There’s a shakeup going on in the retail world. Across the country the once-popular high street chains that seemed unstoppable have ground to a halt and are starting to shut up shop for good. As internet shopping has reached maturity – its effects are becoming more and more far-reaching. Whilst there’s been much speculation on what the future holds for the high street, the prevailing consensus seems to be that the physical stores are about experience, about a destination as much as about selling stock. It’s one reason why places like Garden Centres are thriving with the right attitude.
I want to explore though what the future of retail really looks like: and that’s digital. Much is said of the rivalry between Apple and Google with their competing tribes of device evangelists, but it’s Google and Amazon where the space-race of internet retail utopia is happening. Both companies naturally have a lot else going on but a key battleground for both is how you buy products. It’s been said that Amazon’s goal is really to “take a share of every retail sale in the world”.
As we’ll see, both Google and Amazon have started with two very different retail models, only to find themselves drifting (or indeed, hurtling) closer and closer together. Google is the place where people start their buying journey, with the search results page listing retailers or products. Those retailers bid for space to advertise there, knowing that they are reaching buyers who have a strong likelihood of buying that product.
Amazon started as a store but has evolved into a marketplace, hosting multiple retailers who trade through the platform, using amazon’s payment and distribution services and paying a healthy cut as a result.
But how is this changing? And what does that mean for the future of retail? Well, for me, I think you can identify a handful of trends that add up to a big change:
Generic products — this is the trend of products to become more and more commoditised. The majority of the day to day things you buy are starting to have fewer brands that matter – supermarket own brands make up over 50% of our weekly shops*. Take a look for something like bike lights or saucepans on Amazon and you’re met with a slew of meaningless brands, measured only by reviews.
Google Shopping — it’s not new, but it is significant: instead of listing results of retailers that sell a product, Google now takes a feed from a merchant site and allows them to pay to show their product first, along with picture and price. It’s part of a wider trend of Google pulling semantic data into search, and taking a cut of the profits as a result.
Voice — Now I’m not one of these people who is predicting that 90% of all searches will be on a voice device: voice is a useful input rather than a great 2 way communication (have you ever tried phone banking?!). But voice is a key battleground for Google and Amazon, and that’s because of search
Search is what both Google and Amazon are competing for: to be the place you look before you buy a product. Amazon doesn’t necessarily want to sell every product, it wants a commission, it’s recently launched a new ad platform and is moving closer towards Google’s pay-per-click search result platform.
Imagine a world then when you want a new toaster. You search or ask for one on either Google and Amazon – and they send you one, that has good reviews, and works. Who wants to spend hours choosing a toaster? For the retailers, their efforts are little more than bidding to be the top result for toaster, and getting the chance to fulfill them – making them little more than a distributor.
So where do brands and retailers sit in this tech utopia? Brands have, and always will be a luxury that people will pay extra for. Brand focus will be getting consumers to search on amazon for a Dualit toaster, the mechanisms may change (for example, I expect to see many more brands focusing on direct selling). The jury’s out though on products that can be readily commoditised – will we look back in 50 years’ time and wonder why people bothered choosing a brand for something as mundane as washing up liquid?
For retailers it’s a different story – and a tougher one. Price, and general availability won’t be enough to differentiate yourselves. Here’s two areas where I expect savvy online retailers to thrive:
Experience — just like the high street today, the online retailers will need to offer an experience, whether that’s through discovery, inspiration, knowledge or customer service
Niche/Luxury — people will always want to stand out of the crowd – and those retailers that offer luxury products and a range that isn’t available anywhere else will thrive
So that’s a prediction, it’s one of many, and it may not be pretty, but you can see many of these trends emerging already. Hell, this might even be a 5 or 10 year vision, only time will tell. Until then, brands and retailers need to think hard about how they are going to face the giants of the technology world – before it’s too late.