Opinion

Will the future of retail rest on e-commerce?

7 min read

05 December 2013

Serial entrepreneur Martin Leuw shares his thoughts on the future of retail.

Last night, I had an interesting dream. I was transported into the future, to a world where physical shops no longer existed and absolutely everything was bought online! Depending upon your perspective, this could be a nightmare, a fantasy or is it a realistic view of the way the world is already shifting?

Over the past month, just as the run up to Christmas is getting in to full swing, both Barratts and Blockbusters have joined the long list of traditional high street retailers that have “bitten the dust”. Yet, it’s 15 years since the internet burst onto the retail landscape, so why are some people still surprised?

The Sunday Times recently reported: “British online shoppers are predicted to spend up to £10.8bn in December. According to the British Retail Consortium, 18.3 per cent of all non-food retail sales were made online in October, the highest proportion since it began keeping records two years ago”.

Reading this, it would be easy to assume that the “bricks and mortar” retailers are in terminal decline and that it is just a matter of time before everything goes online; yet, it’s rarely as simple as that. Whilst the likes of ASOS and Net a Porter have blossomed, so too have Primark, the discount retailers and some of the high end luxury retailers. The recent recession has undoubtedly acted as a catalyst for a degree of polarisation on the high street.

I’m the first to admit that I don’t particularly like shopping. I know what I want and generally just go find it at the best price. When Tesco food first went online we were amongst the first to jump on the bandwagon. It was the same with Apple for music, Amazon for books, the Kindle, a second hand car bought on line from a dealership over ten years ago and now pretty well “Amazon” everything.

If you look at the goods and services we can typically buy from shops: Food, clothing, banking/loans, books & music, furniture, property, cars, every single one of these are now being bought online, often both cheaper and faster. The reasons why not to shop online are rapidly diminishing so the survival of the fittest will be those that deeply understand, adapt and cater best to the changing needs of their customer segments.

In this vein, it’s worth remembering that the basics of marketing have not changed and probably never will do, because human psychology is at its core. As consumers in both a business or a domestic setting (as far as I am concerned there is no valid distinction between B2B and B2C), most of us buy things via our preferred channel to save time, save money, because we enjoy the brand experience or a mixture of all three. The internet and now mobile are merely a shift in buying patterns, offering us more choice, in much the same way that “out of town” retailing did for the previous generation.

So if this is the view of the future, whether you are online, on street or a hybrid, where is the greatest scope for differentiation and ultimate success? What can we learn from both the successes and failures so far both in the UK and overseas? Whilst the next battle may be in logistics, driving down delivery timescales and utilising 3D printing, everything suggests the real war will be won on data analytics.

It’s been pretty obvious for a while that customer data is key; it’s the implementation which is challenging as it’s a different skill set and the expertise pool is shallow. In the good old days, retailers succeeded by understanding customer needs. 

Somewhere in the leap to mass consumerisation, this competency seems to have weakened for many, giving the likes of Amazon, in particular, a massive head start on the competition. 

Loyalty cards help with the profiling, but many traditional retailers, with their legacy systems are even today still struggling to manage, mine and manipulate vast quantities of customer data in ways they have never had to before.

So, as time progresses, physical shops will look even more like showrooms (a bit like the Apple store have successfully achieved) selling goods/services, but more importantly acting as a conduit to their web/mobile presence. 

The next generation of great retailers will know everything about us, to offer what we want, where and when we need it, before we even know we do; smart retailers can already see what is trending on web search analytics and deliver to our needs; they can also see what we visit, where we linger and our exit points. 

Crowd-funding techniques are and will continue to establish new virtual communities of consumers with similar needs to get better club deals.

This “nation of shopkeepers” has a bright future, but only if we can both develop and attract the very best data analytics and technology talent globally; particularly young people who really “get” social media. Otherwise, one day we’ll wake up and the retail landscape will no longer be ours and we’ll just be a nation of online shoppers.

Martin Leuw is a serial entrepreneur and former CEO of IRIS, the UK’s largest private software house.

Image source