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Gazing into the Future...of Retail!

About 10 years ago I was laid up for the holidays, recovering from surgery and unable to go out and shop at the stores.  I still got my shopping done – via a dial up connection to my old ‘Wall Street’ Powerbook.  Not a big deal today, of course,  but a decade ago it was a fun adventure: the internet as a consumer portal was very new, and the idea of sending my credit card information out into the electric unknown was a little scary.

And exciting, in a way that being on the web just isn’t nowadays; even though it’s bigger and glitzier, it’s also safer for transactions, more regulated, dominated by marketers and more boringly predictable.

Back then, the fact that everything actually arrived at my doorstep was almost magical.

Curiously, the next year (despite my nascent web-commerce success) I pretty much went back to shopping the old-fashioned way. I guess I missed the rush, the interaction, the frenzied spirit and the experience of actually holding an item in my hands to determine it’s heft and quality.

All of which got me to thinking…

What’s Retail Going to Look like in another Ten Years?

I think it’s  fair question, especially coming off the Christmas buying high.  In a time when Mom-and-Pop stores actually being successful is more newsworthy than a going-out-of-business notice, I wonder what the landscape is going to look like in 2020?  Will the impact of the internet and big box stores kill them all?  And if so, and Mom and Pop are either working in call centers or wearing orange aprons, will there be a throw-down between the two monoliths – big box and the internet – if they really are the last ones standing once the dust has cleared?

I’ll hazard an educated (and admittedly creative) guess, and lay out what the scene just might look like. This is a Futurist post, so I’ll put on my customary tin foil hat  with the coat hanger antenna and hazard a prognostication. (Cue Mid-Fifties Science Fiction Movie Soundtrack Here…).

Not surprisingly,  I think that branding – at least the ability to effectively communicate the brand experience – will be critical, albeit in new ways. The other major formative point will continue to be the very basic human need for tangible experience and interaction.  Bringing these two elements together, I believe, will go a long way in determining product – and retail – success.

Last month, JP Mangalindan wrote a piece in Fortune on Best Buy, which seemed poised to prosper from the holiday push.  Despite a benefit of having a more confident consumer going into the holiday season,  and the company’s store layout change designed to accommodate and showcase super-hot gadgets like the iPad, Galaxy Tab, E-readers and gaming devices, the third quarter results were actually less than those of the previous year.

And yet store traffic was up!

What’s happening in this Best Buy example, I think, is a microcosm of where retail is headed. In this scenario, Best Buy has, despite its desire to sell at the brick-and-mortar retail level, instead become a a destination where one can experience a product, but not necessarily have to buy one.  A place where one can test drive – make a tactile, sensory assessment – and then, quite possibly, buy online.

Although I’m an admitted digital agnostic, I don’t think that we’re necessarily headed into a dystopian future here; a landscape where everyone sits home and clicks, taps and drags to consume and interact, and we devolve into the gelatinous cruise patrons from Wall-E. My sense is that the human animal is, well, just that: we are living creatures that still need to experience our world though tactile and sensory impression.

That said, the landscape is indeed changing.  Best Buy and, somewhat conversely, perhaps the Apple Store experience, serve as cases in point. and I think this may accelerate and evolve.

The future? Simply put, retail products from a given manufacturer will be on display and available for interaction, but you actually will not take the product home from the store that very day.

Of course, this does not apply to all goods categories: perishables, medicines and other items of immediate need and use will continue to generally follow their current format, though hyper-distilled micro-metrics and consumer market profiling will be the critical factor in determining store placement (this behavioral targeting will be a great advantage for current data-miners, like Google and Facebook).  In fact, even now we see the initial formation of the immediate-need store: Target has made a concerted effort to bring groceries and produce in to the mix, and with solid results, and large chain pharmacies, such as CVS, are following suit (see: Stores Like Target and CVS Add Groceries to Attract Shoppers, which ran in the New York Times a few days ago)

But for all other elective product categories (ie, research-able, consumer category and without immediate need), the future  shopping and buying paradigm will be very different.

And the creation and management of the Brand experience will be absolutely crucial to the product’s success.

Shipping is getting better and better.  The Amazon warehouse model is phenomenal (actually, a lot of what they do is truly amazing) when it comes to the ability to meet customer needs geographically, and FedEx and other carriers have truly leveraged information protocol, networking and user experience to make shipping quick and seamless.  And as technology advances, this will only get better, cheaper and more mainstream.

In fact, with tight logistics, shipping efficiencies will soon evolve  to the point where you can get your desired item not only the next day but, in perhaps only a few years, quite likely by the end of the current day!

Picture this: you go into a store and field test all of the, say, digital cameras in your price range.  You pick them up, take a few snaps, look at cases, memory cards – all the options.  Your experience will be administered by concierge-level service on the floor.  They will be well-trained and deeply knowledgeable about the products.  They will likely have a tablet-type order pad at the ready, linked to their own internal networks as well as a geographic radius of competitors who offer the same product, thus assuring you of the lowest possible price within a certain delivery timeframe for your area.  They will walk you through the process, insuring that you are completely satisfied, and will also give you the opportunity to accessorize, impulse-buy and be upsold via the tablet upon which the order is held.

As a customer you may, perhaps, have a secure universal or store-specific ID card for transactions that you can give to your customer service associate, so that no waiting on cashier’s lines is necessary.  Think Universal ID: 2D barcode plus driver’s license info and credit card all wrapped up into one.  Or, perhaps even more likely, Near Field Communication (NFC) chips embedded into smartphones will take care of all of that for you (and this is already being included, apparently, in the new generation of iPhones and iPads. See this Wired article for more). You try it out, you make an educated decision, you get the product at the verified lowest price, and you sign electronically, right in the aisle and move on your way. The purchase made, you leave the store holding nothing, though your receipt and tracking information is already on your cellphone.

And, Voila! –  your order is already delivered by the time you get home.

The store does not warehouse product itself, but only has product to try; to experience. Lean and efficient stores will realize tremendous savings by leasing smaller footprints without need for product warehousing on site. And the shipping is now so efficient, that the only difference is that you don’t have to carry the packages to your car. Your consumer profile is already updated in real time, and perhaps (this is super duper sci-fi), your new purchase is in the system, and additional stores are made instantly aware, and able to provide related buying options for your new, as yet undelivered goods when you come in during that very same day of shopping.

In some ways, granted, it’s a little creepy – especially if you’re one of those guys that doesn’t care for the data-mining policies of Google and Facebook (that’d be me).  But in other ways, it’s remarkable.  And, perhaps, inevitable.

And, I’ll argue, in this commoditized and efficient future, the Brand Experience – every single aspect – will be more important than ever because product perception will be the most important point of differentiation.

In this new future of product experience lies an opportunity – perhaps the only opportunity – to truly make your product stand out from its competition.  Price points – and profit margins – will be largely be dependent upon brand perception. Outsourced production and leveraged economies of scale will go far in both squeezing out small competition and also providing for a general price-plateau among parity products.

So if price does not differentiate, and quality and feature set is similar – branding and perception will likely be the deciding factor.

And there is HUGE opportunity here for savvy marketers: full environmental control.  The store will, realistically,serve as the primary point of contact for the product, which means that companies will have to hire perhaps a new category of marketer: not necessarily driven by the spreadsheet, but instead there will a very strong need for creatives who can empathize with the consumers needs and create a holistic, sensory and multi-tiered brand experience. In fact, this is another spot where Daniel Pink seems to be right (if you haven’t read A Whole New Mind: Why Right Brainers Will Rule the Future, you should).

You see, if you move a bit further down the timeline, Big Box stores themselves will not likely exist in even a multi-channel experiential category.  The product experience will become smaller and more intimate, and the point of contact will be fashioned in order for the consumer to exist within and experience the brand and product in a very deep and sensory manner.  Which makes it all the more likely that either much smaller, more crafted stores will emerge by brand (think Apple store on steroids) or, perhaps, the Big Box space will be broken up into smaller, brand defined spaces where similar offering compete in a single space, though apart from one another.  Think of a  micro-mall: taking Best Buy as our example, large, entirely separate cubicle-store spaces within which each individual company wholly defines the user experience according to the brand. Sure, all of the ‘cube-stores’ would be, say, electronics based, but each brand, product and experience within which consumers would ‘try-on’ the product and brand would be completely different, and each ‘cube-store’ might compete, bazaar-style, for customers to come in and experience the brand, and buy via tablet and concierge if convinced.  There is also a new push for big box to be looking for small footprint high-traffic spaces, mostly i urban areas – a trend that has been noted in a number of publications as of late.

Yes, the revolution would only be an evolution.  And the Brand Experience – from product to lighting to texture, sound, smell and message – would be customized and truly redefine the USP in ways that the actual product might not bee able to.

Idea that future stores will warehouse to online yet be the point of contact for product and brand experience. Limited only by shipping spread/cost- smaller footprint, more experiential.  Think of it as an opportunity to promote and control the best points of your brand – those things that differentiate it from the competition.  Not sure what it means to the impulse buy segment, though I would expect that a similar value-add to encourage additional buying via coupon, percentage off etc could easily be worked into the package.  Would not affect, say perishables or must haves, which may further divide the retail landscape into smaller, more discrete categories.  Not unlike the Apple approach, but considerably more refined.

Last Word: in this admittedly hypothetical future, where does the small business/entrepreneur segment fit in?  The knee-jerk reaction would be to say that it doesn’t: larger businesses will simply become larger, and leverage their economy of scale and web-storefront distribution system to reduce overhead and  bring pricing levels far below the competition threshold of a traditional small business.

But I’ll argue that that may well not be the case.

Sure, if you’ve read enough my posts you know that I haven’t drunk all of the Kool Aid served at the Social Media Digital Lifestyle lemmingfest that’s been going on as of late, but that said, my mind remains open, and sees in this possible scenario a spot where the small business can leverage these tactics smartly and effectively in order to not only hand on, but to thrive.

You see, if things continue as they are going, more and more small retailers of non-immediate-need goods will continue to find, as they are already discovering, that their shop while well-intentioned, has become more of the brand-showroom and experience-storefront – which is all overhead and no profit. So how can small businesses thrive in such an environment?  By being different.  Think USP here – and pay special attention to the U.

I’ll advance here that Unique Selling Proposition, or USP, will be replaced by Unique Selling Experience, or USE (btw, I’m laying claim to that term!). And niche product businesses that can focus, create and control their brand experience and leverage the strengths of social media and ease of entry for digital messaging will be able to not only survive, but thrive.  So there is not only reason for hope, but for optimism for the small business/entrepreneur!

So that’s my take – as of today anyway.  I’ll take off my tin foil hat now.  As always, let me know what you think.