John Hoyle, Sook

The 16:9 PODCAST IS SPONSORED BY SCREENFEED – DIGITAL SIGNAGE CONTENT

If an entrepreneur or an established brand wants to open a temporary pop-up store on a busy retail street, there's a lot of planning, work and cost involved in making that actually happen.

So what if there was a retail space in a high profile location that could be rented for as short a time window as an hour ... that uses LCD video walls and software to establish the look and feel of the shop?

That's the operating premise behind Sook, an interesting UK start-up that has digital-first spaces for rent in attractive locations around the UK, including London's retail-lined Oxford Street.

I visited that Oxford Street location when I was in London recently, and had a good chat with Sook founder and CEO John Hoyle.

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TRANSCRIPT

John Hoyle: So it's really easy to quickly create a clean and bespoke environment and so that means you can literally do whatever you want in these places. It's a space that is as much about non-retail uses as it is about retail. It could be somewhere to have a screening of a movie, it could be somewhere to do yoga, pilates, or meditation or it's a shop in the more traditional form. 

The whole rationale behind this is that if you facilitate hourly access to units like this, which would otherwise be empty, you can actually drive three to five times more revenue than a traditional lease because you are making use of the time before, you know, standard rent is over a 10-year period, deeply inefficient because someone sits in a space and expects there to be effectively making all of their money on in the peak hours whenever those are, which is like a Saturday. Using this you can drive your own footfall, drive different peaks across 120 hours of the week and generate more revenue, as well as make it much more efficient for occupiers to come and engage with the space. 

It's completely modular. You can take this entire fit-out away and move it elsewhere. It's all free-standing so there's a selection of furniture. You can see the hanging rails and shelving units here which makes it super easy for someone to come and self-serve if they want to. So using QR codes, you can learn exactly what you need to do, full WiFi, utilities, audio, et cetera, anyone can come quickly turn this into a space to use for whatever they want. These modules obviously can be disassembled and moved to another space. So we don't take leases. We are just a device that operates as an asset management tool within specific spaces. If a landlord wants to move us, they can, there's a small cost associated with that, but it's much more economically and environmentally sustainable to have this fit-out that can be reused in multiple other locations.

This one is slightly compromised because we're over two stories and the rear loading is in the basement. It actually works better on one level with a big back of the house. It's a bit like a theater set. All of the physical preparation happens out back so that you can efficiently roll into the space for your activation. 

I'll show you downstairs. Everything that’s here, we can take away. There’s storage out back, but this has been everything from a rave for Jaegrmeister who launched a party, to the launch of a High Streets Reports by a big industry insider to a salsa dancing class. So it's all about using the same space for multiple different activations and doing it in a way that allows digital content to drive how you make that place appropriate.

That's why it's interesting to me that they have started to add digital screens to retail kind of after the fact and now we're in the situation where you have people who look like this, that are setting up pop-up retail with digital as the enabling part of it. So you can change the feel of a store, change the message, and everything else with a few keystrokes. 

John Hoyle: Absolutely. If you think about where the brands of the future come from, they are gonna predominantly start online because the barriers to entry are much lower. But they need that IRL engagement to have an authentic touchpoint with their customers. But they don't wanna scale as the private equity-backed retailers in the past have by taking 120 leases and then marketing them. They want to dip in and dip out and have an online-type solution that's agile to determine where works best for their product and to make use of the fact that they can drive their own footfall through social media. 

So if you think about it, I suppose a good example in the UK might be a, let's say Superdry, a challenger brand that's had to play the game of real estate to get where it is, to become AN established brand. We believe that we can facilitate that happening for the brands of the future without them having to need a real estate department to negotiate leases, to deal with the portfolio of assets. In fact, there will be this agile solution that they can use as they see fit, and what's interesting about that is that suddenly you are changing the role of a shop as a static distribution channel for stuff, and you're making it much more of a point of engagement for customers to actually meet IRL, the people that sit behind their brand and the products, and that can happen everywhere. There's no need now for perhaps the flagship in Central London or the concept store in Coven Garden because the various entries are lowered by this solution, you could take your product to secondary locations around the UK, do it for a weekend drives an enormous reaction because the people in, let's say Northeast England are not used to seeing something like that and then get out without any of the legacy, liabilities or commitments that you would normally get through these. 

It's a service in just about every respect, right?

If I'm a fashion designer, which is a very novel concept, if I wanted to open up a pop-up store for the weekend, I wouldn't have to worry about the AV. I wouldn't have to worry about any of that stuff, I just do a deal to have the space for six hours or whatever it is and you guys can take it from there, right? 

John Hoyle: You can dice it in whatever way you want. So you could be completely absent and we would run the entire piece for you, including fulfillment, staffing, and even the design of your space, and you can obviously have complete control because using Canva, which is an Australian Photoshop unicorn, you can drag and drop whatever you want onto the walls and you can walk around in 3D before you come here. So you can be in the US and control space in Oxford Street without having to be here. So that opens up enormous opportunities where at a fraction of the cost we can serve you.

But it's more about just that flexibility for occupiers. It's also making physical spaces available for all sorts of uses that are not necessarily traditional retailers. Social media is becoming increasingly important as part of the customer shopping experience. So working with those sorts of brands to engage IRL, onboard customers online, and complement what they're trying to do online is really powerful.

But equally, if you think about amenities. In the UK, retail banking branches are closing down in record numbers because they just don't make any sense with the rise of online banking. There is a real community value to those places for some people. Could we run a banking offer in the lunchtime slot, which is when people wanna go to the banks and not be there the rest of the time? Can you bring digital art into play? Gaming, estate agency, car showrooms? A whole spectrum of retail uses that basically haven't existed in the physical high street for all sorts of reasons previously to be used in a much more agile way in our spaces. 

Is there a typical time window, like the amount of time when you are seeing bookings?

John Hoyle: It completely varies. We've had a guy take the space for an hour, turn it into a shrine to his girlfriend and propose to her. Equally, we were a Corona testing center in one of our spaces for I think 14-15 months, which is a sign of the times. We have three-month bookings. We have three-day bookings, and that's the point, different people wanna do different things at different times and that really is the core of what we do. No one needs a shop seven days a week, hardly, practically, no one needs a shop for a decade. Think about the time that you need to do activations. Let us manage the headache of all of that, learn from it from analytics, and then get out and do something different. 

The old mantra in real estate about location. I suspect that still applies, right? 

John Hoyle: It does, but it's a mindset rather than a reality. My belief is that footfall is a flawed metric, and that's what really underpins that location piece. The way we've done retail traditionally is that you found a location that suits you. Adjacencies are important, but you are really basing it off the demographic in the area, and then footfall, and that's a deeply inefficient model when you think about it. To make a 10-year bet on a place based on a data set that you see at that period in time, sit there for a decade, and only make money on maybe a Saturday or a Sunday. The rest of the time you have a loss-leading asset. You can't be agile and change if something about that location changes, and you're not learning anything about customers elsewhere.

So what we are saying is why not be far more granular, why not figure out which hours of the week your product works in? So Greg's, which is an incredibly successful restaurant brand essentially, it's famous for its sausage rolls, and they sold more Greggs sausage rolls last year than there were Big Macs in the UK, to put some scale on it. So their biggest selling unit is at Birmingham New Street Station and its peak time is from 10:30 on a Friday evening. It's people who've been drinking in pubs, buying sausage rolls, and are out on their way home. The other time they do a lot of business for essentially the building trades very early in the morning. So they are completely different profiles to an apparel brand, for instance. What we're saying is why don't you blend all of those different uses into more concentrated, more efficient spaces? 

Is it nimble enough that you could do multiple occupants in a day?

John Hoyle: Yes, absolutely. 

Have you done that?

John Hoyle: Yes. When you think about it, most shops don't open till 10:00, and most close at about six. Then you've got four, maybe five hours in the morning, which lend themselves to wellness, for instance, and then in the evening when shops sit dormant, this could be an event space, and that's pretty lucrative. In fact, in its own right. I think we could hang our entire business model on what shops would see after hours in certain locations to use this amazing digital tool, to be a private room for a restaurant or could it be a Deliveroo restaurant for instance, or could it just be a party, but rather than renting a bar and having a minimum bar spend of a few thousand pounds, you can have something bespoke, where there is amazing digital content of the person whose birthday is, for instance. Children's parties, and meetups, there are limitless ways of effectively monetizing space when in normal retail times, it's just closed.

Yeah, I've certainly heard of restaurants that are daytime cafes that have realized, okay, we have a kitchen and everything else, but we shut down at 3:00 PM, why don't we have a breakfast place in the evening? It's a Mexican place or whatever, and they're using the same kitchen, but you're sweating the asset more.

John Hoyle: Absolutely. The same principle applies here, just we've gone to extra lengths to make it more versatile. The food and beverage pieces are probably our most challenging use case because of the infrastructure that's required. You can't just have bare walls and exact screens, so that's our limit.

Although you can cater in these places, you just can't really prepare food through cooking. But yeah, given that there are fast approaching a hundred thousand empty shops in the UK alone, and that problem persists throughout developed markets, why aren't we making use of these assets better and doing it in a way that can be financially sustainable? 

If you do it, what's really interesting is that there is a market for people who want to use these spaces at the right price point, and in the UK, if you have an empty shop it becomes a business rate liability, which is like property tax in the US. So an empty unit isn't just an empty unit, it's actually a liability for landlords. So what we're saying is let's bring them back into the community, let's make them accessible. Let's engage with customers in a completely different way, to the risk-free basis that has been the important use of the real estate asset furniture for so long and engages with a whole new spectrum of occupiers that just didn't exist 10 years ago.

If you have a hundred thousand empty shops, is it a risk to you with that many available spaces, the rental property becomes commoditized, the price comes down, and it becomes a challenge for you to be competitive with that?

John Hoyle: Not really, because our model is an arbitrage on whatever the rental levels are. Right now empty shops are a huge opportunity for us, and when you think about it from our customer's point of view, actually rent shop occupation costs are only about 30% of the total costs of having a shop. When you think about the cost of staffing an empty shop. To my point where if your shop is only really profitable on a Saturday, It is really painful having to staff it for the other six days of the week and a landlord will demand that you do. If you're in a shopping center, you have to be open. That is part of the deal, and you think about the inefficiencies around stock, people buy, and there are billions of pounds of stock sitting on shelves around the UK. It's absurd. Why not lend an online demand model with an IRL activation?

Yeah, create a public showroom and get fulfillment on the back end. 

John Hoyle: Exactly, so we believe that we are creating the opportunity for massive efficiency across the board. It is hard to get brands to think differently. There is a huge amount of inertia around some of the big established brands who just have always done things a certain way.

It's the, “I want that unit. I want it for 10 years with a five-year break, If we get X amount of football and we price our stuff at Y, that will convert into profit.” There are lots of guys that cannot think beyond that and that's one of the challenges of being changemakers like we are is getting the 10% of early adopters to think differently about and do stuff, right? 

So where did this come from, this idea?

John Hoyle: I launched it out of an accelerator called Zinc, which is all about delivering social ventures for profit. My background is in real estate. I'm a landlord, formerly at Grosvenor in Central London. So I was deeply frustrated having been on the other side of the fence about the inefficiencies and the huge numbers of occupiers who are excluded from shops. 

The reason there are a hundred thousand empty shops is partly price points, but partly accessibility. All the ancillary costs around lawyers, agents, and these guys are all set up to do deals that have to be at least a year, but generally five and ideally ten. That struck me as such an enormous opportunity for disruption. That we've seen in the office space. We've seen it in the huge residential space. Huge global unicorn businesses have disrupted those sectors, but no one has done that in retail yet, and it's slightly more complex. There are the customers of your customers to think about. There's stock, there's a brand, and that's why a fit-out is necessary to facilitate all of that. 

So if I'm an apparel designer who has just come out of some fashion school and I wanted to open my own, the commitment to do so would be many hundreds of thousands of pounds to do that, and through this model, I can open up on Oxford Street where we are for a day and have a popup and it's gonna cost well, what would that cost for a day?

John Hoyle: It depends. So it's demand-based pricing, so it's cheaper on a Monday than it is on a Saturday. If you can drive your own footfall, then you might as well take a low-value retail allowance. But you can on a good day get this space for probably just under a thousand pounds on Oxford Street, which yeah, no commitment, no utilities, no legacy issues. You come, do your thing, and when you work it works, you've got clear evidence of that that it is really useful as part of your entrepreneurial journey in terms of building momentum, it's great for content, et cetera, and the halo effect that we all recognize of our engagement is massive for your future on mindsets.  

Are you funding this yourself or have you got financial backers? 

John Hoyle: We have done four funding rounds. We are fundraising at the moment as well. This is our seed round where it's running for the next three months.

We're likely to have strategic partnerships with big asset managers who are invested and some retail groups. To date, it's been largely angels in the UK. There's a really vibrant ecosystem of angel investment in the UK because the government gives some great tax breaks called EIS. 

I'm curious if when you approach people if they give you when the tilted head looks or they get it quickly?

John Hoyle: I think as with anything that's new, there is a bit of adoption. So we find that for our first booking, we insist that there is someone in our sales or customer service team present to help people because there's an element of anxiety. It's a bit like if you organize a party for your other half or family member and you're a bit nervous about the caterers and are people gonna turn up, et cetera, then the party starts and you relax. We see that a lot from our first-timers, but we're at 40% repeat customers, and so for subsequent uses, when you know where it all lies, you know what to expect, it's much less stressful for people. 

It's just like your first day at the office when you don't know whether the photocopier works or what your password is, all of that becomes far less scary. So I think the answer is that onboarding involves more friction than we hope will ultimately be the case, and we are very much pushing the envelope of change. There is a bit of a learning curve, and then you see the penny drop and the opportunity. People's heads essentially explode with opportunities to do things that they could do because everyone's got an idea of how they might use a space like this more.

I'm a digital signage guy, so that's what makes me awfully curious about it. How fundamental were the digital screens to make this work? 

John Hoyle: Absolutely fundamental. So there is a business that is failing at the moment that I was a customer of. They are effectively a booking system for empty shops, and they're pioneers in many ways because they've pushed the idea of flexible occupation, but they really are no different from a normal real estate agent, and the problem with just being a booking system is that you don't provide any of the services that are absolutely essential to launching a shop.

They're renting an empty cavity. You gotta figure out the rest?

John Hoyle: Yeah, and if you do that, they'll only rent for a minimum of a week. You turn up. You spend the first day setting up, and the next couple of days, no one comes in because it's Tuesday or Wednesday. Maybe you have a launch event on Thursday. A few people pick it up a bit Friday or Saturday, and then it's over. You spent probably 15,000 pounds. You've had to buy all of this deeply unsustainable, both financially and environmentally stuff in order to facilitate the fit-out, and you've got nothing really to retain from a legacy perspective With ours, the digital screens are utterly fundamental because that's your fit-out. That's what gives you the environment. You can take that content, you can reuse it on your socials, and can reuse it in other Sook spaces. You can send your stock around. But we will provide essentially the entire platform to allow your Sook to take place without you, wherever else you want. 

Could you do these locations without the screens? 

John Hoyle: It would remove a USP of ours, and of course, there is sometimes demand, but what we are trying to do is a hundred percent occupancy, and a big part of that is out-of-home media. So when we're not actively booked, we can be a billboard for your screen, which is a super light touch. It can operate when shops are closed throughout the night and generate revenue.

It is a really powerful, utilitarian way of squeezing revenue out of latent assets, and obviously, an empty shop's just an empty shop, and you can't do any of that. 

Do you have a handle on what you're using for the displays? The screens are obvious, but, are you using a particular piece of software or…?

John Hoyle: You have to ask the AV guys. We've been through several iterations and in classic startup style we've tried lots of tools, we keep the ones that work, we discard the ones that don't and we're constantly iterating and I would describe that device upstairs, like a massive iPhone. Obviously, it's way less sophisticated than the iPhone today. But the principle is the same. Physically, it iterates just your Apple device and then the software behind it upgrades, but without you needing to change the device. So that is the process that we're constantly evolving. 

When did the first Sook open?

John Hoyle: I opened one in 2019 as the sort of first MVP in Cambridge, and then we won a few prizes straight off the bat because it had such success in Cambridge. 

Why Cambridge?

John Hoyle: That's where I live. I wanted to prove that there was demand, which we did, and enough so that Legal in General, the insurance company, and pension fund, gave us our first proper site in a shopping center in Cambridge, which we opened in January, 2020, but of course, we all know what happened a month later. We were pretty quiet op operationally throughout all of 2020 and quite a lot of 2021 for obvious reasons. But we emerged from the pandemic with this site on Oxford street, one on South Molton Street, and one in Edinburgh. So it was clear that we had identified a need from landlords and we've expanded.

Is it important to be on high streets like this, like really well-known ones?

John Hoyle: Yes and no. So at this stage in our business, the startup, people don't know what it is to your point, people wanna understand it and they wanna be in great places, and we have to prove that investing is a success, and then we can generate revenue. So it is really helpful being on Oxford Street as opposed to somewhere unrecognizable.

But our goal is for it to function everywhere and for it to be a platform where Nike can reach a customer in a place that is utterly undesirable from a profile perspective, but where there are still obviously many customers and we believe actually the impact in those places could be bigger, and you asked me earlier about whether the erosion of the retail market could affect us. Well, one of the things that brands will pay us for is the opportunity cost of being able to do this, which is often in less desirable retail locations with a much higher ROI for us than on Oxford Street.

I'll give you a good example. MasterCard used our space in the Metro Center, which is in the northeast of England, it's probably one of the least affluent areas in the UK. We're in big shops, bigger shops and regional shopping centers there, and they're paying us London prices in Newcastle for the opportunity to have those spaces. 

My dream is that there can be a Sook on every high street and it can address all of the community goals in the same way that maybe a town hall does, as well as being a state-of-the-art retail space for brands to dip in and out to engage with those customers and create a halo effect.

Because a fashion designer can be in Newcastle and, doesn't have to come here to launch?

John Hoyle: No, it's bigger than that. Why can't they be in New York or Dubai or Beijing? Stock light, you can use physical stock, but so much of it can be digital, purchases get made online, which through using QR codes, it's not necessarily about leaving with physical stuff, but if you are a global brand on a mission to scale, what a brilliant way of dipping your toe in the water.

And because there are so many empty sites, landlords love something that is gonna delight, that's going to be good for placemaking and community and that in some instances is more important than actually a business case for the space. It's a tool for asset managers to drive footfall into assets.

You see lots of distressed real estate where somebody's put in a gift shop or a calendar shop or whatever, and they don't have a lot of money and it just looks sad and it doesn't lift the street. It takes it down.

John Hoyle: Exactly. We wanna be the opposite of that. And I really believe that constant rotation of activity is the way to bring life back. Because you could have the coolest brand in the world in your unit, I always use the fashion apparel one, but maybe there's a better example of that, but if its peak hours are only on a Saturday, the rest of the week is to all intents and purposes in an empty shop. So it isn't adding anything to those high streets. 

But running up the costs. 

So how many Sooks do you have now?

John Hoyle: We've got 11. We want to double it next year, and part of that is reliant on fundraising.

We're also allowing some other systems to list on our site, and we have our first overseas site agreed upon in South Africa, Johannesburg. Got opportunities in the UAE, the US, Canada, and Europe. As you would not be surprised to hear, I'm just balancing the amazing demand we have for our product with a fundraising environment that's a bit tepid, thanks to all sorts of reasons, not least in the UK because of very recent economic turmoil, which is completely self-inflicted. 

Where is the business out overall, given what you just said about the economy and Covid?

John Hoyle: We doubled our sales last year on year. I'm really happy about that. 

But that would be in an anomaly year. 

John Hoyle: No, I think we will potentially quadruple it this year, and even if we don't add any more sites, we should double it again. The demand from global brands is through the roof. TikTok, Quikr,. Sonos, Universal Music Group, Uber, MasterCard. 

So they're finding you, even though you're a startup in most respect?

John Hoyle: They're finding us so that's incredibly encouraging.

My challenge is not having today, although I expect to rectify that in February, the capital really to run at so many of these opportunities. This is a brilliant time for a disruptor to emerge. The sector is on its knees, asset managers are desperate for a solution. We have a solution. It's proven. It can get better, it can get more exciting. The fit-out you saw upstairs can evolve dramatically, and in fact, there's a very exciting space that I'll point you towards up Oxford Street, which we hope to take over quite soon, that you should go and have a look at, which is really the next generation of what Sook could be even more immersive.

Could you have a larger, almost like the department store, level place with multiple shops, like there are lots of department stores that I've shops within shops now.

John Hoyle: Yes. So we've talked to two department stores about providing that service.

My personal view is that the department store model is inherently inefficient because you go to some amazing stores that I love in New York, like SHOWFIELDS which is the new age department store, and just like every other shop it has a peak and then a massive drop when no one's in there, and that just to me, as a utilitarian, who is very focused on the revenues that real estate assets can yield, just seems a bit mad. 

So the answer is yes, we could work in a department store, but we'd be in that instance much more beneficial to the department store than to us in terms of driving feet at times when they don't necessarily have customers. 

If people wanna find out more about your company, where do they find you?

John Hoyle: www.sook.space. Everything is on our website. We're at Sook Spaces on social media, across all channels. Follow me on LinkedIn. I'm John Hoyle, and yeah, tell the world about Sook because it is coming to a street near you.

All right. Thank you.