Fending off retail apocalypse with digital transformation
IN the US there has been much talk of a retail apocalypse, with a large number of retail stores closing as American consumers change their purchasing habits, notably with a move to e-commerce.
Sears, for example, now has fewer than a third the number of retail stores it had 10 years ago. Of the 1,200 shopping malls across the US, some experts have predicted that half of them will close by 2023, and that more than 12,000 stores will close in 2018.
The term 'retail apocalypse' has also come to increasing prominence in the UK as some retailers have gone into administration and stores have closed.
Figures for the start of this year also present quite a downbeat picture of the high street in the UK. City analysts had expected a recovery in sales in January, after the unexpectedly sharp fall in December. But January was a tough month for high street retailers as sales rose far below City expectations.
Indeed, UK retailers have been issued with a stark warning. Retail analyst Natalie Berg says: “The UK retail sector is facing unprecedented levels of change. The convergence of physical and digital retail is accelerating, which will lead to more high street closures and require a complete reinvention of bricks and mortar retailing.”
Some go as far as to say that retail is dying. I would strongly argue that it isn't actually dying, it's just changing - and in a big way. Indeed in 2017 some quite exciting things happened in retail that point to what the future might hold.
Adidas made customisable trainers possible. It partnered with a start-up to create 3D-printed footwear. By using a photosensitive resin that hardens as light hits it, they have been able to create a sole in 20 minutes. These soles can then be easily customised.
In the US, Walmart partnered with a smart-lock start-up called August Home, enabling customers to order groceries and have them delivered and unpacked in their house while they're not there. Customers get a notification when the driver rings the doorbell, and security cameras allow them to watch the process. Amazon later announced a similar initiative, called Amazon Key.
Amazon also launched Amazon Prime Wardrobe, a service that allows customers to try clothes on before they buy them. There is no cost for shipping, delivery and returns, and customers are given seven days to make a decision on items. The more items they decide to keep, the bigger the discounts they get.
Walmart and Amazon are also creating cashier-less stores. Amazon Go uses cameras and sensors to track what shoppers take from the shelves of the store. It then charges them for what's in their trolley when they exit. Walmart has created a new store called Project Kepler, which will use technology to track and charge for purchases without having to use a cashier.
In fact, it could be said that there is actually rising confidence in the potential of physical retail, as this stream of digitally enabled concepts take shape. But the success of individual retailers will depend on how well they are able to blend physical and digital experiences. The store of the future will be less about transactions; instead it will become a hub for both experiences and fulfilment.
The high street will increasingly consist of digitally enabled stores that shift their focus from being transaction centres to engaging showrooms that provide a highly personalised shopping experience. The future of retail means every touch point in shops will be enhanced by technology, improving the entire shopping journey.
Many retailers will feel like they are currently between a rock and a hard place. But with innovation and the right strategy, they can certainly fend off an apocalypse.
Retail isn't dying, but those who don't change will likely have their day of reckoning.
:: Patrick McAliskey is managing director of Novosco, an indigenous Northern Ireland managed cloud company with offices in Belfast, Dublin and Manchester. It employs 180 people and works for leading organisations across the UK and Ireland, including many of the north's top companies, UK health trusts, housing associations and other organisations