The end of the one stop shop

Its a weird time in retail right now. Maplin is closing down, Homebase has been sold, Marks & Spencer are closing stores, and Tesco is shutting down Tesco Direct. What they all have in common is that they all try to be one-stop-shops for the section of the market they operate in. Maybe that’s a bad idea. Maybe it’s no longer what the customer wants. Maybe this kind of big retail operation has had it’s day.

Perhaps the poor economy, the driving force behind these changes to the retail landscape, will force the bigger players to relinquish their hold on each of their markets at the same time that new technologies and digital capabilities enable more smaller retailers to fill the gaps.

The state of the economy doesn’t make it any easier for smaller retailers, but if the idea of being a one-stop-shop, using a centralised operations model and a market-domination-by-being-the-biggest approach has lead to the downfall of the big retailers, then that’s a useful lesson for small retailers.

With growth in the number of stores and people comes increased complexity and the need for more people and more systems to manage that complexity, and with complexity comes cost. Maybe it’s better to accept ten per cent profits on a million pounds a year turnover than one per cent profit on a ten million pounds a year turnover.

Perhaps out of these weird times a multitude of small, more specialist, retailers will have the opportunity to take the place of the likes of Maplin, and rather than trying to be a one-stop-shop where you can get everything they will focus on more specific product ranges and more expert service.

The not-so distant future of digital retail innovations

After a few recent discussions around what the future of retail might look like, here’s some future gazing of my own.

Better data sharing leads to greater personalisation

Over the last few years retailers have been working on getting their customer data out of its channel silos to attempt to create a single view of the customer. In the future they will realise that their data is far more valuable if it’s blended with other retailers shopping behaviour data, location tracking data, market research, etc., etc. Big data becomes Huge Data when all of these massive data sets can be joined together and analysed to reach an understanding of an individual to the extent where their needs, motivations and behaviours can be predicted with a practically applicable degree of accuracy.

How might huge data and hyper-personalisation affect the customer?

Personalisation will grow exponentially with every single little detail of every interaction with a business being tailored to each individual customer. The retailers will know what a customer needs, when they need it, and who they are most likely to buy if from before the customer does, and their marketing will lead customers along the happy path to purchase so smoothly they’ll hardly even notice they clicked the buy button. Shopping will become so deeply embedded into life that the idea of ‘going shopping’ will be like going out to the well to get a bucket of water. We don’t do that anymore, we just turn on the tap when we need water and it’s there.

Personalisation won’t just be for the customer, it will be for the business too. It will become a means of connecting with their customers. It won’t be ‘your order is processing’, it will be ‘Alfred is picking your order right now, would you like to watch a live video?’

Artificial intelligence will revolutionise anything that requires thinking

Customer service, merchandising, logistics, finance, in fact every aspect of business can and will be affected by Artificial Intelligence. For a time, AI will be a competitive advantage for those first-mover companies that figure out how to implement it effectively, but the speed of change means that it won’t be long until even the smallest business is powered by AI as much as it’s powered by electricity.

How might AI affect the customer?

The use of AI to take over many of the unpleasant, dangerous, and boring jobs the humans currently do is driving the argument for universal basic income, which would have a massive impact on spending habits in the future.

But even before we get to live in a society where robots do our work for us AI will have a massive, and for the most part, unseen impact on the life of the shopper. Artificial intelligent customer service systems will deal with every customer contact in real time, even being aware of issues before the customer is and only contacting them to tell them that the issue has been resolved. AI customer service will be able to make commercial sound decisions about things like how much discount to offer an individual customer based on their predicted lifetime value and demonstrate with absolute certainty the value to the business of good customer service. AI, and even more so AI utilising huge amounts of data from lots of sources, will make vastly better decisions about all aspects of business because it will understand the far reaching impact a decision will have in a complex system. It will be able to balance the sales that result from stock availability, the costs of distributing the stock, staff availability, customer behaviour patterns, weather, local events that might affect traffic to a shop, etc., etc., to maximize the cost-effectiveness of the business.

Connecting identity to payment will streamline checkout

Traditionally, retail has always regarded ‘who the customer is’ as completely separate from ‘how the customer pays’. This will change as huge data personalisation and AI progresses and customer expectations become more about having a streamlined end-to-end shopping experience that optimises the payment process.

How might streamlining checkout affect the customer?

Clothing shops position their tills to the sides to encourage browsing behaviour, whilst supermarkets line up their tills at the front of the store to make checking out as efficient as possible, and both still struggle to manage queues of people try to give them money. In stores future checkout innovations might be pin entry devices built into baskets that scan items as the customer puts them into the basket, and then the customer simply enters their payment card pin to checkout, or customers having an app on their phone that allows them to walk out the door of the shop with a bag full of items knowing the app will charge their bank account (think the next evolution of Amazon Go).

Online, taking payment could be done using behavioural logic to make educated guesses about whether you are who you say you are. So if you’re making a purchase using a device registered to you, from a location you’ve been to lots of times before, the item is in your size, and it’s being delivered to your work address then the payment system would use statistical modeling to decide if you are who you say you are and then not need you to enter your payment card details in order to complete your purchase.

The decentralization of manufacturing changes economic and distribution models

The use of low cost 3D printing will drive manufacturing into local hubs that can produce products that previously had to be mass produced in the Far East. This will have a massive effect on local economies, the environment, and on the speed at which retailers can launch new products and resupply.

How might 3D printing affect the customer?

Customers will find themselves facing a massive increase in the number of items available and those products will be increasingly made to measure for each individual. Clothing won’t be made in size small, medium and large, it will be made to the measurements the customer specifies. Any and every design of wallpaper, bedding, and wrapping paper will be available. Every possible colour of car, laptop, and inflatable drinks holder will be available. People will purchase products unique to themselves, and retailers will become even more about inspiration and trend-setting to encourage people to purchase with them.

The internet everywhere leads to a mindset of connectivity

Our device-oriented thinking will be replaced with an acceptance that the internet connects all aspects of our lives together. Rather than thinking of our phones as one type of device for doing a certain kind of thing on the internet, IoT devices for a another use, wearables for doing something different, we’ll live in a world where all of these devices will be instantly and always connected and sharing data so that your fridge knows when your going on a holiday that you booked on your phone and adjusts your grocery shopping list accordingly.

How might a mindset of connectivity affect the customer?

This connective mindset will be empowered by the technological changes that in turns drives a behavioural change with people becoming more integrated with the digital systems in their lives, including the heating of their homes responding to the weather, the sat nav in their cars telling them to reduce their speed to allow traffic jams ahead to clear, and retailers having more data about people’s lives to power their AI and personalisation. The internet everywhere will change people’s lives without them really realising it.

Ten things John Lewis have learned about mobile shopping

John Lewis has been trading for 153 years, online for 15 years, and on mobile for 6 years. Here are Tom Rooney’s “Ten things we’ve learned about mobile shopping”:

1. Modern shopping journeys are increasingly complex

  • Customers go through the Research stage to the Purchase stage to the Fulfilment stage but the spaghetti of journey options means that there is no usual journey.

2.Customers love to tell us how they like to shop

  • Don’t need to envisage every journey.
  • Guerilla testing works great.

3. It’s all about the smart phone

  • Last Christmas mobile became the main way for customers to shop online.

4. Smartphones are not the same as tablets (yet)

  • Different sizes drives different behaviour.
  • But phones are getting bigger.
  • Phones early in the day, desktop in middle of the day, tablets in the evening.
  • Tablet use is declining, behaviour shifting to phone.

5. The product page is the new homepage

  • Journeys are less linear than before.
  • 30% of journeys start on product page.
  • Proposition and brand must come across well.
  • Home page is an important anchor that must still be available for customers.

6. Apps offer different opportunities to a website

  • Loyal customers love the app.
  • Features like barcode scanner and digital receipts offer something that the website can’t.
  • Apps are highest converting.
  • Apps used to enhance in store experience.
  • Apps need to have a purchase journey.
  • Journey needs to be slick.

7. Don’t forget your shop floor colleagues

  • It’s hard for shop colleagues to keep up with customers technology.
  • Solutions aren’t entirely digital. E.g. How devices are carried.
  • Encouraging discussion with customers goes along way.
  • Leveling the playing field between customers tech and staff tech is important.

8. Understand and respect your foundations

  • New tech makes new demands of old.
  • This has made building the future tricky.
  • The things we want to build always seem to be the most difficult.

9. Avoid solutions without problems and learn to say no

  • There’s lots of weird and wonderful technology out there.
  • Understand opportunities vs expectations.
  • Listen to your customers and work on what they want.

10. We’re not done yet

  • There’s a smart everything.
  • There will be new ways to shop.
  • The products themselves could directly contribute to the shopping ecosystems.