The Future of Retail
A Look Into the Future of Retail
The future of exactly how retail trade will evolve is not completely certain. It definitely will change, but the exact way that will occur is unclear. However, one certainty is that it will involve the use of emerging technologies. And the question for retailers is how willingly they will adopt these technologies. In the past, reluctance to adopt new technologies has shuffled the deck of successful retailers. One thing is certain, how technologies are implemented will be critical to the emerging strategies of retailers of all sizes.
There are many technological influences that will affect interactions of people with retail establishments. While the following scenario may seem like a far-fetched vision of the future, the convergence of technology, consumer preferences, and the need to reduce costs will lead to implementing a mix of technologies in new ways that have been previously unseen. The question for retail establishments will be whether they will embrace or resist the changes. Many embraced the concept of e-commerce in the early years of the 21st century, but many were also resistant. The onset of the Internet led to some companies going away into obscurity and other companies emerging as new power players. The coming years will result in similar shifts in the market.
One example of the continual shift in retail involves the plight of malls. Malls emerged in past decades as a popular way for shoppers to find specific items they were seeking. The ability to shop many outlets in a short time led to large and successful marketplaces. However, that model has declined in the last decade. A list of failed malls can be found at the website Dead Malls. Certainly the proliferation of online shopping has caused the slide in demand for malls. Even long-term staples of malls like Sears have not been able to avoid the decline and are closing stores in large numbers. This is just one symptom of the shift in demand for this type of historical outlet. And Macy’s is not far behind Sears’ exodus. These large outlets are called mall anchors, and without them the future of malls in their current format looks bleak.
If you look closely, you can see the shift occurring in real-time. While some technologies are not mature enough today to complete the shift from the brick-and-mortar format to an effective online format, all of the technologies needed for the future of retail exist today. The key will be how the technologies are mixed to determine the exact experience. As the quote by Roy Amara stated, “we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” This will certainly be true in how people shop for goods.
The following scenario depicts how the shift may occur. It outlines the experience using current technology tools (as of 2016). While it is unlikely these are the exact tools that will be used in the future, this is intended to show that today a retailer could implement this exact scenario in at least a rudimentary format. The question is how a retailer today can prepare for this eventuality and position itself strategically to take advantage of the future market.
The Future Retail Experience
The year is 2025. You need a pack of sandpaper for that do-it-yourself drywall job at home. The thought of running to the store crosses your mind, but it is overpowered by the desire to finish the job. So, you throw on the Internet visor (current technologies: Google Glasses, Google Cardboard, View-Master® Virtual Reality) and take a trip to the virtual store (current technology: Second Life). You think about going to Amazon, but decide on Wal-Mart.
As you walk through the door, the virtual greeter says hello and asks if they can help you (current technologies: Siri, Cortana). You reply with a simple “no” as you walk by, but you are amazed at how life-like those greeters have become ever since the retailers implemented their newly updated human-like interface for “employees”. Ever since then, you really forget that the greeters and cashiers are really not human. They even have human quirkiness, and every “individual” truly seems unique. “The artificial intelligence has really evolved in the past few years”, you think.
You head to your favorite part of the store – the hardware section. As you navigate the aisles you see a few things that you forgot you needed. You grab a two-pack of paper towels and toss them into the automated cart following just behind you to your right. And as you enter the destination aisle you realize you also need paint brushes. You grab them and toss them into the virtual cart. As you get halfway through the aisle you see a flashing sign that sandpaper is out of stock. It’s hard to believe that with all this technology anything is ever out of stock. How frustrating! Maybe going to Amazon would have been better. That’s the next stop.
This will take a little longer than you intended. You head to the front of the store to the register section and press your eye to the scanner and your account is debited (current technology: EyeLock®). You walk out of the Wal-Mart and next door to the Amazon. As you walk to the hardware section you pick a few items out and toss them into your automated cart. You get into the hardware aisle and hit the jackpot. There is the package you need. You pick it up just to make sure it is the correct coarseness. Yep, that’s it. And they have twelve packages in stock. You toss two into the cart.
Time to go home. Fortunately, Amazon recently had a huge breakthrough in retail transactions. They added that Immedi-Checkout capability to their stores and now you can check out right from the isle you are standing in. No more “suggestive selling” as you head out of the store. You check out and head for home.
You remove your Internet visor and get back to work. You check the time with your personal assistant Jarvis (current technologies: Siri, Cortana) and ask him to remind you when your orders will be arriving. “Yes, sir”, he responds dryly. You ask yourself again why you chose a butler-esque assistant. He updates you that your orders will be arriving in about twenty minutes, and you intend to get sanding as soon as your packages arrive. The Amazon drone (current technologies: Amazon / DHL) should be arriving in 35 minutes and the Wal-Mart drone will be arriving in 40 minutes.
What Will You Do?
A key point to developing a business strategy is to develop approaches and responses to the marketplace. While this vision of the future is only a possibility, your strategy must take into account foreseen and unforeseen threats. So, imagine you are a retail establishment competing in this environment. What will your response be to competitors who have the benefit of a virtual existence and very little brick and mortar costs?
This scenario was built on technologies that are real today. They are not evolved enough today to support the actual activity outlined in this scenario, but they are also not far from this possibility. Google Cardboard is a very simplistic virtual reality product, but this underscores how easy it will be to mass produce virtual reality tools. Second Life is not exactly the most realistic lifelike experience, but it is improving quickly. Drone technology is not currently permitted for air delivery in the United States, but it is unlikely to think that will not change in the next decade. If it is not these players fulfilling these capabilities, then it will be other competitors who bust through the barriers.
As an example, Second Life is very “boxy” in its look and feel, but in theory Wal-Mart could set up a store today that would mirror a real-life store in a virtual reality environment. Now, put together slightly better virtual reality tools with a better Second Life experience, and the idea of walking through a three dimensional proxy of a real Wal-Mart store is not impossible. And why would a person want to make a trip to the store for a mundane item. Who would not want these conveniences?
Obviously some competitors will not change when technological breakthroughs occur and likely will not survive. Today, we have three large brick-and-mortar general retail giants (Wal-Mart, Target, and Kmart), many specialty retail giants (Home Depot, Lowes, Office Depot, Best Buy), and scores of smaller specialty retail competitors behind them. But at some point Amazon will be intruding into their space, just as the competitors will want to make inroads into Amazon’s space. Amazon will be approaching this world from a technology-expertise perspective. Wal-Mart would approach this world from a retail-expertise perspective. Where the two meet we could see this evolution occur. Others will likely be lacking in their ability to adapt to the fabricated world discussed here and will become extinct.
So, if you are a smaller retailer then how will you compete? Will you depend on some third party to develop the software that will let you go online and compete in a Second Life fashion? And who will provide your drone fleet to fulfill the delivery? Surely, those that provide the easiest shopping experience will have the greatest upside opportunity. But if Amazon ends up owning that technology, will they really want to share it with a competitor?
These problems highlight the challenges of owning a business and attempting to determine future trends, especially in retail. If you cannot compete on price or technology, then is there another way to compete? Perhaps one could compete through experience. This would be a differentiation strategy when looking at the generic strategies. Not everyone will want to do business via high technology on every purchase. Plus, humans are social creatures, so some level of contact is innately desirable in the retail experience. Perhaps larger regional malls might exist in urban areas.
For those that will want a different experience, there will also be huge opportunities. Some people like to feel the fabric before buying their clothing. Some want to see the unhindered look of the color of the product through their own eyes or to feel the smoothness of the fabric in their new purchase. For those creating an environment of differentiation, such as a Starbucks, Nordstrom, Wegmans, and local antique and collectible shops, there will be the upside of a declining number of competitors offering such experience. These may become more of a destination for shoppers than they are today.
The Overall Impact
By the way, it is not just businesses that will be impacted in this world of new commerce. It will also be people affected in the jobs that are available. Note that all of the technologies had a common theme: minimal human interaction. So, if drones are delivering, then humans are not. Drones are less expensive, even if they have a high breakdown rate. They are traceable, cheap to operate, cheap to repair, fairly inexpensive to replace, and do not result in workers compensation claims when they are damaged (unlike humans).
So, it is not just businesses that need to continually improve themselves, humans will be required to update or face obsolescence as well. If you are an individual, how will you survive this environment? As companies employ more and more technology to automate basic human tasks, it will be increasingly important to continually improve one’s own skills. It will not just be the large or small business who is singled out in the onslaught of disruptive technologies. People will be affected as well and will have to continually develop their own strategy for survival in an automated world.
