English | EN Future of Retail: Nightmare on Elm Street
Jul 9, 2014
In the 1984 horror classic “Nightmare on Elm Street” the world of dreams and the physical world were connected. People got attacked in their dreams, and woke up physically hurt, or even dead. This virtu-real scenario is unfolding in many parts of the economy today. Like in retail, where brick-companies are hurt by virtual retail challengers.
The times pinching yourself in the arm and asking the question “Is this really happening to me?” are over since 2010. When you look at the staggering yearly growth rate of Amazon in 2010 – 213, we see 20% – 40% rates, adding up to an expected 80 billion revenue or more in 2014. The biggest off-line retailer in the world, Walmart, for the first time is even showing faster e-commerce growth rates than Amazon, while offline sales in retail overall are declining. Buying virtually is getting in the DNA of the 21st century consumer. Almost 70% of the Americans bought electronic goods on-line, 63% bought clothes and 20% buy daily groceries on-line. Countries like India and China are showing the same trend. The famous Chinese company “Alibaba” sold for $ 5.75 billion of goods on their virtual platforms Taboa and Tmall, in only one day (11 november 2013).
Internet of Things is the bricks-and-mortar revival
A nightmare on Elm Street is about the physical and virtual world melting together. And although companies like Barnes and Nobles, Staples and Gap are closing hundreds of shops since 2011, the Elm street nightmare of death in the city, empty streets and closed down shops, is not the only possible scenario. In reality retail is getting virtualized in such a way that bricks and mortar are becoming the new e-commerce platforms. All because of the internet of things. Michael Chui, partner at the McKinsey Global Institute, is very positive about these new possibilities.
“A lot of things we can do online, now, with the internet of things, we can also do offline. Bricks-and-mortar-stores have seen nothing like it”.
One of the dramatic changes in the customer experience Chui predicts is that buying stuff in a shop will feel like stealing. You just grab what you want and walk out of the store, you pay automatically. Jeff Jordan, partner at a Venture Capital fund created by Marc Andreesen and Ben Horowitz, in January of this year stated:
“We’re in the midst of a profound structural shift form physical to digital retail…it’s happening faster than I could have imagined”
The 21st century retail script
When you read the script about technology in the 21st century, you read about all these new technologies that start working together. Social media, mobile devices and apps, consumer analytics, cloud solutions and connected things (The SMACT acronym). Put these technologies in the context of a (smarter) city and scenarios unfold in many different directions. Take Starbucks for instance. More than 1 billion of revenue is going through their own mobile payment app (14% of total sales). Turning the nightmare of waiting in line to pay and order into a convenience – and while doing so – creating an engagement platform that can analyze and anticipate on individual behavior. Payment on mobile is getting trendy. PayPal for instance had an almost non-existing mobile payment in 2010 and now does $ 30 billion in mobile transactions.
In London, Regent Street over a length of 1,5 kilometer will deploy iBeacon technology. This announcement lead to the headlines of “Regent Street becoming iBeacon street”. This cheap-on-energy bluetooth technology enables stores to connect to buyers and do special real-time offers. A future of iBeaconstreets all over the world would certainly change retail. Walgreens, Maceys, Tesco and American Eagle are also starting with iBeacon pilots. Whether or not this specific technology will be a success, the real-time location based advertising is expected to take off. Berg Insight for instance predicts a $ 10,7 billion market in 2018, coming form just over $1 billion in 2013.
Or take another scenario. Amazon again, who is really serious about their drone-delivery. What they are saying “It looks like science fiction, but it’s real. From a technology point of view, we’ll be ready to enter commercial operations as soon as the necessary regulations are in place. The Federal Aviation Administration (FAA) is actively working on rules for unmanned aerial vehicles. Yes. One day, Prime Air vehicles will be as normal as seeing mail trucks on the road today.
The only approved commercial drone operations are at the arctic and done by BP, but Amazon is very optimistic drones will be allowed for commercial use in cities by the FAA.
The Future of Smart Cities dreams and nightmares
How we buy our stuff, products and services, will have (already it has) impact on how cities will look like. City life and bricks-and-mortar retail companies for a long time co-created the cities of today. Whether or not we’ll see a complete city of drones, a modern version of the movie Metropolis, or shops as super effective delivery centers, where you can walk out with the goods as a thief, as Michael Chui is suggesting, two lessons can be learned.
1. There are many ground braking scenario’s, each of them impacting parts of the value chain – payment, advertising, delivery, real-estate, insurance, entertainment and so forth – Only one or two of the scenario’s have to become reality to cause a chain reaction, and change cities as we know them today.
2. What’s smart and what’s not for a large part will be decided by consumers. Smart cities are can’t be dictated by tech companies and city planners. In between the virtual and the reality are people. How and where they want to buy stuff will be one of the important factors in shaping future cities. And buy the way, this can go faster than ever expected. Technology is lifestyle, it’s in our DNA, the platform is mature.
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