Designing the future of retail
Experiential, embracing omni-channel strategies with Web3 technologies.
The Covid-19 pandemic has changed the operating environment for retailers. These impacts may last a while with inflation but have certainly paved a new way to retail experiences.
- Politics — Policies to facilitate business continuity for essential goods and services. This means ensuring diversified sources of food and necessities.
- Economy — Keeping goods affordable given increasing unemployment and inflation.
- Social — Increased awareness on mental health and creating avenues for socialising especially among the weak and vulnerable.
- Technology — Rapid development of technologies to support remote work and contactless terminals (payments, check-ins etc).
- Legal — Revising legislations such as remote witnessing of signing of contracts and legal documents, employment methods etc.
- Environmental — Continuing efforts to ensure environmental safety given that climate change remains the next big challenge in Retail.
01 | Signals & Insights
Here are signals of possible changes that could impact the future of retail.
Signal #1: Best Buy tests limited stock-keeping units (SKUs) on the store floor to make space for fulfilment
The intent is to better utilise space and cater for items that are more popular, allowing space for pickup and ship from store. This caters to the boom in e-commerce post-pandemic.
Store-centric fulfilment is beginning to look like the mainstay of retail earnings to complement omni-channel strategies and digital channel strategies. The move will provide space for items that are typically sold online and would not usually appear on the retail floor, further enhancing fulfilment capabilities.
It signals a shift in catering to increased e-commerce demands to ship from store. It also shows that future design of retail space would be placing emphasis on accessibility with warehouses adjacent to the curb-side areas.
Workers will also be cross-trained to perform tasks outside their primary job function, from staffing departments to making deliveries. When it was launched, Best Buy dedicated 450 store associates to assist customers, and training more than 5,000 staff to assist with online queries so they can assist during the holiday season.
Signal #2: H&M appoints former sustainability manager as Chief Executive
Fast fashion giant H&M appointed Ms Helena Helmersson, as its CEO in 2020. She was in the sustainability team and their first sustainability professional having also worked as its Global Head of Production and Chief Operating Officer.
H&M pledged to be 100% circular and renewable by 2030 though it remains to be seen whether the fashion giant can diversify its business given that it already produces more than a billion garments a year. Will garment recycling technologies be able to swiftly support their envisioned circularity by 2030?
One thing for sure, such leadership appointment emphasise the importance retailers have placed on sustainability efforts.
Signal #3: Retailers design for virtual customer journeys
Use of tech like Augmented Reality (AR) and Virtual Reality (VR) have become more widely used by retailers who wish to create a more immersive shopping experience. They are making inroads with retailers using innovations such as the virtual dressing room.
Retailers like Walmart, and Amazon, allow customers to try on clothes virtually using digital representations of themselves or an Avatar. These digital fitting rooms or mirrors reflect a shift towards customer engagement where customers can curate selections before adding to cart.
Companies like Ikea have used AR to enable potential customers to visualise their furniture at home. As customers seek more immersive ways to shop at their convenience, we can expect more retailers to invest in advancing such technologies.
02 | Drivers
The future does not exist in a vacuum. These are drivers of change that could help us identify future areas of transformation and be ahead of competitors.
Driver #1: Pandemic fast-forwarded retailers’ omni-channel strategies
The Covid-19 pandemic saw the shutdown of brick-and-mortar retail worldwide, from dining to service providers like gyms and salons.
It accelerated omni-channel adoption plans (which was already a trend in Retail), by leveraging on multiple customer touchpoints which have become critical to connect with consumers despite shutdowns and social distancing measures. 45% of respondents surveyed (by Square and Atlantic Brand Partners) have added new channels to their businesses during the pandemic, of which 80% shared that they planned to keep them integrated with the rest of their business.
Smaller retailers have also turned to partners with ready-to-use platforms to obtain the necessary access to payment and transportation facilities (like Lazada, Shopee, Q-Express etc). Partnerships with specialised providers are now presenting a viable alternative.
A successful omni-channel strategy is holistic. It is about providing access to platforms for customers to choose from, providing consistent information seamlessly across the channels, and allowing for personalisation to the customers’ preference. It is about understanding behaviour and using data to keep customers engaged.
Driver #2: Hype and potential of Web3
New technologies are disrupting retailers frequently. One such example is Blockchain which is already making headway. In a report by Deloitte, 86% believe Blockchain will transform their business and 77% believe they could lose their edge if they do not adopt such technologies.
In the same breath, Web3 brings a new set of possibilities for brands, retailers, and consumers. Web3 is an umbrella term for the decentralised web built on P2P networks where users are in control of their data and identity and can trade with each other instead of a company or even bank. Web3 technologies like Decentralised Finance (DeFi) and Non-Fungible Tokens (NFTs) have gained traction in the mainstream.
Retailers leveraging on Web3 can:
- Provide customers have control and privacy of their data
- Connect to customers directly
- Create ultra-personalised shopping experiences
- Provide transparent on their upstream processes
- Redesign customer reward systems for those who share their purchases with others
- Offer customers different payment schemes or models
Driver #3: Future of Sustainability from Retailers and their upstream processes
A survey by McKinsey & Company in April 2020 revealed that 57% of consumers have made significant changes to their lifestyles to lessen their environmental impact, and that more than 60% are going out of their way to recycle and purchase products in environmentally friendly packaging.
This comes as no surprise as consumers are more educated about what goes behind the scenes for their purchases and its impact to the environment. With this they have begun to exercise caution in their choices, with 67% of those surveyed indicating that they will consider the use of sustainability materials as an important purchasing factor.
In April 2022, 16 of the world’s largest fast-moving consumer goods companies (FMCGs) like Danone, Mars, Nestle, PepsiCo, and Unilever, published a paper on chemical recycling of plastic waste. This paper signals the increasing importance placed on environmental impacts of manufacturing and recycling processes.
Retailers should address the upstream production and consumption of materials like plastics as well as impact of their supply chains to make a real impact on their sustainability efforts. This means studying technologies and processes that they could scale upstream and invest in these technologies.
03 | My Forecasted Future for Retail
So what can the future of retail look like in 2032?
Access to personalised shopping anywhere, instantly.
Customers can buy anything they want instantly.
- See someone with something you want?
- Snap a picture with your smart eyewear or device and be informed of a list of retailers in the area that sell the exact item.
- You decide which store to buy from, when and where you will like it delivered.
Retail spaces are redesigned into experience centres.
Retailers with brick-and-mortar stores will be transformed into experiential spaces.
- Customers can experience the use of the products and purchase it directly through smart devices enabled by Web3 technologies. These devices are delivered immediately to them.
- Fast fashion retailers like H&M can delve into the Digital Fashion market and tap on Web3 tech to enable purchases.
- Stores with digital mannequins display items you would like or suit uou based on your stored preferences, letting you know where to get the items you are most likely to enjoy.
Increased investment in omni-channels with shared upstream ecosystems.
Retailers will have established direct B2B and B2C platforms to deal with third-part sellers.
- Retailers can use data to expand into related businesses so they can diversify their portfolio since they have established shared ecosystems.
- Retailers and brands will know how popular their goods are moving and can anticipate how much more they will need to produce.
- With shared data, they can keep inventory optimised without overproducing products or stretching resources required for production. Good for retailers, great for the environment.
References:
Banerjee, A., Byrne, R., Bode, I.D. & Higginson, M. (20022, September 26). “Web3 beyond the hype”. Retrieved from https://www.mckinsey.com/industries/financial-services/our-insights/web3-beyond-the-hype
Brown, S. (2022, August 23). “4 visions for the future of retail”. Retrieved from https://mitsloan.mit.edu/ideas-made-to-matter/4-visions-future-retail#:~:text=The%20future%20of%20retail%20includes,some%20of%20the%20company's%20stores
Edie (2020, January 31). “H&M appoints former sustainability manager as chief executive”. Retrieved from https://www.edie.net/hm-appoints-former-sustainability-manager-as-chief-executive/
Granskog, A. Lee, L. Magnus, K. & Sawers, C. (2020, July 17). “Survey: Consumer sentiment on sustainability in fashion”. Retrieved from https://www.mckinsey.com/industries/retail/our-insights/survey-consumer-sentiment-on-sustainability-in-fashion
Kapadia, S. (2020, November 25). “Best Buy tests limited SKUs on store floor to make space for fulfillment”. Retrieved from https://www.supplychaindive.com/news/best-buy-limit-SKU-store-centric-fullfillment-ship/589697/
Oliver Wynman (2018). “Retail’s Revolution”. Retrieved from https://www.oliverwyman.com/content/dam/oliver-wyman/v2/publications/2018/april/Retails-Revolution-onscreen-version.pdf
Paudel, S. (2022, April 17). “World’s largest consumer goods companies agree on a set of principles for plastic chemical recycling”. Retrieved from https://www.thefuturescentre.org/signal/worlds-largest-consumer-goods-companies-agree-on-a-set-of-principles-for-plastic-chemical-recycling/
Pilgrim, C. (2022, March 10). “How Web3 is Transforming the Future of Brands And Retail”. Retrieved from https://www.linkedin.com/pulse/how-web3-transforming-future-brands-retail-claudia-pilgrim-icp-mkg
Triendl, D. (2022). “How the Pandemic Has Supercharged Omnichannel Growth”. Retrieved from https://www.theatlantic.com/sponsored/square-2021/omnichannel-growth/3688/
Wassel, B. (2020, December 1). “Best Buy Pilot Shrinks Sales Floors in Favor of Fulfillment”. Retrieved from https://www.retailtouchpoints.com/topics/omnichannel-alignment/best-buy-pilot-shrinks-sales-floors-in-favor-of-fulfillment
