1. The Science of Shopping
Old methods of consumer research such as intercepts, surveys, exit interviews and focus groups, are steadily giving way to a new wave of technologies and scientific approaches. Big data collection, anonymous video analytics, mobile ID tracking and even neuroscience are providing insights into subconscious consumer behavior in way never before possible. For example, German neurobiologists are mapping brain waves in response to product pricing and uncovering some highly counterintuitive insights into how the human brain perceives pricing and value. Retailers now have an unprecedented capacity to use technology and data to deliver intelligence, not about what consumers say they'll do, but about what they actually do! The call-out here for brands and retailers is that they should be diverting at least a portion of their research budget from traditional market research forms into these new bleeding edge methods and technologies.
2. The Shipping Moon Race
There is very little now that is not being bought and sold via the internet. Consumer acceptance of online commerce is clearly no longer the challenge faced by merchants. The new test however, has become the speed with which those goods can be shipped. In a few years, we’ve gone from shipping products in days to next- day to same-day with companies like eBay shipping in less than one hour. Now Amazon.com CEO Jeff Bezos is talking about the company's quest for 30-minute delivery - via flying drone! Regardless of whether drone delivery ever materializes, companies like Amazon, Google and eBay all clearly realize how critical speed is to their growth. So, in 2014 and beyond, look for them to begin broadening their testing of technologies like autonomous vehicles and robotics to shorten fulfillment times. In response, expect brick and mortar retailers to increasingly leverage their store networks as last-mile distribution centers in an effort to compete. Same-day fulfillment for most goods and same-hour delivery on many will soon be regarded as table stakes by shoppers. Anything less will feel like a return to the pony express.
Increasingly, stores will be infused with the same level of analytic intelligence that online marketplaces currently enjoy. Their knowledge of who is in the store; where they move in the space; and the products they interact with, will all be instantly and continually calculated. Hot and cold traffic zones of the store as well as the realtime performance of promotions, personnel and displays will be evaluated. Technologies such as video analytics, mobile ID tracking, and sensor networks will give the store a level of consciousness. Apple, Estimote and others have recently introduced bluetooth low energy (BLE) technology to the market that can sense (on an opt-in basis) who specifically is in the store. The technology also allows the retailer to deliver personalized messages and offers to those customers when they are precise locations within the retail space - down to a matter of inches. Steadily, our online and offline shopping preferences, histories and behaviors will meld seamlessly together. When we walk into a physical store, our browsing history will follow us and inform our physical shopping experience. The store and the people in it will know who we are and how best to serve us based on our unique tastes, preferences and purchase history.
4. Media = The Store The Store= Media
Media’s traditional role of Advertiser is shifting. Where the primary purpose of media has been to drive the consumer to retail distribution, it will increasingly be to sell to the consumer directly! For example, much of the Harpers Bazaar online magazine is now completely shop-able. Also, in 2013 Google launched shop-able branded video pages, where viewers can watch videos, learn about products, price compare and buy, all without leaving the video page. Over the next 2-3 years, we're expecting to see network TV shows build shop-ability into their programming. Thus, TV shows will generate revenue by selling products, not merely advertising them - offsetting declining demand for the 30 second commercial. The physical store, on the other hand, will increasingly be treated like a media channel as opposed to a distribution channel. The expectation of the store will be to deliver such an outstanding and memorable product and service experience that the shopper is left with a powerful inclination to buy from the brand across any number of channels. Retailers who are able to achieve this level of in-store experience are likely to forge new revenue models by charging brands an upfront rate to represent their products. Rather than relying solely on conventional in-store sales, which in all likelihood will continue to decline in the face of increasing online penetration, retailers will in essence become a media channel for brands and charge them accordingly.
5. The New Industrial Revolution
25% of working Americans are on some form of government assistance. When you examine the fast-food industry however, that figure more than doubles to 52%. US Fast Food workers are protesting to get minimum wage raised to $15.00. Perhaps most incredible is the fact that if minimum wage had kept up with inflation, it would be somewhere above $16.00 per hour. The reality is that any increase in wages that even approached this level would put a company like McDonalds out of business. And so, they and others like Walmart find themselves in the untenable position of not being able to pay more but also not able to sustain the barrage of bad PR this is causing. This puts low paying brands in a position where increased automation of human service tasks is likely the only way out. The first wave of such automation has already begun, with McDonalds Europe installing 7,000 touch-screens in 2011 and Walmart rolling out both 10,000 self checkout systems and an expanded test of its Scan and Go mobile app in 2013. Look to companies broadening automation to include food and beverage preparation, merchandising, sales, customer service and other more skilled positions.
2013 was a year of clear steps toward blurring the lines between online and offline commerce. eBay for example launched what it calls "digital storefronts" in both New York and San Francisco, bringing a wholly digital shopping experience to the physical world. Consumers can shop, order and pay for goods, which are delivered locally within an hour. Not only do these installations add an element of surprise and variety for shoppers but they also allow brands to set up shop in opportune and often less conventional locations. They need no inventory and apart from periodic technical support, they require no staffing. They're also a boon for mall owners, allowing for quick temporary storefronts during store build-outs or renovations and the ability to lease small, awkward spaces that aren't suitable for full, physical stores. Expect many more of these sorts of phygital concepts in the coming year.
Our lives are inextricably connected to the online world. Yet, in the post Edward Snowden era, we are also awakened to the fact that our digital behavior is an open book. This tension is fuelling a burgeoning new industry aimed at giving individuals privacy and data security (for a price); something that online services will not provide them for free. Personal VPN’s, super-encryption services and anonymizing browsers are turning into big business, courtesy of our fear of big brother.
8. Access = The New Ownership
Stagnation of middle-incomes and a hollowing out of the labor force into low/high-paying occupations will cause a decline in ownership of many things which today we take for granted. Furthermore, the economic and social fallout of 2008 has prompted many to reconsider their attitude toward the accumulation of material goods. Ownership is increasingly being eschewed in favor of living light and accessing what one needs, only as one needs it. At the same time, the pervasiveness of online networks will allow people to connect more easily to share items. Cars, homes, household items and appliances, vacation homes etc. will increasingly be shared. For retailers, this new sharing economy clearly presents a frightening prospect. However, astute brands will acknowledge the trend by creating marketplaces for their own products, moving from pure ownership models to rental or even sharing models to promote brand awareness.
9. Crowd-Cred At The Shelf
As shoppers, we’re becoming increasingly dependent on stars, pins, likes or other forms of social validation before making a decision about a particular product or service. The need to see aggregate social feedback is now an embedded dimension in the shoppers decision process. The inherent lack of such feedback in the physical retail world is one of the key reasons shoppers turn to their mobile devices while shopping. That's set to change. In 2013, Nordstrom experimented with displaying specific items that are “Popular on Pinterest”. Expect to see more including real-time tweets, likes, reviews and photos being brought directly to the shelf, hanger or in-store display.
Online merchants like Amazon as well as airlines and hotel chains have been known to change their pricing multiple times per hour. This ability for online stores to manipulate price amounts to a significant advantage over brick and mortar rivals but that's about to change.
In 2013, U.K. retailer B&Q began testing dynamic pricing on the shelves of their stores. Using digital price tags, prices were adjusted multiple times per day based on data inputs such as store traffic levels and customer loyalty. In 2014, look for other retailers to test dynamic pricing in their stores. Also, expect to see incorporation of other data such as weather, competitive pricing and even items already in the customer's shopping cart. All of this will impact - in real time - the price paid.
Retail Prophet Founder Doug Stephens is one of the world’s foremost retail industry futurists. His intellectual work and thinking have influenced many of North America’s best-known retailers, agencies and brands including Walmart, Home Depot, Disney, Microsoft, WestJet, Citibank, Razorfish and Air Miles.Prior to founding Retail Prophet, Doug spent over 20 years in the retail industry, holding senior international roles including the leadership of one of New York City’s most historic retail chains.Doug is the author of the groundbreaking book, The Retail Revival: Re-Imagining Business for the New Age of Consumerism. He is also the consumer technology contributor on the acclaimed international television series App Central, as well as the retail contributor for CBC Radio. Doug also co-hosts the popular web series, The Future In Store and sits on the advisory board of the Dx3 Digital Conference.He speaks regularly to major brands and organizations across North and South America, Europe and Australia.