GDR CEO Kate Ancketill reflects on the dramatic shifts that are defining the next generation of retail.
If we look at the world as it currently is, retail is at an inflection point globally. Technological, economic and social change has made once dominant models vulnerable to disruption.
We all know how much our lives have changed in the last 15 years as a result of tech companies like Amazon, Tinder, Uber, Netflix, Spotify, Facebook, Wikipedia, Venmo, Square Cash etc, but it’s easy to forget that in a previous era retailers were the big disruptors, throwing main street retail into a tailspin and changing the nature of our cities.
Retail has always redefined itself to fit customer experience around the realities of customers’ lives. The ubiquity of the motor car in the early 1960’s allowed Carrefour to open the world’s first hypermarket just outside Paris in 1963, a move that changed retail everywhere and signalled the shift from daily local shopping to big box out-of-town and under-one-roof mall-based retail. This 40-year period was the era when today’s legacy retailers came of age.
To the mom and pop stores of the time this must have felt cataclysmic. Sound familiar?
What’s happening now isn’t ‘Retail Apocalypse’ – it’s just another momentous shift. Retail is being redefined. As Andy Dunn, founder of Bonobos says: “We are in the first decade of a century-long shift where retail is re-organising from the era of the automobile (the 20th century) to the era of the smartphone (the 21st century).”
Almost all population growth from 2017 to 2023 will take place in cities; an extra 1.1 billion urbanites. City dwellers are more concerned about smartphone ownership than car ownership. Our cities are evolving to focus more on the mobile, less on the car.
So what does this mean for retail?
No-one has a crystal ball, but we at GDR think it’s a good bet to look at what’s happening in China to get an idea of the trajectory the West is on.
Their enormous and fast growing consumer economy is built around the smartphone to an extent we see nowhere else on earth, with 75% of online commerce going through mobile, which compares with only 21% in the US. Jack Ma of Alibaba and Pony Ma of Tencent are also pertinent here. They both want to reinvent retail and the competitive arena they’re in has an unprecedented momentum for innovation. Jack Ma says: “Pure e-commerce will be reduced to a traditional business and replaced by the concept of New Retail ― the integration of online, offline, logistics and data across a single value chain.”
Carrefour has done a deal with Tencent in China, and is no doubt using the Chinese retail petri dish of unfettered experimentation to determine what works. It seems logical they’re likely to then export what they’ve learned back to the West.
Tencent and JD.com’s 7Fresh grocery stores and Alibaba’s Hippo Fresh (formerly Hema Fresh) grocery stores are currently the apotheosis of retail at the very cutting edge. They offer the very best in seamlessness and online/offline integration, with the theatre and excitement of the best that the experiential physical space can offer.
It’s becoming commonplace in China that a physical store will optimise its inventory based on what’s trending on its website in a five mile radius. Unstaffed stores where you enter, pay and exit using only an app on your smartphone are proliferating apace. While a number of Amazon Go stores already exist in the US, we expect to see unstaffed stores really take off in the West in the next couple of years.
Alibaba and Tencent are busy signing deals and making alliances with all sorts of Western brands and retailers, from Uber (Tencent) to Auchan (Alibaba). We can only assume we’ll see some exported innovation changing our landscape soon.
The West’s response
This isn’t to say our home-grown retail giants aren’t furiously (and often successfully) experimenting with their own interpretations of what Alibaba calls ‘New Retail’. Walmart has been particularly active in fragmenting its offer to reflect its increasingly diffuse customer base. From Bossa Nova robots checking shelves, to its new fuel and convenience formats, automated click-and-collect drive thrus and home smart lock integration, it’s also throwing serious time and money at retail reinvention, as are many others.
If you’re on the rollercoaster, great. If not, you need to get on it and start experimenting with entirely new retail models, not just tweaks to what exists today.