Displaying items by tag: Future of Retail

future of retail automationAs we wave goodbye to another decade, it’s time to assess where we’ve been and what the next 10 years will have in store for the retail sector. It’s hard to think back to 2010 and not somehow feel it is closer than it really is. Nine years’ later and you’d think online had virtually replaced traditional retail, but it is still under 20% of total retail sales. About 7% of total retail sales were online in 2010 rising to 19% by 2019 as a percentage of total retail sales.

At the start of the decade, in June 2010, there were 1.97B internet users, by 2019, that figure had reached 4.54B users, 58.8% of the world’s population. Virtually all adults aged 16 to 44 years in the UK were recent internet users (99%) in 2019, compared with 47% of adults aged 75 years and over.

And this is before the roll out and connectivity of 5G. We’ll probably look back and feel we were living in the dark ages when it came to internet speeds when we finally have uninterrupted data and mobile signal.

Left - Autonomous vehicles will be the future of deliveries

While online sales have grown nearly 3 times as a proportion of retail sales over the decade, it’s interesting to look at the growing monopoly of the internet. In the USA, the top five online retailers own 64.7% of sales, (data via Statista).

While online retail sales growth appears to be slowing nobody knows the final plateauing retail mix in numbers yet. One recent report by the analysts ‘Retail Economics’ for the law firm Womble Bond Dickinson, says online shopping could more than double its share of the retail market by 2028. The internet is expected to account for 53% of retail sales in 10 years’ time as younger people who have grown up with the internet become more than half the UK’s adult population according to the report.

Richard Lim, of Retail Economics, said: “Successful retailers have always had to reinvent themselves to stay relevant. However, the pace of change will inevitably prove too fast for many. It definitely feels like the digital retail revolution is only just getting started.”

Arguably the most important revolution in the coming decade will be automation and automated vehicles. Take the human out of something and it instantly becomes far cheaper and more flexible.

future of retail automationThe automated car is coming, it’s just a matter of when. Elon Musk, CEO of Tesla said that he anticipates completion of fully autonomous technology by the end of 2019 with their self-driving vehicles being so advanced in 2020 that the driver can basically take a nap. He said, “I think we will be ‘feature-complete’ on full self-driving this year, meaning the car will be able to find you in a parking lot, pick you up, take you all the way to your destination without an intervention this year.”

There will be rigorous testing and legislation for this to happen, which will take time, but once vehicles become fully driverless and trusted we’ll be able to have everything delivered at anytime for very little cost. It will revolutionise delivery and the volumes of deliveries. Things will no longer be a hassle to return and as such, will be easier to buy. You'll never be out when you know exactly when your delivery is to arrive.

Right - Secure and cheap deliveries without the human

Fashion will become a service. We’ve seen the idea start this year with the rental and secondhand markets growing recently, but it will be with automation when the business model will make sense. Fashion companies will sell ideas and consumers will buy or borrow those ideas. At the end of life, these items will be returned and disposed or recycled responsibly. The new affordability automation allows will make it cheaper than buying regular clothes. This is when the idea will reach a tipping point.

Having large fulfilment centres servicing larger numbers of people will also be more efficient and reduce wastage, particularly in food. The idea that every supermarket has to guess what that individual store will sell that day or week and it doesn’t leave that store unless it is sold, reduced or thrown away makes no sense in the 21st century. Retailers and brands will like this reduced wastage and more full price sales. Consumers will get fresher items and greater convenience.

The environment will become increasingly important and efficiencies will be driven by green ideas. I think it’s naive to expect consumers to buy less and retailers don’t want that either, it’s going to be about cycles and closing the loop on goods and services.

future of retail automation

It will be about knowing more with regards to what to make and when, with fewer sales and less wastage. When The H&M Group is estimated to sell three billion articles of clothing per year, made in 40 countries, using 275 factories in Bangladesh alone, the scale and potentials for efficiencies is huge. Consumers being able to order exactly what they want and it will be a boon for retailers as well as the environment.

Left - What will the first automated vehicles look like?

How fashion dictates how we look throughout all this will be anyone’s guess, but luxury brands are getting bigger and more dominant, though never underestimate consumer’s desire for change and the human characteristic of becoming bored and moving on relatively quickly.

Whether we will still be wearing sportswear in 2029 is yet to be seen…but the future will definitely involve less humans.

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Published in Fashion
Wednesday, 08 May 2019 16:00

ChicGeek Comment Neighbourhood Shops

GoodHome by B&Q neighbourhood retailThere was a time when ‘if you build it, they will come’ rang true for retail. Large out-of-town sheds have been encouraging people to pile into their cars since the 1980s. But, traffic is slowing and retailers are starting to realise that in order to survive, you need to go to the people, because they won’t be coming to you.

Left - B&Q's new neighbourhood concept, GoodHome by B&Q

People’s time is precious and the thought of driving to a shop, potentially getting snarled up in traffic or fighting for a parking space, when you could simply go online, is making these expensive retail parks less and less viable. Following the march of the supermarkets with their local formats other retailers are now realising it’s all about ease and convenience if you’re going to compete with online. Mix in the fact that car ownership and young people passing their driving tests is falling, then you have a perfect storm for the retail parks and out of town shopping centres.

In a sleepy suburb in South London, Wallington, Zone 5, home and DIY retailer, B&Q, has just unveiled its new smaller format, “GoodHome by B&Q”. The new, boldly coloured and contemporary space offers automated key cutting machines, touch screens to browse the range, a complimentary coffee machine and “over 6000 products available today”. It is a warm, compact space with friendly staff to offer advice, in comparison to one of their rundown, draughty mega stores, run on a skeleton staff, without anybody to help or offer advice. This is the first of these neighbourhood B&Qs which they hope to roll out nationwide.

In October, 2018, IKEA, the ultimate in out-of-town-spend-all-day-and-dine retailers, opened it's brand new mini store – the IKEA Planning Studio – on London’s Tottenham Court Road. It specialises in kitchens and bedroom storage and is more a showroom than a smaller version of the larger store. This week, IKEA launched their first store in central Paris. “Paris is a magnet of trends and fashion,” said Jesper Brodin, chief executive of the main retail arm of Ikea, Ingka Group. “We hope to use the Paris store as a loudspeaker for the rest of the world. If we are successful we could do a lot more of these.” he told The Financial Times.

The new IKEA store in Paris is 5,400 sq m across two floors and includes a 150-seat restaurant. About 1,500 items are available to buy in-store. Located in Paris’ 1st arrondissement, it will be followed by similar openings in Lyon and Nice. “There’s not a typical online customer or offline customer; people are mixing channels,” said Mr Brodin. “They still want to be able to touch the product and have a physical experience of the product”, he said.

GoodHome by B&Q neighbourhood retail

Over in America, the luxury department store chain, Nordstrom, is rolling out its ‘Nordstrom Local’ formats. First trialled in California, it is now planning two in New York to complement its new full line department stores opening at the end of summer 2019.

Right - Inside B&Q's new smaller format, GoodHome by B&Q

According to the company’s research, Manhattanites don’t particularly want to leave their neighbourhoods if they can help it which is the crucial reason for adding these hubs. The smaller stores will not carry merchandise, they are places for online pickups and returns, as well as services like tailoring and personal styling.

The first Nordstrom Local opened in 2017 in Los Angeles, where it, now, has three shops. Some offer individual services, like manicures or shoe repair, based on their location. Most importantly, the company said customers who visited a ‘Local’ spent on average two and a half times what other Nordstrom shoppers did and made returns earlier, which allows the retailer to turn its inventory faster.

Nordstrom Local neighbourhood retail

What many large retailers and shopping centres rely on is the car and the attraction of free and easy parking. Government-backed research shows that the number of teenagers holding a driving licence has plummeted by almost 40% in two decades.

The number of young people with a driving licence peaked in 1992-94 at 48% of 17 to 20-year-olds. By 2014 only 29% of the age group had a licence. Among people aged 21 to 29, the number of licence holders dropped from 75 to 63% over the same period. The decline in car use was more rapid among men than women.

The study, published in Feb 2018, said that rejection of car ownership was likely to become the “new norm” as more people communicated online rather than face to face.

Left - Nordstrom Local in Brentwood, LA

Commissioned by the Department for Transport, it found that changes in living circumstances meant that most young people no longer gained a driving licence or regularly drove a car. It said that a rise in lower-paid and less-secure jobs, a decline in home ownership and an increase in university participation had an impact on how people used transport. The study also cited the high cost of driving and a preference among young people to communicate online. It quoted figures showing that young men aged 17 to 29 were spending 80 minutes more per day at home in 2014 compared with 1995. Women in the same age group spent 40 minutes more at home.

The study by the University of the West of England in Bristol and the University of Oxford, said that many young people had become “accustomed to a lifestyle in which private car use is less central than it has been for previous generations”. The report added: “It is possible that the changes in young people’s travel behaviour described above are the first phase of a social change that will continue through successive generations.”

If this trend is continued by successive generations than it will be bad news for out of town shopping centres with poor public transport. It could also mean, in future, entire families will be without a car or driving license and unable, or, will find it more difficult, to visit these huge out of town shopping centres or retail parks.

Nordstrom Local neighbourhood retail

It is already starting to take its toll on shopping centres with footfall down and retailers reducing the number of stores they run or open. At the beginning of this year, shopping centre landlord Intu took a £1.4bn hit on the value of its properties. Intu said the value of its portfolio dropped 13.3% to £9.2bn during the year. The drop in property values pushed the company to a loss of £1.2bn, down from a profit of £203m a year earlier

Retailers are realising that transport is key and is where the volumes of people are. Walk through St Pancras station or New Street station in Birmingham, and the range and quality of the stores is nothing like the sad Upper Crusts or Boots of a few years ago. From Tiffany to Ted Baker, these stations are much more glamorous and attractive places to quickly pick things up or drop things off than they were before and compete just as well with any modern shopping centre.

Right - Inside a Nordstrom Local, LA, California

One British retailer proving the value in travel retail is W H Smith. W H Smith could have disappeared like its main products; magazines, newspapers and music or been flatlined by Amazon on books, but instead has flourished by going for convenience and the captive audience of people in stations and airports. 

Since WH Smith demerged its news distribution business in 2006, the travel business has been able to grow its profits in every year since. The size of the business has increased from 309 stores in 2007 to 867 in 2018. With the acquisition of American airport retailer, In-Motion, it will probably have more than 1,000 stores by August 2019.

WH Smith had 581 stores in the UK at the end of August 2018; 149 were at airports,127 in railway stations and 131 in hospitals. Around 125 are located in motorway service areas and are franchised stores, with the remainder in workplaces and bus stations. Internationally, it had a total of 286 stores located in airports, recently opening eight stores in Madrid Terminal 4 and six outlets in Rio de Janeiro. While not the most exciting of retailers, it shows that you can thrive if you go where the people are. 

Smaller and more cost-effective neighbourhood shops could be the answer for some brands. Businesses built on big stores will need to think about how people get to them if they are to survive. The automated car will offer some relief to the out of towners, if and when it arrives, but it feels like it will continue to become a strange concept to drive large distances out of your way to go shopping, especially for the younger generations.

Published in Fashion

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