The Future of Retail

BY BRENDAN CHRISTIE

What factors will have the greatest influence on the retail landscape in the next five to ten years? Our panel of experts weigh in.

Generation Alpha. Fifteen-minute cities. AI and the metaverse. There’s no shortage of factors that will influence the retail landscape over the next decade. So, to help anticipate what’s coming, we turned to the experts to find out what they’re keeping a particularly close eye on – the issues at the top of their list.

Of course, we took some issues as a given: Consider sustainability and the environment, for example. Or social justice. Those are marketwide, fundamental concerns every brand needs to consider. Research says that 66% of consumers actively consider a brand’s stated or perceived position on social, environmental and political issues prior to purchase. In fact, evidence suggests that today’s consumers are four to six times more likely to purchase from, protect and advocate for brands that demonstrate a clear sense of purpose. So, those are issues that retailers need to be well into considering already – not in future.

We wanted to hear about all the other things, some unprecedented, that may change the face of retail. And there were some surprises.

The Future Of Loyalty

With the cost of living at an all-time high, consumer loyalty is more fickle than ever. Brands must tap into new strategies – from inviting their consumers to become brand stakeholders to fostering new forms of ownership – to keep their customers close in an era of price over image. With fear remaining a significant driver behind consumer decisions, methods of appeasing guilt and worry around overspending and carbon footprints are quickly gaining traction, such as splitting costs and ownership with others. It will be important to explore new co-ownership and circular models to win customer loyalty in the coming years.

EXPERIENTIAL E-COMMERCE

With advanced digital tools and platforms at their disposal, many companies are investing in Web3 to achieve new levels of consumer interactivity. However, brands also have the choice to take inspiration from the metaverse’s more surreal approach to online shopping. Alongside virtual stores, AR fitting rooms and meta-commerce, online shopping experiences are increasingly exploring the boundaries of entertainment, gamification and technology to boost engagement and drive sales. These advancements present new opportunities for e-commerce, which has traditionally prioritized streamlined user experiences.

Doug Stephens, Founder and CEO, Retail Prophet, says it will be all about the experience.

AI + HUMAN CREATIVITY

From the frontlines of customer service to the murky tentacles of supply chains, AI will help retail businesses achieve extraordinary levels of efficiency. A significant percentage of the human effort that goes into day-to-day problem solving, scenario planning and decision making in many organizations will be transferred to various forms of AI across the value chain. The labour savings for most companies will be historic.

Some companies will simply drop these savings to their bottom lines. Smart companies will reinvest them in the one thing that AI can’t yet do: imagine, conceive and develop original and innovative ideas. While AI is a wonderful tool for convergent thinking and problem solving, it can’t conceive of things that don’t currently exist. This matters because truly innovative companies have more than twice the future earning potential when compared with their less innovative rivals.

The winners in the AI arms race will be those that invest early and wisely in optimizing the potential benefits of AI, while also becoming a lightning rod for the best, brightest and most creative humans.

Getting Innovative

Upon opening its House of Innovation stores, NIKE soon recognized that shoppers who spent time in one of these outlets and who later shopped online purchased 30 percent more than shoppers who did not have a NIKE store experience. Similarly, in their smaller format Nike Local stores, a focus on local running and fitness clubs yielded club membership sign-up rates six times greater than any other Nike stores. Both of these results suggest that a focused and well executed physical store experience actually has a powerful media effect and direct influence on consumer behaviour.

Media Is The Store And Stores Are Media

For centuries, media, in the form of advertising, was used as a tool to drive consumers to a point of distribution which, until more recently, was almost always a physical store. Today, this flow is reversing. Retail is atomizing into just about every form of media, be it a TikTok post, Instagram video or YouTube channel. Media is no longer just a callout to visit a store, but is literally becoming the store, as consumers become increasingly engaged with online media and are willing to buy directly from it.

This doesn’t make physical stores redundant, but it does alter their fundamental purpose and value. Smart retailers today regard their physical stores as a powerful and engaging media channel that can be used to draw consumers into the brand ecosystem. Stores today are increasingly doubling as brand clubhouses, brand cathedrals, event stages and content studios as they vie to attract a new generation of consumers.

Therefore, while media in every form today is becoming “the store,” visionary retailers are leveraging their physical stores as the most powerful, manageable and cost-effective media channel they own. In other words, rent is the new cost of customer acquisition.

Creating Experiences

New York City-based toy retailer CAMP has created such immersive and entertaining experiences in their stores that, in many cases, consumers are paying an admission to just take part in them. In fact, powerhouse brands from Disney to Nike have recently engaged CAMP to mount branded experiences in their retail stores. In essence, the experience at CAMP has become the product.

The Experience Is The Product

We live in the age of peak product. Amazon, for example, offers more than 500 million products, the vast majority of which can be on the consumer’s doorstep in a day or two. And Amazon is only one Goliath in a market saturated with buying options. The brutal reality today is that for most retailers, product, price and promotion are no longer stable footholds from which to compete.

Ultimately, the only remaining distinction between one retailer and another is the customer experience. Put a different way, in the age of unmitigated consumer choice, the experience of buying the product has become the product itself. A growing number of enlightened brands, therefore, are putting every aspect of the customer’s journey under the microscope to ensure that each consumer/brand interaction is not merely acceptable but delightful, memorable and worth talking about. Retailers who fail to observe this trend do so at their peril.