The retail sector has always been slow to innovate, but is now catching up with social and technological trends. A younger generation of shoppers with different expectations, a higher comfort level with technology, and a smartphone in every pocket has moved retailers, grocers, and other innovators to re-invent retail.
This fundamental industry re-tooling should not be mistaken for a retail apocalypse. Although certain retailers have faced headline-grabbing closings and bankruptcies, the real issue is a combination of changing shopping patterns, and a failure of some retailers to adapt.
Will we see more big shopping malls and massive superstores? Probably not – millennial shoppers aren't interested. Smaller format stores, more online shopping, automation innovations, and AI-driven convenience are driving the future of retail.
Brick-and-mortar stores where buyers have to wait in line to pay will be as obsolete as rotary phones. Stores of the future will be a hybrid experience of smartphone-driven convenience, automation, an enhanced customer experience, and behind-the-scenes improvements.
Below are five trends that are emerging and shaping the future of how the world shops.
Amazon, the 800-pound gorilla, enters physical retail. The biggest new players in the retail and grocery business are not going to be traditional retail players. Instead, they will be innovators with more experience in technology and automation than in actually stacking things on shelves and selling them.
Expect a hybrid player to emerge, where tech giants like Amazon pair up with traditional retailers – as in Amazon's acquisition of grocery retailer Whole Foods – or experienced sellers take on a more tech-focused approach with new levels of expertise, like Kroger with their "Scan Bag Go" pilot.
Partnerships and acquisitions are playing a major role in retail. Wal-Mart's $3.3 billion purchase of e-commerce startup Jet.com has been an overwhelming success, giving the massive store chain a firmer footprint in the online world. Other partnerships are geared towards convenience, such as alliances between major hotel brands and retailers. Virgin Hotels' collaboration with Gap Inc. allows guests to order online from Gap stores and have items delivered to their hotel rooms the same day.
AI-enabled retail automation. Lower costs of retail automation technology, including Artificial Intelligence and computer vision will open doors to small- and mid-size retailers. Amazon may have started this with its highly-publicized Amazon Go store, but like all technology, the barriers to entry break down quickly, and the gorillas get some serious competition from smaller and more nimble startup competitors.
Amazon was the trailblazer in automated retail technology, but it is not a model that all retailers can follow, due to the high expense involved. Newer startups like DeepMagic, an innovator with a robotic and fully-automated retail concept, advances retailing into the age of George and Jane Jetson with an affordable strategy that is more accessible to a wide array of retailers, small and large.
DeepMagic's intelligent, small-format, cashier-less platform allows merchants, property managers, and others to operate an unmanned shop in secure locations such as apartments, hotel lobbies, and airports. A self-contained "Qick Kiosk" system can be delivered directly to a specified location, and assembled in less than four hours.
Virtual and augmented reality. The final hurdle for online success is making the online experience as hands-on, visual, and personalized as the in-store experience. This is being manifested in new apps like Wayfair's recently-launched augmented reality mobile app, which lets mobile shoppers see what a piece of furniture would look like in their own living room. This technology is more accessible than ever to consumers, especially since the release of Apple's new ARKit Augmented Reality Platform, which will bring about dramatic changes in how consumers interact with technology.
Smaller footprint stores. Toys R Us, J.C. Penney, Sears, and other major retailers were historically considered the most stable and desirable retail tenants, but no longer. While those big retailers are closing locations in record numbers, others are flourishing.
Fully-automated, small-format retail stores located in apartment buildings and other destinations, plus smaller discount stores like Dollar General, are seeing tremendous growth and an expected 900 new openings in 2018. Even established retailers are embracing more compact "express" formats. One of the most visually striking is Adidas – which has decided to not open any more shopping mall stores in favor of smaller standalone facilities, including their innovative New York pop-up store which is shaped like a giant shoebox.
The smaller floorspace initiative is driven by two factors – the different shopping mentality of younger shoppers as compared to the Baby Boomer generation which is more comfortable with superstores, and a growing focus on innovations like pop-up stores, automated "walk-in, walk-out" shopping experiences, and larger chains changing their strategies to include smaller stores in their property mix.
Supply chain automation. The headlines may go to shifts like Scan, Bag, Go and other innovations moving towards a seamless, omnichannel "bricks and clicks" experience that positions the ecommerce channel as equivalent to the physical one. But the biggest change is behind the scenes at the supply chain level. Technologies like blockchain are already in use at many retail outlets for implementing "smart contracts," improving response time, better forecasting, and predictive analytics.
By improving the entire supply chain with this type of automation, grocers and other retailers are able to better track assets at every stage, improve safety and quality, and better predict and respond to consumer demand.
The future of retail is here already, and shopping will never be the same. From automatic fulfillment being tied to smart home technology, to new technologies that allow people to skip the long checkout lines, retailing has entered a period of rapid innovation that will deliver unparalleled convenience to shoppers – and an improved and more personalized customer experience.