The Future of Retail... Today

A reflection on the last week of news in the retail world, our view on the challenges the industry faces, and how we can best navigate them.

Much has been written and said over the last few months about the future of retail. How it must become more experienced focussed, more social, and must evoke an emotional response from customers. Whilst there’s no doubt that the role of physical retail is changing rapidly, and as a result the design of stores must evolve, it would seem that there are some involved retail design who are oblivious to the real challenges facing retailers today.

Over the last week Google announced that it will be bringing its Shopping Express service to the UK, no doubt to capitalise on Google Home sales and try to recover market share on Amazon and its Echo + Prime Fresh proposition. Amazon have also upped the ante to the tune of $13.7bn with its announcement on Friday that it will be buying Whole Foods. This acquisition is clearly about retail operations much more than it is about adding healthier, organic products to Amazon Prime Fresh. One assumes we will see Amazon move to smaller, local distribution centres (in Whole Foods stores) from which they can fulfil Prime orders in well under an hour, and with it shifting customer expectations of convenience again.

The world also got a glimpse of Moby last week, a prototype 24-hour convenience store that’s being developed in Shanghai. Promising to do to retail what Uber has done to taxi’s, its aim is to have a fully automated, AI driven system that can travel from warehouse to a customer where ever they are, at home, in a park or at work, to select the products they want and be billed through their mobile app.         

Clearly these changes have immediate, significant implications for both convenience stores and grocers, however, with the rapid advances being made with both AI, and VR it is not a stretch to see how this technology could trickle down into fashion. Men’s fashion could be a particularly susceptible for disruption from this type of technology given the success of services like Thread and The Chapar in recent years in catering to men for whom a trip to the shops is well down on the list of priorities.

Convenience alone is not enough to guarantee loyalty, look at churn rates for converged telco providers offering TV, mobile and broadband services. Their consumers fail to remain loyal if a competitor brand comes along with a better product, price or service offering.

We feel that it’s along these old battle lines that physical retailers need to be re-defining themselves, not by seeking out new ways of laying out their stores. Those that have already embraced this return to good old fashioned marketing and retailing are succeeding.

Also last week, David Shing (AOL’s self-proclaimed Digital Prophet) prophesied that the 4 P’s of marketing are totally irrelevant in today’s day and age. However, we couldn’t disagree more, and the stock price of some of our clients seems to back this up. Both Best Buy and TJX are enjoying some of their best financial results in the last 3 years, much of it due to taking time to understand their customers needs, and then focussing on pricing, product, promotion and place in order to appeal to these.

Service and supply chain (and the data created through both) are fast becoming the key differentiator between winning and loosing. Both retailers and brands should be looking at how they can protect the direct connection they have with their customers, to ensure that an intermediary, (be that Google, Amazon or someone else), doesn’t step in to fill an un-met customer need, and with it cut off the data supply.

Nike’s “Customer Direct Offense” announced last week reflects this thinking. The triple double strategy (2 x Innovation, 2 x Speed, 2 x Direct connections with consumers) that will touch everything from the board room structure to product development processes and how customers purchase is clearly an attempt to both delight customers, and provide long term protection of the connection Nike has to them.

When working with clients we try and look beyond the immediate brief to understand the real challenges they are facing to provide ideas that will help them profit. At the moment, we can’t help but feel that some of the retail design industry is too focussed on the store as an end point, not a link in a much bigger journey. Whilst there is this focus only on the store, it’s technology businesses not retailers defining the future of retail.

As retail designers now is the time to help re-address the balance, not bury our heads in our sketch books.

 

Header image credit: Wheelys

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