Internet connections, and the occasional mortgage loan. New services from banks not only meet additional consumer needs but also put a personal touch back into a business that has too often become sterile. Redefining the concept is also good business. You can open 1,000 bank branches to increase your overall revenues, but federal lending rates will still dictate your profit level. Non-financial services create new revenue sources that have much higher margins.

We are not the only ones to think of combining or expanding concepts, of course. Different fast-food companies are placing their taco, chicken, and burger brands physically together in order to sweep up customers regardless of the type of cuisine they want. One small restaurant has an American burger concept at lunch, run by the husband, and a Thai concept at dinner, run by the wife. Staples, the office supply company, now offers shipping and delivery service via in-house UPS Stores. Seeing a similar synergy between copying and delivery, FedEx bought Kinko's. (We had proposed to our financial institution FedEx had beat us to the punch!) UPS bought Mailboxes Etc. and is rebranding most of the MBE stores to UPS Stores, bridging the gap between service behind the scenes (delivery and inventory management) and service behind the counter (retailing).

Such combined operations raise tough questions about brand. Should each concept remain separately branded? Should one brand disappear to the betterment of the other? Should a new brand be created to encompass the new entity? There is no pat answer. UPS and FedEx bring a distinguished brand quality that Joe's Delivery would not, but Staples and Kinko's are well respected too. The decision rests on the strategic direction of all the parties involved. For example, if Kinko's is simply a way to supplement FedEx's delivery business, then Kinko's should remain a separate brand. If FedEx wants to expand its consumer concept from delivery to a number of new services with delivery as a component, then FedEx should swallow Kinko's and the Kinko's brand should go away. FedEx's advertising of the “FedEx-Kinko's” service shows the difficulty of combining brands or changing over from one positioning to another. Combining the names implied that FedEx would eventually phase out Kinko's. The problem is, the primary personal interaction with the general consumer (as opposed to the corporate shipper) was with Kinko's rather than with FedEx. Further, FedEx's service was part of Kinko's overall offering, making FedEx (psychologically) the subsidiary brand. The combined name did not exactly roll trippingly off the tongue. Was the new branding an example of a non-retailer, FedEx, missing the key consumer touch points? Or was this awkward positioning part of a necessary transition? Ultimately, FedEx must have hoped that its own brand name was powerful enough to overcome short-term consumer confusion.

To extend its services quickly and credibly, a bank might partner with Starbucks for coffee and FedEx-Kinko's for copying and shipping. But, over time, a multi-brand approach might help the brand partners more than you. If a huge Safeway market has a small Starbucks counter in front, nobody is confused about which brand experience predominates and which supplements. But if three equal brands have roughly the same share of a location, the bank may not get “credit” for the new services. Customers might perceive the experience as a trip to a mini-mall when you want them to think, “Wow, look what my bank is doing for me now!”

Changing the experience means changing the brand, and you can extend the brand only as far as the customer will let you. Safeway can logically extend its proposition of selling consumables to include the idea of selling gasoline. The two are a similar experience, and it is convenient for a customer to stop only once for related errands (getting groceries, getting gas). Service stations have long since flipped the idea by selling a variety of quick-food items along with gasoline. A financial services firm can extend itself into a host of business-related services, but lending money to buy a car would not relate to pumping gas into a car. The two experiences do not compute. Brand extension needs to be just that, a process of accretion. Think of it as extending the brand into the welcoming arms of your customer. It is what your customer would want you to do, if only you put yourself in the customer's place. A giant leap into unrelated areas will diminish rather than strengthen the brand. Consumers will not know what you stand for if your brand pillars are too far apart. Extending branded bank services to include coffee and other beverages is probably at the edge of customer acceptance. A bank could partner with Starbucks to test the concept and determine whether, at some point, it is “safe” to bring the service in-house. A final possibility is to sub-brand the entire multi-service concept to keep the primary brand intact and superior. Such decisions often require considerable consumer research as well as a gut feel.

After you have developed the concept and know the trend on which it rides, you need to do some initial research to validate the concept. For example, Steve and James of Blue C Sushi took a hard look at the market before proceeding. Three kaiten houses operated in the American Northwest for comparison (James ate at the local one regularly), and of course James had his memories of kaiten restaurants in Japan. The two men got comments, descriptions, impressions, and photographs of kaiten houses from James's friends still living in Japan, and from other friends who traveled to Japan during this time. This up-to-date research enabled them to proceed with a reflection of a “modern Japan” aesthetic. James and Steve also had the opportunity to fly to London to evaluate the two major kaiten chains there. One had three restaurants that were more exclusive and expensive than Blue C Sushi envisioned. The other had fifteen restaurants that were of lower quality (but slightly higher prices) than Blue C Sushi was considering. Both of the concepts were succeeding. Finally, the would-be restaurateurs went to the Internet to examine the many comments and reviews about existing kaiten restaurants to determine how to improve upon the existing offerings worldwide.

When Steve and James first broached the concept to me, I was dubious. “What's another sushi house?” I thought. “What would be different?” But they took me to the local kaiten house one evening. It was in an out-of-the-way spot. The restaurant was a cluttered eatery with light pink Formica countertops and matching floor tiles. The interior was poorly lit. It did not smell particularly fresh. Despite these shortcomings, the place was packed with customers, who were from a variety of economic and ethnic backgrounds. I had never seen a conveyor-style sushi house before, and the flexibility and informality of the operation created an atmosphere that encouraged talk and laughter.

You can tell a lot from the daily operations of similar concepts. (No matter what your idea is, someone has done something similar enough to compare.) Careful observation at the ideation stage provides a good seat-of-the-pants analysis of the market. You can get a good feel as to whether the economics work, whether “the juice is worth the squeeze.” Scrutinizing the traffic over several days, we could calculate that the kaiten restaurant was easily doing a million dollars a year in sales! This and the other factors were enough to convince me of the appeal of the concept, not just in Seattle or on the West Coast but throughout the United States. Japan's population of 130 million supported 5,000 kaiten sushi houses, or one restaurant for every 26,000 people. The much larger U.S. population could theoretically support 10,000-plus such restaurants.

Our observation provided the last way to parse a market, which entails looking for what is not there. The goal is to find the Achilles' heel of the current leader and determine how you can position your concept to exploit that weakness. As you may have figured out, the weakness of local competitors in kaiten sushi was a lack of quality. Nor was there any aggressive marketing. Of the three kaiten restaurants in the Pacific Northwest, none was poised for ownership of the category. The owners had done nothing in terms of location, service, branding, or expansion to claim the dominant position. An opportunity beckoned for a new entry.

Blue C Sushi's opportunity presents a textbook example of process for ideating any retail concept. The concept sprang from within them, from their interests and values. Authenticity came from James's background. The trend came from a rising Asian-American population on the West Coast and from a general American desire to eat healthier foods and a willingness to try new cuisines. Taking as ancient a concept as probably exists, the restaurant, they created a variation—and established a niche. They did not plan another generic seafood restaurant or even a generic sushi restaurant but a particular kind of sushi restaurant, the kaiten. They established a point of differentiation, quality. They did enough financial research to establish the concept's economic feasibility. With all this deliberation they were able to both define and validate the concept: a kaiten sushi house that has high quality to win against competitors and low prices to bring in the general public. Validating the concept is the last step in ideation. After that, you begin the process of creation, of developing the concept in specific form. Steve and James had a real opportunity to elevate the concept. “Do it right,” I told them, “and you will blow the others away.” The same applies to any retailer who finds a new concept or a new variation on an old concept, who identifies the trends that will support the concept, and who focuses on creating a high-touch, authentic experience.