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The Future of Retail

2012 January 25
by Greg
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What’s the next big thing in digital?  Mobile? Social? Online video?  Those are things moving fast but the trend with the most potential for significant economic impact is, in fact, retail.

The sleepy, boring business of selling things to consumers is pepping up and becoming a hotbed of innovation. Technology and consumer trends are combining to create a shopping experience entirely different from anything we’ve seen before.

As Darrel Rigby points out in his HBR article, every 50 years retail goes through a major disruption.  The rise of urban centers brought us department stores.  Automobiles created suburbs and shopping malls.  Then category killers and discount stores like Kmart and Wal-Mart challenged that status quo.  Now retail is being reinvented all over again.

The Slow Crawl of E-Commerce

At the beginning of the dot com boom, many assumed that e-commerce would become an instant success.  Eager VC’s threw money at just about any business plan that promised to end the drudgery of shopping with a few clicks of a mouse.

It didn’t work out all that well.  When the bust came, e-commerce start-ups were hit the hardest and hot companies like Pets.com and Webvan got slaughtered.  Some, like Amazon, survived and even thrived, but after 15 years online makes up a very small part of total retail sales.

This chart from a census bureau report shows that e-commerce still garners a mere 5% of the total pie.  I’ve seen estimates as high as 9%, but anyway you slice it, shopping continues to be primarily a bricks and mortar activity.

Therein lies the dilemma.  With all the huffing and puffing, e-commerce has a very small impact on total revenues. So how do you inject digital technology into the shopping experience?

A New Omnichannel World

The answer lies in what Daniel Rigby calls the “Omnichannel Organization.”  A purchase, after all, is more than a singular event, but a series of touchpoints that result in a sale. Consumers often browse online and purchase in-store or vice versa.  They also will comparison shop in-store on their smartphones.  The analog/digital distinction is a false one.

E-commerce is also flattening the path to purchase.  Recommendation sites such as Yelp and Trip adviser are becoming an important part of the shopping experience and “daily deal” sites such as Groupon, Living Social and Scoutmob encourage consumers to discover new things.

Another persistent trend is pop-up shops.  Digital technology allows the storefront to appear anytime, anywhere, as Tesco shows in this video.
 

 
So the question is no longer one of e-commerce vs. traditional commerce, but one of how digital technology can be deployed to improve the overall shopping experience.

In-Store Experience Transformed

While the online world has been transforming itself, the physical world hasn’t been exactly standing still.  The Apple Store, for one, has become a cultural phenomenon as much as a commercial one.  Here’s what Ron Johnson, who created it, says about what makes a retail success in an interview:

A store has got to be much more than a place to acquire merchandise.  It’s got to help people enrich their lives.  If a store just fulfills a specific product need, it’s not creating new types of value for the consumer.  It’s transacting.

To buck that trend you need more than just gadgets and fancy displays, it takes an enormous devotion to detail.   Ironically, digital has made the human element of retail more important, not less.  If all a store has to offer is selection and a price, than why not just buy online?

It also takes experimentation and perseverance.  Johnson and Steve Jobs worked on a prototype in a warehouse for almost a year before they got their store design right.  The Genius Bar at the Apple store was a dismal failure the first few years, but they stuck with it and it became a hit.

Most retailers today understand the need to equip their store personnel with smart phones and tablets, but what should be on them?  How should they be used?  Like any other area of innovation, the future of retail will be created through trial and error as much as anything else.

A New Retail Mindset

Long a sleepy industry that prided itself on supply chain management and efficient use of floor space, retail is becoming much more daring, as psfk shows in their report.

Macy’s, for instance, has created a backstage pass program where consumers can get tips from celebrities, while Bloomingdales has created futuristic dressing room pods that drop down from the ceiling

Scanning technology is improving rapidly and will soon be making an impact.  My Best Fit does full body scans to suggest the optimal size in various brands.  Kraft is experimenting with technology that can suggest what you might want to buy for dinner based on information gleaned from a facial scan.  Disney has a mirror that lets kids try on virtual outfits.

Do these technologies represent the future of retail?  Maybe.  Probably not.  Nevertheless, it is clear that we’ve entered a new age where experimentation has become de rigueur. Churning out transactions is giving way to creating experiences and those experiences no longer begin in-store.

The future of retail, after all, is not a storefront, but an omnichannel, where digital, virtual and physical all merge into one.

- Greg

17 Responses leave one →
  1. January 25, 2012

    Bang on the money, well I hope you are!

    You might like the brand story section in: http://www.colonycommerce.com/_assets/files/CC_Whitepaper.pdf

    Although I admit the rest is a little rough.

    [Reply]

    Greg Reply:

    Thanks! I’ll check it out!

    - Greg

    [Reply]

  2. January 25, 2012

    That digital shop on the video is awesome. This is totally the future.
    Ryan Critchett´s last blog post ..RMC Tech iGraveyard: White iPhone 4 LCD

    [Reply]

    Greg Reply:

    Yes, It is cool, isn’t it?

    - Greg

    [Reply]

    Ryan Critchett Reply:

    Totally! I love the future. I love how things are changing. I’m ready! Lets do it!
    Ryan Critchett´s last blog post ..RMC Tech iGraveyard: White iPhone 4 LCD

    [Reply]

  3. January 26, 2012

    Good post Greg. I was just reading the follow-up by Larry Downes to his post on Best Buy that went nuclear in December, and he touches on a lot of points relevant to this discussion:

    http://www.forbes.com/sites/larrydownes/2012/01/09/the-people-vs-best-buy-round-two/

    It will be an interesting space to watch.
    Tim Kastelle´s last blog post ..Please Reinvent the Wheel

    [Reply]

    Valeria Maltoni Reply:

    That and also some of the recent research on collaborative consumption affecting products, a Store Startup affecting place more directly, and flexible pricing from the recent newsletter.

    We’re heading to what I termed “the Storeless Store and the Saleless Sale”, especially thanks to smart phone adoption, which means hyper relevance of the experience is even more important because your competitor may be just one click away price-wise.
    Valeria Maltoni´s last blog post ..Keep the Faith. Demand Proof. Relentlessly.

    [Reply]

    Greg Reply:

    Great point!Collaborative consulting is definitely one of the most interesting things going on.

    - Greg

    [Reply]

  4. Katya Voropayeva permalink
    January 26, 2012

    Thank you for this post Greg. I was just looking for the ideas to promote our price comparison app and your post gave me good inspiration as well as lots of useful information that might change the way we design our app.

    [Reply]

    Greg Reply:

    Spasibo Katya! I miss you guys.

    - Greg

    [Reply]

  5. Katya Voropayeva permalink
    January 26, 2012

    We miss you here a lot as well :)

    [Reply]

  6. paz0r permalink
    January 27, 2012

    liar!!!))))))) we all miss you baby :)

    [Reply]

    Greg Reply:

    Vse Vremenya chesny:-)

    [Reply]

  7. jay morran permalink
    February 5, 2012

    As always, your points create valid questions on all aspects of marketing intelligence.

    Without being too picky, you need a better proof reader. I caught many many typos in your piece.

    [Reply]

    Greg Reply:

    Sorry about that. Any you can point out?

    Greg

    [Reply]

    jay morran Reply:

    Here are two and maybe three in this piece. I found two in another.

    his chart from a census bureau report shows that e-commerce is still garners a mere 5% of the total pie. I’ve seen estimates as high as 9%, but anyway you slice it, shopping continues to be primarily a bricks and mortar activity.

    Like any other area of innovation, the future if retail will be created through trial and error as much as anything else.

    [Reply]

    Greg Reply:

    Thx. Fixed.

    - Greg

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