The Future of Retail

January 22, 2018

For more than 10,000 years stores have played a significant role in the formation of our cities. They built around town squares and have historically acted as meeting spots providing culture and community.

The Internet is changing this behavior. First, retail stores moved away from town centers and out to suburban malls, disconnecting from the city center. Later, as online buying became more and more popular, these same stores started really struggling with diminishing sales. The first real casualty of online shopping was when music stores began to disappear. Ask yourself, when was the last time you were in a record store with CDs? This trend is bound to continue as more diverse products (clothing, medications, home goods) are being offered by the online giants. Brick and mortar stores are being forced to innovate or die. Even fresh food is openly available to be purchased online and delivered to your doorstep in larger cities!

The future of retail

Jack Ma, founder of legendary Alibaba coined the expression 'New Retail' as the next evolution of the retail space. He said he believes the future of physical stores will have to use the advantages of an online store in a physical location in order to survive.

This could be things like:

  • Unstaffed stores (powered by AI)
  • Uses digital screens rather than printed materials
  • Communicates the right message to each customer at the right time (rather than everything at once)
  • Personalized store experiences.

The key word for future retail? Experience.

Retail locations will need to give their customers a stronger incentive for a visit. Sales and lower prices are great, but they're not a viable long-term solution for any business. Online will always be able to carry lower costs due to lower overhead and longer times between order and fulfillment. As long as you don't need anything right this second, local online retailers will often give you the option of a next-day delivery, which many customers would happily take.

“It used to be that 80/20 rule — [malls] would be 80% shopping and 20% experience. It’s got to go the opposite now, because all the shopping you can do faster, cheaper, etc., online.”

- Angela Ahrendts

What customers (users, advocates, or fans) are looking for is an experience that an online store isn't able to provide. They’re looking for entertainment, information, and a unique, personalized experience.

  • Adidas is starting to sell their Adidas 4D Futurecraft shoe. It is the first shoe to have a sole that is 3D printed based on your feet. This way, you'll get a pair that is unique to you guaranteeing optimal comfort.

  • Volvo is releasing their new SUV, the XC40, with a new concept called Care by Volvo. It's what they describe as "the next step in our journey to redefine how people use cars." Rather than purchasing your car you go online, customize it to your liking, and then hit 'Order'. The car is made to your specifications and then you'll rent it for a monthly fee. The monthly fee includes everything: service, insurances, maintenance, and repairs. If you ever have the need for a larger vehicle, there's even an included discount for rentals! For younger people that don't want to (or can’t) pay a lump sum for a vehicle, this is great option.

  • In 2017, Amazon released Amazon Go, a completely new type of shopping experience with "the most advanced machine learning, computer vision and AI". No lines, no registers, no checkouts. Amazon Go is opening to the public today, January 22, 2018 after a delay caused by the complexity of tracking crowds of fast-walking humans. The store’s tech didn’t work when more than 20 people were inside or were moving too fast, the Wall Street Journal reported.

More than ever before, serving your customer is the secret to success. User experiences are now being designed so we can be freed from our computers/smart phones and take advantage of the physical spaces we frequent. The result? A happy customer.

So retail isn't dead?

Quite the opposite! Amazon invested more than $13 billion in 2017 in just retail locations and there were in fact, more retail stores opening than closing in 2017.
What's true though, is that retail as we've know it, will change.

"Shopping today may not always mean going to a store and looking at a vast amount of inventory," Shea Jensen, Nordstrom's senior vice president of customer experience, told The Wall Street Journal. "It can mean trusting an expert to pick out a selection of items." (Nordstrom's New Concept: A Store That Doesn't Stock Clothes) “Nordstrom Local”, at just 2% of the average size of a mall-based store, is designed to be a neighborhood hub bringing back that city center feel to retail.

Apple, is tapping into a similar concept with their retail stores. Apple Stores historically have performed great - they have a higher sales per square foot than any other retailer in the world, including jewelry and car dealers - but they find in store sales declining. It turns out more customers are turning to for their brand new iPhone order. In February 2016, Apple changed direction by removing the word 'store' from it's retail locations.

"It’s funny, we actually don’t call them ‘stores’ anymore. We call them ‘town squares’ because they’re gathering places for 500 million people who visit us every year.

We view our stores as a modern-day town square, where visitors come to shop, be inspired, learn or connect with others in their community."

- Angela Ahrendts

The change we're seeing is very positive, but unfortunately it could mean the extinction of some stores that don’t follow the changing trends. As customers, we will benefit. We will get better, more personalized service at a variety of retail locations. Remember those online giants I mentioned earlier? Soon they are coming to your community and will bring the personal interaction we’ve been missing. Retail is evolving!

“Online preorder, that’s all wonderful,” she said. “But you are the physical, right? This is the human connection I talked about at the keynote. That’s what they’ll never be able to get online. That’s your gift.”

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