The (Retail) Tipping Point

We are poised at a pivotal moment in the evolution of retail. Like all significant historical events, we are aware that something ‘big’ is upon us. Understanding what it is and how it will change the course of history is harder to grasp. In my last article I looked to the past to consider how significant moments in society and society’s inventions have changed the way we merchandise, shop and live. I described how inventions like the footpath (sidewalk) enabled window shopping, and the creation of the shopping arcade was a vehicle for the emancipation of women. In this article, I provide insight to today’s society and today’s inventions to propose what the future might hold.

Firstly we must accept that we are at a ‘tipping point.’ Popularised by Malcolm Gladwell in his book by the same name, the phrase refers to the point in time when the build up of minor changes and incidences reach a level that triggers a more significant change. Since the new millennium, discrete often revolutionary changes in technology, like near field communication and QR codes, and the tools that exploit these technologies – smart phones and tablets, have had us wondering how technology will change the way we shop in the future. In response, we have started tinkering with the tools of the technological revolution – holographic changing rooms, QR code purchases via magazines, ’apps‘ to enable mobile purchasing - to name a few. Arguably, however, these are just the tools of our time; harnessing the technology. The bigger question sits behind the glare of the shiny new devices and trendy purchase mechanisms. What is the societal shift and what changes will it bring?

At some point in the last decade, possibly accelerated by the Global Financial Crisis, certainly enabled by a new generation of consumers who have embraced 21st century digital technologies, society began to allow place based (bricks and mortar) and placeless (on-line) retail to coexist. The latest statistics from DBREEF’s Bricks and Clicks: Rethinking Retail Real Estate in the E-commerce Era (2012) indicate that the online share of retailing has been growing steadily in the last decade, but remains low accounting for only 5% of non-auto sales, though twice that in key segments amenable to online selling. Retail luddites argue this shows on-line shopping is just a blip; that it isn’t competitive and therefore we should continue to deliver more of what we know, more of the same, perhaps with a couple of techno-gimmicks for interest. This is head-in-the-sand stuff; this is missing the (tipping) point.

What we are experiencing through the emergence of online retailing is a fundamental change in the economics of place, based on a model we have relied upon since the early twentieth century. The fundamentals of retailing, as we know it, are premised on agglomeration economics and practices - the idea of clustering number of things together in one place to generate an outcome that is greater than the sum of its parts. This is the conventional supply and demand model, which we have relied upon to determine the location, size and configuration of physical shopping centres. DBREEF expect online sales to double in market share in the next five years, at least. If their prediction is correct and e-commerce is on the verge of prodigious growth, then our twentieth century approach needs a serious overhaul. Mannequins that move courtesy of robotics, and using your mobile device to interact with a shop window will not cut it. Enter contemporary economic theory. The suggestion is a new retail paradigm can work, possibly improve the retail experience, without a singular reliance on physical place. If so, the implication is that there may not be less retail product, but there will be less reliance on the physical space in which to showcase it. Bricks and mortar retailing as we know it will shrink, but there will not be a void.

What will fill the space? In a recent forecasting of visual merchandising for 2020, Jonathan Baker asked “the movers and shakers, the creatives, the writers, the academics, the suppliers, the designers” of retail what they thought the industry would look like in the future. To paraphrase, the retailers, publishers and editors, design companies, and industry suppliers all said to use the technology as an extension of the store, go back to the art of the shopfront, connect with the customer and help them feel connected to a time and place, and make it more entertaining. These responses are distinctly twentieth century in their approach. They continue to use technology as a tool to reinforce a physical place.

Conversely, and perhaps not surprisingly, it is the academics who see the world differently. While they still reference technology as a tool, it is also an enabler to guide a more ecological and sustainable industry, consistent with contemporary philosophical and futuristic thought. They argue that retail should take on a sustainable emphasis; a whole-of-life approach (rather than lifestyle retailing). The supply chain, the packaging, the store fitout, and (finally) the product are all relevant to the retail experience. Some of this experience is physical, some is virtual, but more and more is educational.

As the consumer becomes better informed and asks more questions, the retail equation is less about traditional supply and demand, and more about the demand for a certain kind of supply. Two examples spring to mind. At the July 2011 Men’s Fashion Shows in Paris, the French “brick-and-click” clothing and accessory retailer -Colette, held ironing classes exclusively for men in its basement Water Bar. A dozen ironing tables were installed like a classroom, all equipped with Rowenta steam power stations. The event has been well documented both by Colette and also by a number of independent fashion blogs. In this example, the whole-of-life approach is that it is one thing to buy the clothes, it’s another thing to actually own and care for them. This demonstrates that the retailer can continue to help with that – not dismiss the purchaser as a ‘mission accomplished’, as they walk out of the store.

A second example closer to home is the ‘School of Life’ that has opened recently in Melbourne, following the success of the school in London. In their own words, the School of Life is a cultural enterprise offering good ideas for everyday life. They run a variety of programmes and services concerned with how to live wisely and well, and with the ethos - “what one could do to change the world for the better.” The school is first and foremost a physical place, with an online community. This is paralleled by a physical and virtual source of literature, and a twenty-first century ‘bookshop’. We should probably all grab a copy of their “How to Thrive in the Digital Age” by Tom Chatfield. In the whole-of-life approach presented in this paper, it is hard to say that the school is explicitly a retail experience, but equally, it is very hard to say it isn’t. The formal shopfront has been dematerialised and the (retail) experience pervades all decisions from which class to take and when; which venue to attend; which book to purchase, and by which method. Without being a traditional retail experience, it is certainly a hedonic consumptive experience in its focus on the multi-sensory and emotional response the both place and product – a theme covered by Paul Drechsler in his March 2012 SCN article. It is also an excellent example of technology ‘powering’ the experience without it being the experience itself.

So, as we creep further in to the twenty-first century we are still working out how best to use our new information and our new inventions with respect to retail. If we accept technology is the enabling tool of our time and that it is time to rethink our traditional supply and demand model, then we can be less reliant on the crystal ball and more focused on guiding our own future and making it ours. That future will be physical and involve a connection to place, but the ‘old’ retail will be paired with other experiences – education, health, wellness, community, and others we don’t know about yet - that would not traditionally have been called retail, but which will complete our desire for the whole-of-life approach. In this way we will create a future for retail we believe in, not merely define what it looks like.

To make the believable retail world effortless and real, there is, I would suggest, much going on behind the scenes. Before the technological gizmos themselves, are the revolutionary pre-technologies that are driving the devices. These are becoming more sophisticated every day. Near field communication (NFC) is enabling contactless transaction, data exchange, and simplification of the ‘effortless’ purchase. It has so significantly changed our future options for making payments that Radio National’s By Design (30 January 2013) program recently suggested money as we know it is becoming a kind of ‘heritage’. People are seemingly less focused on the monetary transaction itself and more interested in the whole-of-life consumption within a broader understanding of shopping as life than just the physical shop. Therefore, when our future selves look back and ask what was the retail tipping point for our time, perhaps they will place the physical dissolution of money in the same category as the footpath enabling window-shopping and the arcade aiding the emancipation of women.