The way we shop for goods has greatly changed over the last 15 years, in line with the mass popularity of internet shopping. Physical retailers, especially ones that have limited online presence, often blame the rise of the internet as a source of decreased revenues. Technological advancement is inevitable. Therefore, in order to survive, retailers need to rethink how they fit into future consumer behaviours. More importantly, in order to thrive, they need to predict how future technology can help them innovate their offering to actually better the customer relationship.
I’ve always been interested in online consumer behaviour and also needed a thorough understanding of it during my time running a digital creative agency. That said, my interest in traditional retail was limited until I first moved to London and was on the doorstep of Whiteleys shopping centre. Opened in 1911, it was the first department store in London and was claimed at the time to be the biggest shopping centre in the world. I was in awe of its (grade 2 listed) architecture with its beautiful colonnaded façade. Then I walked in…
I’ve never seen anywhere in London that was so big with so few people. Even Hyde Park seemed busier. Whenever possible, I shopped there for everything out of a longing for its success so that its history as a shopping centre could be preserved. I’d often divert my local friends there instead of the newly built alternative of Westfield Shopping Centre a few tube stops away. Despite the good intention, the experience of shopping inside Whitleys wasn’t at all pleasant. Over the years I saw shops open and close with more and more sites remaining empty. It quite frankly made me feel sad watching it die.
I started asking myself why this was happening. Was it underinvestment? Was it the internet? Was it the displacement of footfall? The answer was most likely all three but then again this problem was not exclusive to Whiteleys. It was happening all over the developed world. The real problem for Whiteleys was it hadn’t pro-actively created new ways of interacting with its audience, let alone just keep up with basic consumer expectations. In some ways, its long history and traditional approach to retail were its downfall. It was like a dinosaur waiting for its extinction.
Believe it or not, eBay has now been running for 23 years and Amazon an amazing 25 years. Over this time, the steady increase in the power of computing combined with data intelligence has made for easier, personalised and more delightful online user experiences. In parallel with these continual digital improvements online, not a lot has changed in the way physical retailers present their consumer offerings in-store.
The recent development and convergence of AI, robotics, smart speakers and IoT (internet of things) offer a multitude of opportunities for any retailer that invests in innovation. In order to innovate and differentiate, even online retailers need to start thinking differently. Its simply not enough to disseminate what has been successful and re-create. The very human process of shopping needs to revisited, taking into account different human wants and needs in their modern environment.
An example of a recent disruption that has been successful is food box deliveries. For those that don’t know what this is, a food box company offers you a weekly menu to choose from and then delivers all of the fresh ingredients to you in a box. You then follow the recipe cards to make your tasty home-cooked meals. I’ve tried a few companies over the years including Hello Fresh, Gousto and Mindful Chef. Each has their own spin on things but all have helped change my life. I now make the time to cook and enjoy it, I eat more healthy than before, I save time shopping, I have learnt cooking skills and most importantly I have sit-down dinners with people. Every time I have a meal with friends I associate that positive experience with the box company. Food box deliveries were not only designed to be life-changing. They were also conceived by innovating the operational and logistical processes. It just goes to show an innovative response to market trends does not necessarily need to be based on the use of cutting edge technologies.
The box companies have managed to create an entirely new offering but startups with ‘zero to one’ offerings account for a fraction of the almost $30 trillion spent worldwide. So how should existing retail respond? Unfortunately, looking to the future doesn’t provide one solution to fit all. It is dependent on so many different factors including whether the product or service is unique to the retailer, if its a digital or physical good, if its a white-label or luxury brand and/or if its a FMCG/commodity or a lifetime purchase.
Having a high-street presence should not be an automatic assumption. It is important that each company looks at their foundations, analyses their brand and decides which retail channels are best….and if there is no long-term future rapidly diversify.
The one thing you can be certain about is that physical retailers have a bright future ahead of them only if they are both selling the right type of product and are obsessive about creating experiential connections with their customers. It is time to rip up those old marketing books with the 4Ps marketing mix and add an E. It’s Product, Place, Price, Promotion & Experience.
Consider the behaviour in buying a TV for example (which is similar to most high-value consumer electronics). A few people might buy in-store, a few more might go to the store to see the TV and then buy online. The majority of us will go online, read trusted independent reviews and then buy at the cheapest price on an online marketplace. It’s not exactly a meaningful experience buying a TV. So why are shops still selling TVs?
It’s this kind of thinking that has led many luxury brand owners in the consumer electronics sector to open their own stores. Unlike the resellers that stock competing products, the manufacturers can exclusively promote their brand experience from the moment you walk in the door. Apple stores have excelled in not only selling a lot of product (have you ever seen an empty Apple store) but also in cross-selling across the entire range and most importantly have added overall experiential value to the brand. Other good examples of brand owners that have created a successful physical experience include Nespresso (you can go and sit down to sample free coffee from their machines) and Tesla (you can go and sit in one of their showroom cars where they successfully convert leads into test-drives).
Technology, especially relating to automation has and will continue to push commodity goods to our door without the need to visit a store. In the future, smart tech in our home will be able to monitor our purchases and usage to predict our buying behaviours so that we will have toilet roll or ketchup before we’ve even realised we need it replacing. We may all have ‘goods boxes’ the same as letterboxes that notify us when the drone with our shopping has arrived.
The large marketplaces and supermarkets are well aware of these trends and have already invested heavily in their behind the scenes operations, creating CFCs (Customer Fulfilment Centre’s) that efficiently automate using robotics and other digital technologies. The next step, which really isn’t that far off, is to integrate the next generation of front-end into the existing systems, replacing your mouse and keyboard with input from IoT devices. Opportunities to innovate and differentiate in this environment will then become more of a creative challenge as to which data sources are used and how they are intelligently processed to make things as convenient as possible for the user.
With commodity goods leaving our consciousness, our buying decisions will be more focussed on the purchase of luxury brands. This is where physical retail spaces will shine. Supermarkets will start to look more like real super markets. Brand owners will have micro-market stands allowing their customers to sample products and offer direct promotions in order to entice the customer to upgrade their automated shopping preferences. Shopping centres will feature incredible shopping experiences from door to door making for a fun, full day out.
One misconception about the future of high street retail is that it will be made up of shops that require us to physically see or try a product before we can make a purchasing decision. Whilst this might be true in the short-term, in the future, technologies such as virtual and augmented reality will allow us to use our very real senses to evaluate a product without leaving our homes. This is even more reason for stores to focus on brand experience instead of perceived necessity. High street fashion retailers that react now to make their stores more about brand experience and less about trying on clothes will be better placed for future trends.
Will all the independent stores that fail to embrace new tech-savvy behaviours disappear? Well…yes, especially if they do not have a totally unique product or service. It’s already been happening for a while and I’ve seen it with my own eyes in the Whiteleys department store. Thankfully, Whiteleys is undergoing a £1bn redevelopment. With the correct modern infrastructure combined with its historic beauty, it has been given a new lease of life.
If Whitleys is to survive another 100 years it is vital that the retailers create an experience that is more than just a convenient in-store purchase. The experience needs to be consistently emotive, engaging and meaningful from the very first moment a consumer finds out about the brand, through to interaction, purchase and for the rest of their lifetime.
Photo by: Marcin Kempa