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Retail In The 2020s: The Death Of Consumerism?

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I spent the last two months diving deep into things I wrote in the last decade that have staying power into the next one. It’s time to consolidate and categorize those comments into the forces that will not just influence but outright shape the next decade in retail technology.  I’ve identified six forces. They follow something of a progression:

Consumers are becoming more mindful and sensitive to their environmental footprint, and consumerism is highly vulnerable to that sensitivity. I would even go so far as to say that in the next decade, retail sees a substantial shrinking of consumerism (Force #1).

It won’t quite be the full-on death of shopping – modern economies are built on specialization, and specialization is not possible without an efficient exchange of goods, which retailers enable. But it will shift consumer behavior from things like fast fashion to “heirloom-worthy” pieces, where consumers buy less but spend more per item because they intend to keep the items longer.

The first immediate implication of this consumer shift is that retailers will find, in the next decade, that they can’t build profitable businesses off of pure aggregation of demand and distribution of goods. They will need more.

Luckily, when consumers want to keep the items they own longer, it means there is more opportunity to provide services in support of that longer life (Force #2) – repair, maintenance, etc.

Also, because they’re spending more and caring more about what they buy, they put more effort and consideration into what they buy. This means retailers will also need to differentiate themselves based on their ability to match customer needs to the right products to begin with.

In order to position themselves to better meet these services needs, retailers will no longer be able to avoid the internal technology transformation that will be required to shift from being a product retailer to an end-to-end life solution provider. Services simply cannot be delivered without technology.

So, while I have been quoting Philip Krim shamelessly for the last few years, for the next retail decade, I would tweak the quote just a bit: yes, retail success in the next decade will be driven by those retailers who can deliver experiences, and those who cannot will find themselves wiped out in the backwash of the so-called retail apocalypse. But the retailers who figure out how to deliver experiences will do so because they have figured out how to transform their companies to be digital-first in everything they do (Force #3).

Experience requires vision and a deep understanding of consumers, but it is impossible to deliver at scale without technology.

One important aspect of experience is, once a buying decision is made, frictionlessly delivering the product into consumers’ hands. Retailers have been struggling in the last decade to get omnichannel right, but even the most sophisticated omnichannel retailers have not fully embraced what this means to their business.

For example, one of the top things retailers are concerned about right now in an omnichannel world is consistency in promotions across channels. They either want to preserve the ability to have channel-specific promotions, or they want to figure out how to have consistency in promotions across channels, even if consumers are buying products across channels. Can you still apply the buy-one-get-one promotion if one is cash and carry in the store and one is shipped to home from the online DC?

The reason channel-specific promotions exist is because up until very recently, the inventory residing in stores and the eCom DC could not be viewed as one pool of inventory. If inventory isn’t moving online, and you have no way of exposing that inventory to other sources of demand, your only choice is to offer an online-only promotion to help clear out the inventory that is stuck in the online channel.

But consider this: if you can expose that inventory anywhere, and get it there cost-effectively, then why do you need channel-specific promotions at all? The fact that these kinds of conversations are jolting to most retailers tells me that omnichannel is still far from mature – but we can make significant progress in the next decade towards “true” omnichannel, and it has the potential to reshape not just how supply chains work, but how retailers approach their brand strategies (Force #4).

Because retailers are going to have to rethink pretty much everything in order to ditch their channel-based thinking, they are also going to have to fundamentally rethink how their companies are organized (Force #5).

For example, while there is a lot of industry focus on whether there should be a “chief customer experience officer”, the real question is, who should report to this person? What would be their span of control?

If it is truly about the customer experience, shouldn’t the reporting structure include sales people on the floor of the store, the customer service reps in a call center, the Voice of the Customer analytics team, the visual merchandising team, the online merchandising team, the store design and refresh teams?

And shouldn’t there be a corresponding VP of Customer Experience Apps within the IT organization to support this person’s team? Think about how many existing organizations I just blew through in a first pass at this list. And it didn’t even include supply chain – because fulfillment would be a significant part of the customer experience too.

Finally, once retailers rethink their organizations, and honestly even before then because they can’t wait that long, the 20’s promise to bring a lot of store innovation (Force #6).

It’s time. The most aggressive retailers remodel their stores every five years, and most fall more in the 10-year range. That means that stores up for remodel now were last remodeled around 2010.

Very few retailers were doing ship from store at that time. Very few retailers saw so much shift in customer behavior that they were thinking about services becoming a central part of their business, let alone done any of the thinking on what that should mean in terms of store layout and design. Retailers are thinking about that now, though, and thinking hard.

2020 won’t be the year of the store of the future, but it will be the beginning of retailers’ exploration of that future in earnest.

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