The Future of Retail

Physical retail and the world of technology have yet to combine in any meaningful way. I believe that is all about to change. Having spent more time speaking with retailers recently, it is clear they are about to make a technological leap. All of them have a deep fear of Amazon. Showrooming is a trend spoken about often internally at large brick and mortar locations. Yet one of the more interesting trends of late is called “Webrooming”. I outlined this trend in this insider report but, at a high level, webrooming is when consumers research online but then purchase the product in store. Our research on consumers who do this revealed the primary reason for webrooming was to read customer reviews of products they were interested in. 78% said they use Amazon reviews as their primary source for getting reviews of things they plan to purchase in store. Perhaps more interestingly, 42% said they read reviews on Amazon about products they were considering while at the store where they eventually made the purchase.

What I find intriguing about this environment is Amazon has been playing the game with an unfair advantage. Amazon has been using technology to gain competitive advantage. The playing field is not yet equal since most retailers have not been using technology to their advantage. I believe the groundwork is being set to level the field.

Payments

If you didn’t understand why the timing was right for Apple to get into payments and embrace NFC, then I encourage you to look into the EMV Migration and the accompanied credit issuers liability shift which has a deadline of October 2015. EMV is essential a “chip and pin” solution which enables credit card issuers to put a secure chip into their credit cards. The process for payment will be pin-based — meaning consumers will have to enter a Personal Information Number to authenticate the transaction. This shift will require all new payment terminals at physical retail locations. Merchants are incentivized to embrace this shift because as of October 2015, if they have not meet the deadline for the EMV transition, either they or the issuing bank becomes liable for any fraudulent charges. This shift in liability from the credit card companies to the merchant or the bank is the mechanism driving the investment in infrastructure change that makes not just chip and pin but NFC viable now in the US market.

Apple will sit right in the middle of this, playing a key role in helping limit fraud, thus limiting the risk to banks and merchants. This is just step one of brick and mortar retail stores embracing technology. The next will be Beacons.

Contextual Shopping

Beacons can help bring retail into the technological age. As our research on commerce highlighted, consumers are increasingly using the internet to make purchasing decisions. After the Christmas season last year, I spoke with several IT managers for major retailers and all of them were surprised at the high level of usage in store of their mobile app. This was everything from coupons, to product information, and sometimes just a map of the store to find a certain section. Thanks to our mobile devices, the in-store experience stands to get significantly better and low power proximity beacons can play a role.

If you have never seen this video from Estimote, I encourage you to take a look as it presents a vision of how beacons can transform retail.

Things like QR codes, and RFID tags are used today to give customers relevant product information. But the experience still needs to get much better and more interactive. This is what the promise of Beacons can deliver.

When we dive into the trends in markets like US and Europe behind webrooming and showrooming, it becomes clear in both cases technology is what has enabled them. This is why it will be interesting to see what happens once technology comes to physical retail in a meaningful way.

E-Commerce is growing but is still less than 10% of all retail sales. Clothes, shoes, gifts, books, and snack foods are the top five items purchased online out of 50 product options and categories. Automobiles, flat screen TVs, laptops, and mobile phones are the most researched online and purchased offline.

While still early, I have a hunch that, when technology is deployed strategically at retail, it could have an impact on Amazon. As I mentioned earlier, Amazon has been playing with an unfair technological advantage. Convenience and reviews are at the core of their value and both can be replicated and advanced by physical retail through the use of technology.

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Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio

12 thoughts on “The Future of Retail”

  1. I’m one of those “guilty” of webrooming. Primarily because I would always rather give my money to someone concerned with my neighbourhood. I know, not all the companies are concerned, but the people working at some of those kind of companies are still my neighbours working to pay their bills, taxes, rear their kids, etc. I still do a fair share of web purchases for harder to find items.

    The 42% webrooming while at the store is interesting. I do that a lot, too. But a lot of stores make it hard, either intentionally or at least because of the structure of the building. I imagine a bit of protectionism is at play, too. Stores used to hate retail espionage. Will beacons help alleviate some corporate fears along this line? I feel like a lot of stores are still more afraid of the internet as opposed to finding useful ways to use it.

    Joe

    1. Heck, I’m 90+%. I don’t know if guilty is a word I would use. I would only order online if I can’t get it locally, or if the price is just that good… I always check review sites before purchasing locally or otherwise. I never go by retail site reviews.

  2. I totally agree. And it’s not only retail. There are many other markets in which something similar to what you describe could greatly improve the end-user experience.

    On the other hand, I’m rather disappointed at what Amazon and similar e-commerce retailers have achieved during the last decade. The Amazon website hasn’t changed much, and the design is still awful. In fact, that awful, cluttered design seems to be common among huge e-commerce shops.

    Discovery hasn’t improved that much either. They still rely on a recommendation system that doesn’t really expand your choices.

    I’m looking forward to what ideas we will see for tech in retail.

    1. I am as hopeful but less optimistic. There are a few companies that seem culturally capable of implementing technical aids to user experience (like most outdoors retailers—REI, EMS, etc.) but as for general retail, I think it will take a whole new generation of thinkers, for whom technology is common sense rather than some hee-haw new fangled gadget.

      I think one of Apple’s greatest unsung innovations is the B&M Apple Store. All one has to do is look at the economics of what they’ve done to see the benefits. Yet there is not a single retailer coming close to implementing what Apple has done. It is too easy to brush off technology for low-tech/no-tech solutions. Technology adds complication, maintenance, and thus expense that, even in the face of the technological competition of the web, seems hard to justify. (Not what I believe, but what most retailers seem to believe.) There is a huge philosophical and cultural underpinning that does not exist for much to change in retail.

      I agree about the Amazon website. I also feel similarly about Apple’s website. I’ve long thought there was a disconnect between the rest of Apple and their website. Seems like two different companies.

      Joe

      1. Agree on Apple’s website. Online retail websites in general haven’t improved much in a long long time. Apple’s website is no exception, nor of course is their App Store. It is unfortunate that we aren’t seeing more meaningful innovation here.

        As for retailers and other laggard-ish businesses being culturally incapable of incorporating technology in a meaningful way, I have to agree. I like how you also comment on the complication and maintenance costs. It’s similar to a marketing problem that I face in my own business as well.

        I generally think that the issue is that tech often fails to demonstrate tangible benefits that will convincingly affect the bottom line. If we can put definite numbers into their financial spreadsheet forecasts, the decision will become a no-brainer. We need more examples that show tangible benefit.

        Because mobile is that much closer to the actual point-of-sale, I expect tangible benefits will be easier to demonstrate.

    2. My guess is that amazon believes that they are good enough with regards to their online presentation(an in some ways much better than competitors, i.e. review amount), and now the thing that will determine the sale are things like price, shipping, selection and the like ,and they put their efforts there.

      It also helps a lot that it’s relatively hard to copy such innovations from them, while relatively easy to copy a good presentation – so they focus on the hard part.

      1. I agree that Amazon might be thinking that their website and mobile app are good enough. Many other online retailers are similarly complacent.

        I also agree that they seem to think fulfillment is more important from a competitive standpoint.

        The question for me is, are these the right assumptions going forward? Is that what they need to be doing to capture customers who are currently prefer webrooming? I don’t think so.

        1. You’re right , webrooming is important.

          But with the two big reasons behind webrooming being the cost/time of shipping and time/hassle/expense of returns , the solutions all lie in the physical part of the business and not the online part.

          1. I’m not sure the two big reasons behind web rooming are cost/time of shipping and the return stuff.

            I was simply thinking that a lot of people want to actually examine the product in their hands before making their final decision. They also might want to consult with a real person. Also, for a lot of people, shopping itself is something to enjoy with friends or family.

            I would like some data on this, but unfortunately I don’t know of any.

            Based on my assumption though, I think online retailers would do better if they provided convenient access to real knowledgeable people (maybe through a chat application) and/or incorporated more multimedia presentation of the product.

          2. I think there is a huge amount of satisfaction in walking out of a store with the purchase in one’s hands. There is an experience in shopping that cannot be replicated online, just like recorded music can’t replace a live performance.

            And there is the interactive engagement aspect, much like how vinyl records are making a comeback due often to the nature of the physical act of playing a record, which is unlike any other way of playing recorded music.

            There is a large part of human nature that wants the excuse to get out of our chair and out of our house and go “do something” that physical shopping addresses.

            Joe

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