When half our money is spent online

In May 2020, online retail sales in the UK peaked at 32.8% of all transactions. The number has since dropped off to 26.6%, as shoppers returned to stores. But the direction of travel is clear. The percentage of retail sales happening online has tripled in a decade. A year ago, The Guardian covered a report by Retail Economics that suggested that 53% of sales could be online by 2029. With the trend-accelerating effect of the COVID-19 pandemic and lockdown, this seems more likely than ever. So what happens when half of all sales are online?

Jobs

According to the Centre for Retail Research, 125,000 retail jobs were lost in the first eight months of 2020. It seems unlikely to me that this number will stay under 200,000 for the full year - and the CRR concurs. Lots of retailers were already weak going into the crisis (47% at significant risk of failure according to the 2020 Grimsey Review). With GDP dropping 20%, it's clear we are in a financial crisis of 2008 levels or beyond. Any serious weakness is likely to be terminal, with major names like Oasis, TM Lewin, and Victoria's Secret falling into administration.Of course, the growth in online retail creates jobs as well. But the type of jobs it creates are rather different and very polarised. At one end, there are warehouse and logistics jobs for deliveries. These tend to be jobs with little security, either short term or long term. Warehouse automation, drones, and self-driving delivery vehicles will likely eliminate most of these jobs in the next 30-40 years. At the other end there are office-based design, technology, buying and marketing jobs, that tend to be highly skilled and well paid. These jobs are much more secure, but there are many fewer of them. One central team can serve a whole nation, if not the whole world, rather than requiring representatives in each store.Today, roughly 3m people are employed in the retail industry in the UK. Back in 2016, the British Retail Consortium predicted that would be down to 2m by 2025. That certainly seems likely, with perhaps another 500,000 going in the following five years as the transition to online continues.

Shops

Vacancy rates are at their highest for 6 years, with 11 of stores vacant in July 2020. In April, not long before it collapsed into insolvency, shopping centre operator Intu said that it received just 29% of rent due in the previous quarter. The new operators of Intu's locations are full of optimism about the prospect of bringing in smaller, local retailers. But rents will undoubtedly have to fall to attract them in. The same is true on the high street, where small retailers who have historically felt priced out by the combination of rent and rates are now seeing opportunities. But long term rates reform is clearly needed, with many calling for changes to the way rates and calculated and reviewed, and some suggesting more radical changes such as a local sales tax.No level of rent or rates cuts is going to conjure up new product categories though, or change buyer behaviour. The simple reality is that many of the product categories that used to fill the high street no longer exist. Media is now mostly digital. Rent and rate cuts might bring independent book and record stores into the main strip, but that only leaves vacancies elsewhere. The convergence of electronics into the phone has undermined gadget retailers. Gaming's future looks to be streamed or at least downloaded.Fashion remains the category with the greatest apparent potential, with the social factor of clothes shopping and the practical reality of trying things on. But online is still taking a big bite (around a fifth pre-lockdown). And at some point consumer trends are likely to turn against fast fashion, whether over its water consumption, climate impact, labour ethics, or just raw consumerism. Big brands may find themselves sharing space and wallets with charity and vintage stores.Most of all though, they will find themselves sharing high streets and shopping centres with other classes of tenant: schools, housing, health centres, and much, much more.

Cities

Apart from pure geography, what makes a city centre? What differentiates it from other districts or suburbs? In megacities (more than 10 million inhabitants) and those approaching this scale (like London), there are already multiple centres with different characters and specialisms. As retail becomes less of a feature of the city core, will the differentiation between centre and suburb start to decline? It seems likely to me that as more space in centres currently devoted to offices and retail gets turned over to housing and amenities, the unique character of the city centre is diminished. While its assets in terms of transport access and location will continue to differentiate it from the suburbs, we might see cities become more of an ensemble cast rather than having a single star.This could start to change the flows of people around the city, reducing peak volumes, and changing routes. It might have an impact on property prices, and planning.

Creative destruction

Lots of people are clearly aware that the crisis in retail is ongoing. But it also feels like much of the conversation about restoring town and city centres was based on an idea that the damage has already been done. That the one third vacancy rates in some places after the 2008 crash was as bad as it would get. In fact, it looks like it might get much worse. There are years of disruption still to come for the offline retail sector.  And the effects will require continued intervention from government both local and national. They will need to deal with the (structural) job losses, the property vacancies, and the resulting losses in business rates. It will take time to bring new visions for town and city centres to fruition.There is a glimmer of light here. The vision presented by the potential to reshape cities away from a single core presents some potential benefits. But for retail there is a long dark tunnel ahead. 

#AskAFuturist: What is the future of the high street?

What is the future of the high street? This question was asked on my #askafuturist thread on Twitter but also raised by an optometrist at the Stockport Business Summit at which I spoke yesterday. So, I figured now would be a good time to tackle it.The original question from Jasper Hegarty-Ditton was this: “With the recent news around retail decline in 2019 and everyone predicting its continuation, what are more innovative ways we could use our city centres? (Rather than just filling with bars/restaurants/coffee shops).”

Real, structural decline

The first point to make is that the decline of retail on the high street is both a) real and b) structural rather than cyclical.To put the decline in numbers, we lost almost 2500 shops in 2018. Twice as many shops closed as opened. This left us with a vacancy rate of over 10% by the middle of 2019. On top of this, it is estimated that the top 150 retailers have on average around 20% too much space – more than they can afford.This translates directly into job losses. Over 140,000 jobs in retail disappeared in 2019 and that is an ongoing trend, not a one-off.So, why the decline?

Shops are not coming back

When I say the decline is ‘structural’, I mean that bricks and mortar retail is not going to make a comeback any time soon. When you understand why retail has declined, and how disconnected it is to the overall state of the economy, you can see why. That’s not to say that there won’t be a bounce when the economy booms, but it will never reach the same levels as before.Almost 20% of our spend has shifted online. This combined with the smaller number of shops means there is less reason to head to the town centre, compounding the effect and reducing the chance of serendipitous discoveries and knock-on expenditure. Footfall is falling year on year.More of our expenditure will shift online as we outsource more of it to automation. I genuinely believe that within a decade or maximum two, we won’t shop manually for more than half our weekly goods. A smart digital assistant will know what we want, order it, and ensure it is delivered. For some people that will be food and sundries. For people like me, that might even include clothes (I buy the same items over and over again as they wear out).

Future of the high street: less stuff to sell and buy

Note that online retailers are struggling as well. But this is mostly about competition, the economy, and some fundamental issues with the costs of logistics and particularly returns. These things can be resolved.What can’t be resolved is the simple reduction in the volume of things we might shop for. Digitisation is destroying, or has destroyed, the market for many of the staples of the high street. Physical media is largely over, apart from the boutiques and back streets and high value luxury items. It is not coming back outside of those niches. That means we can support a fraction of the number of shops selling books, music, film, stationery, photo processing etc.Technological convergence means we also don’t need as many devices on which to consume all this media. Digitisation of media doesn’t just disrupt the distribution businesses; it disrupts the device manufacturers. One device can now act as your radio, TV, music player, camera, remote control, games console and much more.There will undoubtedly be new classes of device in the future. But it’s hard to see how these devices break out of this digital media paradigm in a way that requires anything more than a showcase presence on the high street.

Distributed manufacturing

As we look to the future, the situation gets even more stark. It is taking a lot longer than expected, but you can foresee a time when many other products succumb to the same digitalisation. Clothes for example: why ship volumes across the world when you can manufacture on demand close to the customer? Lower cost, lower carbon footprint, less waste. Are those clothes likely to be fabricated at home? Not any time soon. But one smart fabrication unit could replicate many different designs shared digitally. With the ability to try on clothes in full photo-realistic fashion in mixed reality, there is even less need for physical products in a high street store.So, in smaller towns and cities, the loss of the high street is pretty much assured – at least as a venue for retail. As I said on Jon Richardson’s show, Ultimate Worrier: the question is not whether the high street is dying. It’s “What do we do with the corpse?”

The high street is dead. Long live the high street

So, is there hope for the future high street? Absolutely. But if it’s not in shopping, what is it? It is in living, working, learning, and socialising. Well, and a bit of shopping.As I said, larger city centres will remain destinations for shoppers with large, experience-focused brand stores continuing to draw crowds. The shops that survive on smaller high streets will be ones that offer high levels of service and craft, as well as products or services that are more spontaneous purchases.The more that our world is driven by mass market, low friction services, the more I believe we will crave the unique, the original, and the personal. Having a human-fronted service, whether that is an optometrist, or a butcher, will be an everyday luxury that I think will many will crave and choose as a badge of their personal brand. And a statement about their wealth and status.

Reassuringly expensive

For these businesses to survive, they will have to be relatively highly priced, when compared to their highly digitised low-friction alternatives, because what they offer will by definition be low volume. That can be a scary prospect for the business owner. But the evidence is that the people who can afford to will patronise such businesses if the service they offer matches the pricing.There is a ceiling to the prices they can charge though, and if these business are to become a viable part of a diverse high street mix then we will need to see reform on business rates and rents.

Spontaneous shopping

Even when we get much of our groceries online and delivered automatically, there will still be those occasions where we just need to grab an extra pint of milk, a bottle of wine, or a bunch of flowers at short notice. Metro grocery stores that cater for these needs are probably here to stay.Both the more craft based businesses, and the metro grocery stores will rely on footfall to survive. Almost no retail business can survive if it is surrounded by empty units without traffic. If other shops won’t drive that, what will?The critical strength of the future high street is in diversity. It is not just a place to shop but a place to live and work, learn and play, eat and drink. It needs to be a place for everyone, particularly all ages.

A future high street for everyone

As I’ve written about before, some towns and companies are already making interesting moves in this direction, with Legal and General investing in bringing retirement living into city centres to replace failing retail space. They are not only building homes but amenities such as doctors’ surgeries, creating a gravitic pull for a wider range of potential city-centre tenants. This is likely to increase the appeal of city centre living to, for example, families with young children. That might in turn drive the construction of more schools and nurseries in city centres.With the shift to electric and ultimately self-driving cars, and even better, drives towards walking, cycling and public transport, town centres can become cleaner, safer places. Many councils, such as Stockport, are now building new, green spaces in the middle of cities.I picture a future high street that is a rich blend of places to live, work, play, eat and drink, study and shop, alongside services for health and beauty. Clearly some of those components are there today but it is the others we need to bring in, and fast if we are to halt the decline of many high streets and save the businesses that still populate them. That will require intervention by both central and local government, and great innovation and flexibility on behalf of landlords, many of whom may not be financially incentivised to do so. Accepting lower rents on their properties to keep streets vibrant may well lead to a devaluation of their asset, something that could be much more difficult for them than having empty units. Changing that situation may too require government intervention.

3D printing might still change everything

I wrote in a recent post about how predicting what will happen is easy, but predicting when it will happen is hard. Here's a very personal example: I thought the 3D printing revolution would be much further along by now. I even said as much on national radio, on new years day in about 2016, from memory.What I mean by the 3D printing revolution is a fundamental change in the way we produce and buy physical goods. Everything from clothes to cutlery, to consumer electronics. Right now, most of our goods are produced in giant factories, or networks of smaller ones, on the other side of the world where labour is cheap, or raw materials are accessible. They are then shipped or flown to us to trickle down through a network of distributors, wholesalers, brands and retailers, before landing in our homes or on our person.The possibility with a new range of manufacturing technologies is that instead of shipping finished products we ship a smaller range of base materials that can be transformed into products by machines driven by digital patterns. At home or in local bureau, the raw materials are transformed into the goods we want. The potential advantages? Lower environmental costs, reduced waste, total personalisation, easier recycling. With the right technologies in place, and the accompanying shift in economic power and consumer culture, we could see a very, very different - and arguably better - world.I didn't think we would be there now. But I thought we would have taken the first step. I thought basic 3D printers would have become more reliable, and cheaper, so that they were as common as inkjet printers in your average family home in the late 90s/early 00s. This hasn't happened.The price has fallen, for sure. You can now get a basic 3d printer for around £100, and a good one like my own Creality CR10S Pro for around £500. But 'good' for 3D printers remains a relative term. They still require a lot of fettling to print reliably. The process for turning out goods is nowhere near as accessible as say, desktop printing, even though great strides have been made with incredible software like TinkerCAD, Fusion360 and Cura. The finish on these goods is often still rather rough. The 3D printer is still not a mass market machine, as evidenced by the curiosity that is engendered in people when I tell them the noise they can hear in the background of our conference call is something printing.And yet, the potential is still there. And my enthusiasm for it has been renewed by a recent side project.

Keeping your data on site

The world of home automation enthusiasts is up in arms at the moment because many of the big software and hardware companies involved keep changing the rights of developers to connect in to their home automation devices. Application Programming Interfaces (APIs), the means by which one piece of software can talk to another, are getting turned off and breaking what might be years of hard work from the open source community. At the same time, these companies are often selling services that rely on our personal data being stored on their servers, sometimes with them having rights to use that data for targeted advertising or other analysis.In a recent example, Google announced it would be turning off the Works with Nest programme by which my thermostat talks to the rest of my home. From August, I will no longer be able to automatically turn the heating down when the alarm is armed, or control it from the same panels from which I control the rest of my home*. This is a problem only for those at the intersection of privilege and geekery, but it has offended many.The result is that more and more enthusiasts are turning away from any product that relies on cloud-based software beyond their control, and looking for alternatives. There are many great software alternatives, like the incredible Home Assistant project. But there are fewer options in hardware.So having refreshed my 3D design skills (I originally studied Mechatronic Engineering), I set about starting to design some. The first project has been a network connected camera to replace the ones in my cloud-based alarm system. These are different from your average camera because they have a physical privacy shield that slides into place when the alarm isn't armed, removing that sense of being watched in your own home. I wanted to replicate this, so designed a camera with a rotating shield driven by a small servo. The whole thing is powered by a Raspberry Pi and should be assembled for under £50 if you have the requisite skills. It's still a work in progress but when it's a little more polished I'll move all the code and design files to a shared repository so that it is updated as I make changes, and post a full build guide.

3D printing: not just geeks

Right now my little creation is only of interest to geeks like me. But building it has shown me that while my expectations for 3D printing may have been optimistic, we're not that far off. It's very easy to see that in a few years, devices like this could roll off a 3D printer with all of the required wiring embedded, have a standard microprocessor added (it could be programmed on the same machine that builds the body), and you have an instant piece of custom consumer electronics. Since anyone can share a digital design at nearly no cost, the range of options could be nearly infinite. A ratings system could ensure that you only print things that work.This isn't a new idea but it's one that still excites me, and it's one that I can see being realised in some form in the future. Just not quite yet. *Google has since relented, allowing people like me to keep their developer accounts for the time being.

Even giants fall

Even giants fall, eventually. One of the things that baffles me most in this age of high frequency change is the sense of permanence that we have about certain institutions that are really just a few years old. We feel like change happens faster (I'll be releasing some research to this effect soon). We witness the rapid collapse of established names from our past - consumer, commercial, media and political. But we seem to believe the new giants - Facebook, Apple, Amazon and Google particularly - are immune to the same effects.I've long argued that Facebook will fail, at least as a network, if not as a company. If I was wrong about the timescale (always the hardest thing to predict), my opinion about the outcome has, if anything, hardened. These companies are not immortal, and their products and services are ephemeral, subject to the same market forces as everyone else.This is true too, of Amazon, a subject that came up while I was speaking to Matt Ward for The Disruptors podcast. Matt has a lot of experience with Amazon and he believes it presents the dominant threat to retailers today, particularly with its own brand goods that can displace all competitors in its search rankings - one of the most important discovery channels for consumers, alongside the likes of Google. I totally agree: Amazon is a massive threat to competitive retailers and those that use it as a route to market. However, that is not to say that it cannot be competed with. There are lots of ways to disrupt and defeat Amazon. Here are two examples:

Discovery

Amazon is an incredibly efficient way to buy things when you know what you want. But it has so far failed to crack the discovery challenge: helping you find things when you don't know what you want. This might seem to go against the weight of evidence. After all Amazon's sales growth has been stellar and it has reported great results from its recommendation engine - particularly personalised emails. But this is a different thing to serendipitous discovery. Amazon's recommendations are based on your search and shopping behaviour, so they are always going to be narrowly tailored to your known tastes. And what if you're shopping for someone else? Amazon has enough data points to separate out gifts from personal purchases in theory, but in practice I find its recommendations frequently appear muddled.So where do we look for serendipitous discovery? There are better digital options, like Pinterest, though I still wouldn't rate this as truly good. The real answer is the high street. Here we still have the opportunity to browse, be inspired, and look - at speed - beyond our normal filters.If someone can crack digital discovery, they can open up a crack in Amazon's armour.

Curation

The bigger opportunity though, is in choice. The reason Amazon has become a first stop for our searches is because it is easy and low friction. But the best interface is often no interface: what does Amazon do when we no longer search for ourselves? If Amazon doesn't succeed in making Alexa the default platform for our autonomous product searches - where digital agents find and acquire things on our behalf without explicit instruction - then it is very susceptible to competition. Yes, it might still have the best logistics engine to deliver those products, but this is eminently disruptable without a stranglehold on the customer acquisition piece. It levels the playing field for competition.

No knockout blows

When we're looking to the end of companies, we're always looking for the single big challenger who knocks them clean out of the market. The reality is always much more complex. There will be no single knockout blow that defeats Amazon or Facebook. They will lose slivers of their advantage, one piece at a time, as new competitors come in and secure ground, or old competitors return reinvigorated by innovation (it can happen). It's a cliche, but change is the only constant. And that's as true for today's digital giants as it is for the behemoths of the past. Even giants fall.

Travel and payments: two differences between British and German high streets

Travel and payments are two examples where there are different futures for outwardly similar cultures.There is no future. No singular future at least. Everyone's future is different, moderated by geography, culture, and our own experience. We are not all impacted by the same, single wave of change. Instead, there are many parallel and overlapping waves of change that hit different places, and different sectors, at different times.Spend some time abroad and you will see this clearly. In Germany this Christmas, I noticed two very great differences to the British high street. Places where waves of change were more advanced here, having encountered different social and cultural barriers. First, the prevalence of travel agents. And second, the lack of electronic payment options.On paper the adoption of e-commerce by consumers in Germany is very similar to that in the UK. 15.1% of transactions in Germany are online vs 17.8% of the UK, but in terms of internet penetration and uptake of ecommerce, the numbers across the two countries are very similar. But it appears that in one sector at least, travel, the behaviour is very different.Germany trails the European average when it comes to use of online travel agents, at 43% of transactions vs the average of 49%. In the UK it's more like 60%. In Germany, high street travel agents continue to grow alongside growth in the online market. This is very easy to see. Walking through the centre of Heilbronn this Christmas, I was amazed by how many travel agents we saw: five or six stores along one route. And they didn't look tired or defeated. These were freshly-refitted shops with sharp window displays. And they were busy. Heilbronn is not a big place. It's a regional capital but its population is only about 125,000.

Travel and payments: cultural differences?

You can read this two ways. Germany is culturally different, so there is a sustainable, larger market for high street travel agents. Or, the Germans are on the same path as we are, towards the majority of bookings being online, and just behind us on that curve. The answer, as usual, is somewhere between the two. It may well be that Germany will have a larger proportion of offline transactions in the travel sector for the foreseeable future. But the macro trend is the same between the two countries: towards digital.The same is true for payments. The other shocking thing as a consumer in Heilbronn was the prevalence of cash. Restaurants and bars just did not take cards. And I'm not talking about tiny places, but big independents, like the Italian restaurant where I had to leave my family to go and hunt for a cash point in order to pay for the meal. Will this cultural preference for cash persist? Or will it ultimately be overwhelmed by the shift to digital forms of payment? My belief is the latter, but it will never be quite like other places. Every future is different. That's true for travel and payments, and for a thousand other small differences between geographies.So much of our discourse about the future is driven from the same sources. Tech-heavy, US-centric, and market-driven. It's easy to forget that even the most universal of macro trends will encounter different levels of resistance in different places and sectors. This resistance will both change the rate of adoption for any big trend, but also drive adaptations. Trends can be macro but their local effects will always be moderated by the environment. Not one wave of change but many, smaller waves.

Future-Ready Retail: Report

Between 2015 and 2017 I worked closely with Salesforce Commerce Cloud (formerly Demandware) to produce a series of reports on the future of retail. This report was the first piece around which the rest of a two year campaign of white papers, blog posts, lunches and dinners was built. It was an enormously successful campaign, co-ordinated by the marketing agency GroupBrand. You can access the full PDF of the original report - no longer accessible on the original microsite - here.Feel free to share this with your clients, or use the research in your own work. Or, maybe think about using the toolkit to produce a report like this for your industry? 
 

Are we buying the coffee or the shop?

Whitbread is continuing to open more Costa Coffee shops predicated on the continuing growth in demand. That growth has slowed, but the company believes we are entering a ‘third wave’ of coffee consumption, where we are willing to spend more per cup. Yes, that means you, with your single-estate cold brew.While consumption patterns are interesting, I’m much more interested in what the continuing expansion of the chain says about our need for third space, a living room beyond our home, or a work space beyond the office. To the naked eye the coffee market looks saturated. And yet more and more continue to appear. Why?

Third space

The reality is that we are living in increasingly densely-packed circumstances. This is nothing to do with immigration, which is both culturally positive and economically necessary. Rather, it’s about housing.Multi-generational homes are now increasingly common. As we stay single later and house prices grow ever more un-affordable, we’re sharing houses with our peers, later and later in life. Or renting the smaller spaces that we can afford in cities, where have little room to relax or socialise. Sometimes, we need to escape.Developers are building what someone described to me yesterday as ‘student accommodation for grown-ups’: giant blocks of small apartments with high-quality shared spaces to make up for the lack of space to entertain or relax inside the flat itself.

The new pub

The irony is that we had a huge network of shared spaces in this country. Places that were designed to be the ‘home away from home’ for those who couldn’t afford the space, or the heat, in their own home. Places where groups could meet and socialise. Places where at one point in time, a lot of business was done. They’re called pubs, and they’ve been closing at a rate of 27 per week.Of course we also had a very strong coffee shop culture in the past. Perhaps this is just cyclical. But nonetheless I think this trend is interesting, particularly for the way it counters this idea of us disappearing into our digital devices.

Social spaces

If we really were becoming an antisocial nation of nerds, lost to our laptops, then these physical meeting spaces would have much less value. Yet sat in one of my favourites yesterday (Manchester’s Chapter One bookshop/coffee shop), less than a quarter of the tables were occupied by solo workers. Most people were there to meet, talk, work and socialise. This was pretty typical of the other shops I stuck my head into. Hardly a scientific survey but enough to validate my suspicions: these are social spaces and they will continue to grow.Human beings are collaborative by nature, fuelled by connection. We need spaces to make those connections, for business or pleasure. The pub fell out of favour for all sorts of reasons: homes well-equipped for entertainment, changing attitudes to alcohol, and a richer array of alternatives. But what’s clear from the continuing — almost baffling — growth of the coffee shop market, is that our need for connection has not gone away.

Five trends for the future high street

Yesterday, I joined a retail round table discussion hosted by my client Freeths solicitors. Senior executives from a range of big retail brands joined us for two hours of conversation and cracking food.I kicked the discussion off with a little provocation. Here’s the five bullets I used to get people talking.In the future…

…augmented reality personalises every space

The first thing you need to know is that our physical and digital experiences will continue to collide. In ten years I believe we will spend 10–12 hours each day experiencing the physical world through a digital lens. That is to say, in ‘augmented reality’ (AR) or ‘mixed reality’ (MR).Initially this will mean that everyone starts to wear smart glasses containing a smart-phone-scale computer, a pair of digital lenses, and a front-facing camera, as well as a variety of user interfaces: eye-tracking, bone-conducting microphone and speaker.There’s much scepticism about this idea, in the wake of Google Glass. But I think a lot has changed in the nearly five years since Glass launched. For a start, the amount of hours we spend glued to screen continues to rise, with the latest Deloitte figures showing many of us walk right across roads while staring at our phones. Secondly, our acceptance of cameras everywhere has grown. They’re now on many car dashboards, on cycle helmets, on drones, and in kids hands as little action cameras — every beach is peppered with people shooting in high definition. And no-one bats an eyelid.This technology changes everything — particularly the front-facing camera. Now our machines can see what we see, and combined with all the other sensor data, including location, develop a hugely rich picture of our physical world interactions, as well as our digital interactions.

…more and more shopping is done for us

I’ve argued before that many of our low-engagement purchases will be handed over to a personal digital assistant. Toilet roll, tinned tomatoes, that sort of thing. No-one enjoys shopping for them, but no-one wants to run out. So why not let an AI-driven assistant ensure that you are kept supplied and never think about them again?Increasingly I’m convinced that more of our high-engagement shopping might be taken over as well, or at the very least, assisted.Right now, clothes shopping online remains a lottery. Inconsistent sizing, even within single brands, means that neither men nor women can shop confidently without trying goods on. And reverse logistics — the returning of goods — is an expensive nightmare for brands, especially when dealing with low-cost ‘fast fashion’.Both of these issues can be solved. Manufacturing data could be applied to give the most detailed fit data, and supplemented with shared data from people who have tried goods on. With a digital personal assistant holding your measurements — updated daily every time your head-mounted camera catches a mirror — you could buy with extreme confidence something will fit.Or your personal digital assistant could buy for you. Everyone loves surprise post. And we’re increasingly signing up for subscription-based purchases for everything from pants to organic vegetables. Why not give your AI some discretionary spend to surprise you with a new item of clothing every month — or even week.With the rise of autonomous vehicle — including the rolling drones trialled in Greenwich last year — automated warehouses, and better integration of offline and on, the costs of reverse logistics start to fall. Brands can be more confident sending out goods that will fit and suit their clients. And know that if things do need to come back, it won’t cost the earth.

…but the tactile experience grows in value

All this suggests that there will be more damage to an already-challenged high street. But speak to 16–35 year-olds and it becomes clear that they have an enormous attachment to the high street and the physical experience it offers.According to research I was involved with for the Salesforce Future Ready Retail programme, the high street is an important social venue for many (29%). 28% say they go for ‘something to do’ and 43% say they go just to get ‘out and about’. This trend is likely to increase: we have growing multiple occupancy in shrinking homes. People need a third space to escape to, so footfall shouldn’t be a problem.But will they buy? Most of this cohort say they go to the high street to research or make purchases. 58% want to try items on or test them out. 54% want to touch or feel items before they buy. 51% value the high street for the instant access it provides them to goods. 38% are seeking ideas.Altogether, 96% say they still like to visit actual shops on the high street and in shopping centres. The challenge though, is connecting this physical activity to digital commerce.

…necessity connects physical and digital

The reality is that many people try offline and buy online. Not only are the prices potentially better, but the convenience is increasingly greater. With rapid fulfilment, why lug your shopping back when it could be delivered to you, neatly packaged, by the time you arrive home?As the figures above show, the offline experience is crucial to the buying process. The challenge is demonstrating that with enough confidence to continue investing in it. The widespread acceptance of augmented reality devices could solve this problem. The data will be there to track someone through a physical interaction with a product right through to their digital purchase. However, two problems remain.First, we will not be able to make a causal connection, only a correlation. This shouldn’t be too much of an issue though: there is rarely a causal connection between physical advertising and the purchase, but nonetheless we continue to invest billions in it.Second, there is no obvious mechanism for paying the provider of the physical world experience for the digital purchase. Should one retailer pay another because an online purchase was spurred by an offline experience in their store? Not likely.More likely is that brands will start to have to foot the bill for physical exposure, and find ways to map the investment in one back to the returns in the other. In this scenario, department stores have an enormous opportunity, aggregating the costs of physical exposure and charging brands for the privilege. We may yet see the renaissance of the department store as a venue for people to touch and feel goods, even if their purchases are ultimately offline. Some may feel this is already what they have become, but in the future it may be a sustainable business model.

…in-store the focus is on product and service, not transaction

For those investing in stores, they will want to ensure that they can maximise the value of that investment. This means focusing on product exposure and service quality and not on the space currently devoted to transactions. Tills will largely disappear, replaced perhaps by RFID systems, but more likely in the long term by computer vision systems tracking goods around (and out of) the store — as seen with Amazon Go.Human staff will be augmented by virtual assistants, powered by the full range of data captured about each shopper and what that shopper chooses to share from their own digital assistant.

---

Five trends for the future high street was originally published in Book of the Future on Medium, where people are continuing the conversation by highlighting and responding to this story.

Powered by WPeMatico

Mum hasn’t gone to Iceland

Have you heard of transactional memory? It’s the outsourcing of memory to other people around us. You don’t remember your nephew’s birthday because you know your other half will. You don’t need to remember to get the car MOT’d because you know your other half will. By outsourcing this way we can store much more than we can fit in our own heads.Human beings have always been looking for ways to be more than our own biology allows. We’re a race of toolmakers, determined to turn every material we can find to our advantage. Whether it’s a stone axe or a smartphone, we’re keen to augment ourselves to be more than we could otherwise be. Do more than we could otherwise do.This deep and ingrained comfort with transactional memory, and our own desire to augment ourselves, is why I think we will so happily accept AI extensions of our own selves. A transactional relationship with software agents that extend our memories, our processing power, and give us the ability to do what every busy person has always wanted: to be in two places at once.Hold that thought.For the time being, the biggest battleground in digital marketing is still search. What this means is people spending billions of pounds and using all sorts of sneaky means to ensure that when you type the relevant words into Google or Bing, theirs is the first brand that you see.You may not think it, but Google and Bing are your friends here. Every day its engineers go to bat to make sure that what you see when you search is not what someone else wants you to see, but objectively the most relevant answer to your question.On the other side though, every day, every brand’s agency is working to do the opposite. To ensure that whether you’re searching for car insurance or cat food, it’s their clients who appear right at the top of those search results.Two sides locked in a constant battle.Hold that thought.Tell me: do you enjoy buying toilet paper? Really? Or tinned tomatoes? Or washing powder? All those things that make up a good chunk of your weekly shop. Things you really need, but honestly, do you really want? Do you lust after them? Are you fulfilled by finding that perfect pack of triple-ply?What if you could have a transactional relationship with an artificial intelligence who ordered those things for you. Ensured that you never had to think about them again. They would always just be there. You would never run out of washing up liquid, or dog food, or nappies again. It has access to your credit card and an online store, and limited scope for discretionary spending against a list of key items.Outsourcing plus tools.Now imagine the battle that is going on behind the scenes. Today that battle is between marketing agencies and search engines. But what happens when you stop searching? When you allow an AI to do the searching for you? Imagine how much effort will go into influencing your AI to buy a particular brand. This is the next big battleground and there won’t be a single human on the front lines.Personalised marketing engines will suck in huge amounts of data about you and your peers and serve endless offers at your AI, only for it to bat them back. 99% of them will be rejected. But every now and again, based on appealing to the criteria that your AI has been given, or learned, it will change your brand of toilet paper, cat food, shower gel, or, yes, cereal.What might that data be? Let me give you some ideas.For a start, we will all be wearing cameras on our heads, all the time. Your AI won’t just know what brands you buy, how much you use, and when you need more, it will know what your friends and family buy and use. People like you bought things like this? Imagine Amazon’s recommendation engine turned on its head and brought into the physical world.Your smart glasses won’t just know what you ate elsewhere, they will know how much you enjoyed it. Heart rate monitors, breathing, galvanic skin response, even an EEG reading brain activity. All this is today’s technology the output of which can already be used to reliably interpret emotion by an AI. Sampled a different cereal elsewhere and liked it? You may find a box in your next order.But only if it’s good for you. Your personal AI will know a lot about your health. We already pump data into systems like MyFitnessPal, recording our diets and streaming data from our Fitbits and connected scales. A few years ago I made a programme called ‘In the future, toilets will be our doctors’. I wasn’t kidding. You can learn a lot about what’s going on inside you by looking at what is coming out of you.We are already on this journey. We have outsourced our memories to digital calendars. Our sense of direction to GPS.We are increasingly comfortable with subscription-based shopping models for everything from films to food, razors to pants.The future of retail — at least large chunks of FMCG — is automated. Decades of marketing to humans will increasingly be turned on the AIs that assist us, trying to game them into switching our brands. This is the new brand battleground.Mum hasn’t gone to Iceland. Nor has dad. And they haven’t sent the kids. The AI has done the shopping and it has bought you exactly what you need.