US-based consultant Doug Stephens describes himself as the “world’s foremost retail industry futurist”. Noella Pio Kivlehan asks him what tomorrow’s retail will have to offer
What innovations are retailers thinking about today? Store fit-outs? More customers experience? Different kinds of merchandising? More on the internet?
What’s happening now is that old-era retailers are stuck with an abundance of physical assets they no longer know how to make productive. Consequently, they are swinging to online, placing increased pressure on supply chain partners, cutting staff levels, downsizing their physical stores and attempting to redeploy stores as offline distribution points.
This will staunch the bleeding temporarily but ultimately it’s going to prove a failed strategy. The truly successful retailer of the future will be neither a pure online player nor a solely brick and mortar retailer. This new breed of retailer will employ a structure that combines the best of both worlds.
How far will internet retailing actually go?
The next generation of e-commerce will be infinitely more immersive, tangible and haptic in nature. Through the use of technologies like virtual and augmented reality, consumers will literally feel they are stepping into online stores and shopping in a very natural way.
Algorithmic fitting will massively improve confidence when ordering online, while advancements in 3D printing technology will offer mind-blowing levels of bespoke manufacturing.
How important will the physical store remain for retailers in the coming years? Could there ever be a time when physical stores don’t exist?
Physical, public spaces for commerce will always exist but the strategic purpose of those spaces will change radically. The fact is that online retail has become tremendously effective at displaying and distributing products. In some categories such as electronics, I’d argue that online is far more effective than stores. The ability to shop comfortably from home, have access to product data, reviews and video, and schedule fast, and often free, delivery is making online the preferred method among a growing set of consumers.
Given that, I see stores becoming more like experiential galleries where consumers can learn about a brand and become excited about their products through live experiences. The revenue model for these stores will begin to look more like an advertising model, with brands paying great retailers upfront to represent their products in the market.
The retailer will be less focused on retaining the sale and more concerned with inspiring the consumer to buy it somewhere – anywhere – including from a competitor. The nature of work within these stores will change drastically too. Inventory management, price lookups, merchandising and so on will be managed completely by technologies such as artificial intelligence and robotics. The salespeople of today will evolve into highly skilled brand ambassadors with significant earning potential.
Will we see the rise of more dominant global chains along the lines of Walmart? Or does the future belong to the independents?
Walmart, Tesco, Unilever, P&G and so on are empires that were built when being an empire was a guarantee of dominance and success. Today, however, networks like Airbnb, Etsy, Uber and others are threatening industry giants with models that scale faster, reach further and cost less to operate.
Big-box retailers also find themselves caught in the middle between massive internet marketplaces and small, specialty retailers. They have neither the selection nor convenience of the marketplace nor the concierge service and customer experience of the specialty shop. Ultimately, the future belongs to retailers – independent or otherwise – that are able to construct remarkable customer experiences.
Could we see a league of super-chains evolving, in which large chains such as Walmart, Tesco etc gobble up smaller chains, creating more consolidation in the market?
The more likely scenario in the short term is that these chains will expand their online marketplaces and leverage their store networks as ship-to points for click-and-collect commerce. I doubt we’ll see significant investment in the in-store experience. That said, the battle between these titans will become even more binary than it is today and eventually only a small handful of them will survive.
Which sectors do you see standing out in the future? Clothing? Food? Technology? Garden/pet centres? Will the consumer’s priorities shift?
We’ll see food stand out as the next frontier of e-commerce. There’s extraordinary complacency in the food category among incumbents who are resting on the idea that shoppers won’t order fresh items online. This makes them ripe for disruption and companies like Instacart, which is growing its user base in a quantum way, are stepping up.
Grocery is also a critically important category for a firm such as Amazon, and its Amazon Fresh platform, in the sense that it could mean delivering to a home up to three times per week and in doing so, availing all kinds of other purchase opportunities with the same deliveries.
The data flow from this kind of purchase frequency would also be of interest to a firm such as Amazon, because it could become extraordinarily predictive in its marketing to Amazon Fresh users.
What about the future of shopping centres? Will they continue to evolve as they already have into entertainment and leisure centres?
We’ll find that successful malls go back to their historic origins of becoming a central aspect of community and social life. Malls will increasingly become the centre of communities where people live, work, eat and play. Well-curated retail will be an intrinsic aspect of this offering, but unlike shopping malls of the 60s, 70s, 80s and 90s it won’t be the primary focus any longer.
In some markets, particularly those seen as tourist destinations, outlet malls will also continue to proliferate. And at the other end, luxury centres will also thrive as they satisfy the demand of brand-hungry consumers from Asia, South Asia and other emerging economies.
Will we be using our smartphones to do more shopping, and will consumers actually take advantage of the real time voucher offers being pinged at them?
If you define shopping as the process of defining local options, browsing products and navigating to local stores, then we’re already shopping on mobiles in a significant way. In fact, 46% of line traffic in the US on Black Friday last year came from mobile devices. Some analysts believe that within two years the majority of all retail transactions will be influenced by mobile technology.
That said, we’re also learning that shoppers have a very low threshold of tolerance for irrelevant push notifications and offers driven to their device. Retailers will have to be very sensitive to this in their employment of beacons, mobile ID tracking and audience identification technologies.
Which retailers are getting it right today? And what can others learn
from them?
There are various retailers today that are succeeding in different ways. Upmarket US fashion retailer Nordstrom is a wonderful example of a traditional brand that is pushing to explore how its customer experience can be supported, animated and improved through the use of new technology.
US glasses and sunglasses retailer Warby Parker has challenged the way we go about buying prescription eyewear and sunglasses by developing a very user-friendly web shopping experience and in the process is disrupting category monopolies such as Luxotica.
Menswear retailer Bonobos menswear is redefining the purpose of physical stores with its Guide Shop concept, in which men can go to be fitted and styled online.
And Burberry’s 360 store concept on Regent Street has explored the degree to which consumers may be willing to share personal and geospatial information in return for a more personalised an d remarkable shopping experience.
There is no one brand out there that has mastered the new rules of retail but there are many success stores and lots of great experimentation.
Are landlords and developers recognising the needs of today’s retailers?
No. Not yet. If we agree with the idea that stores are becoming media then the mall needs to be the network. And like any good network, it has to manage extraordinary content to drive the
highest possible ratings. It can’t depend on one show to support the network. In the same way, malls can no longer lean on an anchor store like Macy’s, Nordstrom or John Lewis to bring traffic. The mall needs to become a draw in and of itself.
This comes down to managing carefully an overall shopper experience and measuring the mall’s ability to engage consumers with its mix of entertainment, dining, brand assortments and lifestyle offerings.
Will we see more retail influence coming East to West, rather than West to East?
Yes! Asia, South Asia, the Middle East and sub-Saharan Africa will drive most of the world’s retail innovation over the next 25 years.
How will the luxury market fare in the future? And how will the middle market survive?
As developed economies continue to bifurcate and middle incomes continue to stagnate, we’ll see an extended growth of luxury and discount offerings and further decay in the mid-tier.
About Doug Stephens
On his website, Doug Stephens describes himself as “one of the world’s foremost retail industry futurists”.
His intellectual work and thinking have influenced many of the world’s best-known retailers, agencies and brands, including Walmart, Home Depot, Disney, BMW, Citibank, eBay, Intel and WestJet.
Stephens is also listed as one of retail’s top global influencers by Vend.com; the founder of advisory firm Retail Prophet; and the author of The Retail Revival: Re-Imagining Business for the New Age of Consumerism.
