Retail in the Future
5 Areas Profoundly Changing It
November 21, 2018, Bruno Jacobsen
There's no doubt that retail is changing. And fast. What used to be a day spent in a shopping mall, window-shopping with the occasional purchase, is fast disappearing.
Retail has become a digital experience, far more optimized, quick, and personalized. That's not to say that physical retail is disappearing - far from that.
But it's become unrecognizable. In this article, we look at the future of retail through technology, business and value chains, the service industry, values and social responsibility, and the global economy.
This article is based on our latest free foresight radar. In it, you can get a 360-view of what the future of retail is like, covering the trends below and many more. Check it out here.
Retail in the Future
Digitalization, Smart Devices, and IoT
Technology and digitalization are perhaps the most significant drivers behind the recent evolution of retail, and its future.
The platform economy, enabled by digitalization, is a big game-changer. The internet levelled the playing field, where new competitors emerge everyday. In the shape of platforms, they bring consumers, brands, and advertisers together. At the same time, some of those platforms are growing bigger and bigger, especially in retail. We will continue to see a handful of companies dominate retail and online platforms, as they achieve economies of scale previously unthinkable.
Technology will also change one’s interaction with retailers. Virtual reality is set to have a profound impact. Being able to walk through a store, "try out" new things, and experience shopping in a completely personalized way - all from the comfort of your own home - will open new worlds of possibilities.
Along with virtual reality, we'll have to come to grips with the growing trend of augmented reality. Want to know how that couch would look in your home? That good old-fashioned red and green Christmas sweater on your partner? Just take your phone out, point, and click. Companies like IKEA are already developing their own applications, and more are sure to come.
Finally, new payment methods are constantly being developed. At the moment, 95% of global commerce still takes place using traditional payment methods. However, contactless payments are becoming common in more developed countries. From cards and mobile phones to smartwatches, NFC is making payments possible with just a tap.
It doesn't stop there. In the US, Amazon has begun to operate "walk-out stores," where you can take items off the shelves and simply walk out. It gets charged to your account, digitally. While in Korea, 7-Eleven has experimented with hand-scanners, recognizing your identity by the palm of your hand and charging you later.
Business and Value Chains
In logistics, too, new technologies are making their impact.
Drones, for instance, are a promising means of delivering in the last-mile or to less covered areas. We might soon begin seeing drones with far more regularity. Using drones to deliver items can not only reduce delivery times, as they do not need to conform to traditional transportation routes, but since you can accurately tell how long it will take for a drone to fly anywhere, they can also increase customer satisfaction by providing reliable time estimates.
3D-printing is allowing for retailers to offer not only more personalized goods, but also to keep their production closer to the consumer. For example, your Nike outlet might decide to have a 3D-printing factory near major demand locations, allowing you to order (perhaps for a heftier price) personalized, “locally-sourced” sneakers.
In the future, although physical retail won’t go away, its nature will change. Instead of stores you go to “browse,” pick a product, and take it home (requiring retailers to maintain large amounts of inventory), you’ll see showrooms.
According to Strategy&, showrooms allow retailers to decrease inventory and make customer service much more personal. Whether it’s clothes, furniture, or any other items, you can easily see how they would look or work, can learn more about it, and understand what’s best for your needs. After that you just have to order easily through a store iPad, or online.
Showrooms will also provide the retailers with more information on customers, through a better understanding of their needs and the data provided at the store.
The Service Industry
The example above of showrooms is also a result of other trends changing the service industry. We like to think of retailers as organizations essentially selling products. But your experience during purchasing is a big part of what makes some retailers more successful than others.
Retailers will have to constantly come up with novel ways to attract customers. With the surge in data collection, gamification will play a big role. It does not need to come in the form of a game, of course. Using a Kindle or a Kobo? Are you a “super-reader?” Maybe if you buy another 10 books you’ll get closer. Or maybe you can become an “Exceptional Athlete” if you get the newest sports outfit from your favourite retailer.
This experience will not come just through one channel, however. You’ll see it on your phone, smartwatch, laptop, tablet, showrooms, and, who knows, perhaps even your toaster. As more and more devices become connected, through the Internet of Things, you’ll be “browsing” all the time. Needs will become more immediate (a fridge reminding more milk is needed and asking whether it should order more), and will be satisfied more quickly.
Values and Social Responsibility
Larger social trends also have an impact on the future of retail.
While in some countries consumerism seems to be growing, in others the opposite is happening. In many developed regions, where people live comfortably, simplicity and minimalism have begun to gain in importance – the same goes for decreasing value in ownership, with people much more comfortable these days living within a sharing economy. Going forward, retailers will have to grasp with two big-picture realities, even if individual targeting becomes easier.
On top of that, we see "adapted ethnicity." Cultures, tastes, and values are becoming more interchangeable among different parts of the world. We can see that in fashion, music, and many other areas. This will no doubt continue to have an impact on the demand for several goods, as we approach the "global citizen."
And as we become more encaptured by the internet and the digital world, we'll also see a growing tendency to try to escape them - so called technology-free zones. This might affect retailers who depend mostly on internet to reach their consumers.
This is especially the case in a world where competing for attention online becomes increasingly harder, and competition from a globalized world tougher.
It’s not just about the consumers, however. It’s also about those working on the floor, for whom automation undoubtedly looms large. The conversation around automation, with its subsequent loss of jobs, and its impact on society is likely to continue to polarize opinions. Retailers, and society at large too, will continue to work towards solutions to please all sides, in a finely calibrated game of balance between competition and social responsibility.
But there's another topic drawing increased scrutiny and calls for regulation. That's privacy. New laws, such as the General Data Protection Regulation in Europe, have recently been passed, intended to protect consumers' privacy. As fewer, larger companies accumulate most of our online data, more regulation is bound to come in. This could significantly limit the available tools retailers have to offer us personalized services.
But it has another consequence, too. New regulation attempting to limit bigger companies' hold on the personal data of its consumers also strips them of some of the competitive advantage they once had.
While they'll undoubtedly still remain powerful, the door is nevertheless opened to changes in the competitive landscape.
The Global Economy
Several economic aspects are also at play when it comes to shaping the future of retail.
More and more, we see middlemen disappearing, as companies and new businesses make use of their own online shops to deliver goods directly. On the other hand, we also see the "middlemen" resurfacing in new ways. Multisided online platforms, in a way, play this new role, connecting businesses and consumers at scales previously unimaginable.
Technology has also brought to public debate the centuries old practice of price discrimination. Offering consumers different prices based on their profiles isn't new. But the scale at which this will be done is. In the future, small details about yourself will play a role in determining how much you pay for a given product or service. While this can be good, it can also raise serious questions about the extent to which this should be allowed.
Consumer-to-consumer markets, a growing trend themselves, will also be right up there competing for consumers' attention and wallets. Whether for new, used, or rented products, we'll begin relying more on our social networks to get what we want (Facebook Marketplace is a good example of this).
And of course a significant economic trend comes from automation. Visit an Amazon or Walmart warehouse today and it will look very different from retail warehouses 5 years ago, let alone 20.
As we move towards new methods of payment, supply chain automation, targeted advertisement online, and other trends, there's no doubt jobs will be lost. The question is whether the adage that new jobs will be created suffices any longer.
We will have to wait and see - but it could bring about one of the greatest revolutions our societies have seen.