The ultimate age of retail
Retail innovation cycles last approximately 20 years. As we take a look at retail history, this cycle becomes self-evident. From the general store to department stores to discount stores and so forth, each variety has their day in the sun as the leading channel for most purchases. Today, we’re lucky enough to be living within two powerful cycles simultaneously. But the fun will soon come to an end.
In early December, I was engaged on my annual “slash & grab” Christmas shopping excursion. It’s the one day of the year where I aggressively visit a variety of stores and web sites to take care of my giving list for the season.
One of the items on my list was cordless headphones for our stereo. I went to Best Buy and found a pair of Sony headphones. The price was $99. That felt really high to me. With my smartphone, I scanned the UPC on the box and quickly found that Amazon.com sold the exact same item for $59. To add to my bonanza, no sales tax would be added to my online purchase and as an Amazon Prime member, shipping would be free. So in effect the price difference was actually $110 vs $59. No contest. The sad reality was that without putting them on my head in the store or being able to carefully study the box, I might not have bought them at all.
Of course, my behavior has a new name within retail circles -- showrooming. Now, I recognize that Best Buy was willing to match the online price at the store. And I wish I had taken this path to see how it worked for me. But this effort on their part doesn’t answer the larger question.
The larger question being…how long can this continue?
My ability to visit well-apportioned, visibly-appealing showrooms while testing, sampling, and otherwise evaluating products in a comfortable environment, then quickly touch a few buttons on my iPhone to purchase the items I want from the cheapest option my phone can find demonstrates true retail bliss for the consumer.
Clearly both e-commerce and brick-and-mortar infrastructures can’t continue like this forever. One can’t operate long term at a loss while the other attempts to maximize its margins.
In retail, at least since World War II, we’ve seen 20-year cycles of innovation. The first twenty years after the war saw huge growth in department stores and chain store brands. The 70’s and 80’s saw the rise of discount merchandising. From 1990 – 2010, the big box retailers have ruled the merchandise universe. Of course, this phenomenon has overlapped with the Internet and e-commerce -- creating what I call the Ultimate Age of Retail.
These two systems have both captured our imagination and our wallets. But very soon, both systems will need to find their respective niches. As product lines like music, software, and movies cease being available in a physical store, neither will the UPS man deliver 50-pound bags of dog food to your door. These are the obvious examples. But expect to see many other product lines become primarily purchased in a more standard common-sense way, even as the number of ways we purchase products multiplies.
I know all of industry hype surrounding the power of the consumer and how they will each dictate individually how they want to purchase products and services. Much of this hype comes from me! But at the end of day, economics and the power of the dollar ultimately win out --pushing consumers to the most efficient approach.
Allow me to provide a certain future state scenario. Once ninety percent of shoppers own and use a smartphone, will retailers continue spend significant capital to build 20-plus cash registers at a venue to expedite shopper purchases? What if the remaining ten percent of shoppers want to check out the old fashion way? How will retailers accommodate them? At what point will this accommodation no longer be supported? Will shoppers need to download a retailer’s specific smartphone application in order to transact purchases? What if they have no desire to do this? Will retailers basically force all of their shoppers to become “members” to buy their goods?
I’m not sure what the future holds. What I do know is that the retailing industry is entering into a transformation similar to the one that the music and newspaper industries have been experiencing over the past ten years.
Expect to see significant changes in the non-sustainable golden age of retail starting about 2016, which is approximately 20 years after e-commerce became a valid option for consumers.
By this time, the retail industry (that includes both online and brick & mortar) will find the right approaches in selling and supporting each relevant category. Until then, enjoy that showroom.
Michael Hiatt is the president of Dynamic Retailing, LLC—a retail consultancy focused on helping both retailers and service providers maximize their customer-facing technologies to improve and enhance the shopping experience. He can be reached at Michael@Dynamic-Retailing.com.