Tuesday, 25 April 2017

Blowing Up Retail....The Tipping Point Has Come & Gone


 4.5 MIN. READ:

The Jetsons’ flying car I’ve been waiting for since 1962 has arrived (click to watch the video!), but I still can’t try on clothes virtually in every store I go into. Where’s the retail tech revolution we were promised!?! AI, VR, holographics. I want it NOW!

Today’s bricks and mortar (B&M) retail environment is pretty boring, if not depressing. Stores have been turned into warehouses to ensure your choices are in stock within driving distance (exploiting Amazon’s ‘last mile’ barrier). I couldn’t squeeze through the rolling racks in the men’s section at Sears recently. Even my corner convenience store is offering ‘order online and pick up in store’ and Amazon, Google Shopping and Ali Babba are continuing to gradually suck the lifeblood out of everyone’s best efforts at eCommerce. (At Canada’s Hudson Bay department store the clerks now encourage you to go online and buy an item for 40% less, then give them the code and they simply bag it and hand it over. It’s all about changing mindsets and habits and moving volume.)

Stores are closing at a rapid pace and the majority of openings are focused on wealthy neighbourhoods. Openings that are getting a lot of coverage are either ‘Pure Play’ going offline, like Amazon’s GO locations, or ‘Own Brand’ stores, a trend that started with Apple Stores in 2001, spread to Tesla, Nike and many other brands, now including the very successful Lindt Chocolate stores staffed by Brand Momentum in malls across Canada. Recently BMI began rolling out RBH’s IQOS demonstration shops in Toronto and Vancouver to introduce a new way of inhaling no smoke while consuming a cigarette replacement. Pop-up Shops are cute, but hardly the immersive high tech experience we were promised some years ago. Sure, like the Jetsons’ flying car, tech takes times to catch up with our imaginations, but the reality is that, like the music industry waking up one morning to find their office doors locked by the bankruptcy lawyers, retail disruption has come and gone.

We don’t talk about it much, but Capitalism is retail’s biggest problem. As Richard D. Wolff of Democracy at Work likes to say, when Capitalism does what it’s designed to do (continually make more profit through growth and/or cost cutting), ultimately it kills itself. Think about it. Every corporation traded on the global gambling pool that is the stock market must grow by 10%+ per year, or the wealthy stop buying its stock. To grow, Boards of Directors have to either cut wages or ship the jobs overseas, thus gradually cutting the spending power of the entire population to the point where they cannot afford the corporation’s products, or they have to leverage mergers and acquisitions. The latter tactic is inevitably leading to relatively few global corporations and tons of start-ups vying to get bought up by the mega-corps.

When corporations become global powerhouses, they have the power to make the rules, nationally, regionally and globally (humans are both greedy and opportunistic at heart, and the least ethical are most driven to become rich or politicians). There is no other way for a capitalist corporation to go, other than to grow to the point that it eventually exploits everything it can out of the masses to increase revenue and profit.

Which are today’s fastest growing corporations that have unprecedented daily interactions with average people? Amazon, Google and Ali Babba. Interestingly, growth has replaced profit as their primary goal. They don’t even try to make a profit, they just reinvest in growth every year and investors seem happy to keep buying their stock. The unprecedented advantage these firms have over B&M retailers is data – every single time we use Google, or buy from Amazon, they are learning more about us. Over time they are getting smarter and smarter about how to leverage that information to create more compelling (addictive) interactions. This is a tool that no amount of incentivization around “Please go to our website and fill out a survey for a chance to win!” is going to bring to the B&M retail chains.

Meanwhile, the Long Tail (thousands of new products from new and existing manufacturers) is sucking sales volume from long established bulwarks of Branding at P&G, Kimberly Clark, Reckitt Benckiser and the rest and we’re seeing the first declines in performance for many brands in North America in decades. No wonder that these firms are rushing to get listed at the top of Amazon’s Subscription service -- if they can get into the “First Basket” of regular monthly grocery orders, up to 80% of those reordered products will never change if the concept of monthly deliveries manages to gain real traction. (And why wouldn’t it? Once you ‘get’ that it is easier and cheaper for Amazon to send you all that regular stuff, it means less tedious shopping and more time for more exciting stuff.)

So where am I going with this? Amazon and Google, unfettered by the need to worry about making a profit, are free to just keep growing, exploiting every niche opportunity and disrupting as they go, wiping out retailers as they do so. Like Walmart and their ‘big box’ brethren who wiped out the retailers on Main Street and are now shutting stores if the jobless, destitute people in an area cannot afford to shop there, the Amazon and Google behemoths will continue to roll relentlessly forward, opening their own stores or acquiring the chains they bankrupt, leaving big box centers scattered among the most densely populated areas and upscale shopping centers in the wealthiest neighbourhoods.


So what really is next for B&M retail?

Retail technology is where I’m putting my money. To enhance the in-store shopping experience chains are going to have to double down on exciting technological gadgetry and anything else that enhances Shopper Engagement. The staff are going to have to whip up mocaccinos and give foot massages [I’m joking, they’re going to have to be super knowledgeable, impeccable and more like your bestie (best friend) than ever before]. Staffing and training firms like Brand Momentum, who find and manage the best candidates to be Brand Ambassadors for in store experiences, are going to do well.


The Future of Retail:

In B&M chains big data and RFID (radio frequency identification) is going to have to get so refined by AI (artificial intelligence) and VR (virtual reality) that as you walk past what looks like an inanimate mannequin it will turn out to be a hologram OF YOU with the latest fashions of the type of stuff you bought IN THAT SEASON THE YEAR BEFORE morphing over it, reading your eyes to see which outfit most appeals to you, while (in a voice most appropriate for your sexual orientation) it negotiates in real time with you to find a price point you’ll say yes to and the transaction will happen automatically. The items on the shelf will then glow and ping on the shelf nearby while your smartwatch guides you towards them and then directs you to the fitting rooms -- if you feel the need to check the fit (eventually won’t because the invisible laser scanner will have determined your precise current shape and offered you the exactly correct size of each item).

I just made all of that last part up.

But it’s all still going to happen, just not soon, and it won't be the 'magic sauce' that will rescue B&M chains from Amazon-induced bankruptcy. ;-)


Kevin is a Concept Inventor: innovative business-building concepts and breakthrough solutions. Want more of his insights and how they can help your marketing efforts? Book a conversation with him today: KevinLenard@Gmail.com

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