Shopping is one of our favourite pastimes. Adored by some as a great way to fill the hours of the day; hated by others for the queues, agony of choice and general inconvenience; it is still one of the pillars of the modern economy. Since the advent of mankind, trade has been the fuel for growth and progress, at first catapulting simple tribes and later entire civilizations into prosperity; ensuring that whole cities were situated on lucrative trade routes and requiring the building of incredible retail spaces, such as the still functioning historical Grand Bazaar in Istanbul.
Today we are living at its pinnacle – in the age of malls, shopping streets and a myriad of online stores. Retail is the term that describes the period between the manufacturing of a product to the moment it is sold to the consumer. It encompasses many variations of trade. Global retail sales are projected to amount to 28 trillion U.S. dollars by 2020, rising even further than the 22 trillion it amassed in 2016.
Globalization and trade agreements allow retailers to sell all over the world, making the industry a massive player. According to Forbes magazine the richest person on Earth (at the time of writing) is Jeff Bezos, the founder of a very well-known behemoth – Amazon. His estimated net worth is 131 billion U.S. dollars.
The fourth richest person on this globe we call home is Bernard Arnault, the chairman and CEO of LVMH, the world´s largest luxury goods producer (a conglomerate that has stuffed its portfolio with popular brands such as Louis Vuitton, Hennessey, Bulgari, Dior and many more). The sixth richest is Amancio Ortega, the Spanish billionaire founder of Inditex (a company that owns Zara, the most popular and largest apparel retailer on Earth). His net worth is estimated at 62.7 billion U.S. dollars. There is obviously a lot of money to be made in retail.
Our need for new things is not easy to satiate. In the age of globalization, we are bombarded with advertisements in every conceivable form, enticing us to get the newest, presumably best, freshest items that we simply need to put our hands on at once. Be it food, fashion, tech or mobility, trends change rapidly, making it hard for the average consumer to keep up – a very clever setup that fuels the retail industry, ensuring it can produce ever more product to be sold all over the world, with no signs of slowing down.
New technologies and clever marketing schemes make those things that we purchased but a year ago quickly seem obsolete and dated. Strong forces drive the market and influence consumers, who then flock to physical and online retail spaces to get what they desire and need.
The incessant consumer cycle is simultaneously vicious and fascinating, laden with opportunities for those who know how to spot them. In the golden age of online shopping, physical retail locations are struggling to keep up. After all, in many places all over the world, customers can order pretty much anything anytime they want and have it delivered straight to their doorstep within hours. So, how does one make up for the convenience of ordering something while lounging on the sofa or relaxing in the bathtub with a glass of wine, what can one even offer the consumer, what can be more enticing than such remarkable convenience?
Since the internet age has facilitated an incredible shift in consumer behaviour, can physical retail spaces even challenge online shopping giants, survive and maybe even prevail? Is online shopping just a fad, or is it the only possible future?
Some retailers are already stepping into the future
Amazon – the pioneer and absolute juggernaut of e-commerce has, somewhat surprisingly, started venturing into physical retail. Why would such a company even do that? It dominates the web and has even recently blasted past all other industry titans to become the world’s largest retailer, surpassing even Walmart. Last year the company made 10 billion U.S. dollars in profit.
According to Business Insider, 90% of all retail sales happen offline. As a company that is estimated to dominate half of all e-commerce, Amazon has always had a keen eye for shifting trends and known how to stay on top of them. Jeff Bezos and his team have completely overhauled the world of online shopping, starting the business in a physical bookstore form and then turning into an online company that sells seemingly every item under the sun. Its super-fast delivery service, Amazon Prime, now has 100 million subscribers in the United States alone. The company is also heavily investing in television and movies and is expanding its free shipping model even further. Additionally, Amazon’s cloud computing platform, Amazon Web Services (AWS) provides on-demand hosting to pretty much every conceivable customer – individuals, companies or governments. Amazon is venturing into tech, creating highly popular intelligent speakers and e-book readers used to consume the content purchased on its website.
Despite all this success, perhaps recognizing the growing depersonalization in the technologically advanced world and the modern buyers’ desire to feel and touch the product before making the decision whether to go for it, Amazon has started to venture into what was considered an almost antiquated way of selling things. Namely, in actual “brick-and-mortar”, physical spaces.
Over the past few years the company has started opening stores their customers can actually enter with their bodies, not just their fingertips. The first bookstore of Amazon’s modern era was opened in Seattle in 2015. Nowadays there are dozens of such bookstores across the United States – a move that would have been unprecedented only a few years ago. But books, Amazon’s initial claim to fame, were not all the company set its sights on in the physical retail arena.
In 2017 Amazon acquired the popular upscale grocery store chain Whole Foods and absorbed its 460 stores across the U.S., Canada and Britain for 13.4 billion U.S. dollars. Whole Foods is famous for exclusively selling products free of artificial flavours, colours and preservatives, preferring to source its organic produce from ethically, ecologically and environmentally responsible producers. It caters to a growing community of health-conscious consumers. This move helped set the stage for the next step in Amazon’s evolution.
Online vs. in-store shopping
In 2019 Amazon has opened cashier-less grocery stores called Amazon Go, dubbing the concept “the store of the future”. These retail spaces carry freshly prepared foods and grocery staples, as well as a small selection of alcoholic and non-alcoholic beverages, making them the perfect solution for a quick, healthy lunch. The entire shopping experience is managed with digital technology, similar to that used in driverless cars. Amazon calls it “Just-Walk-Out” technology because the stores feature autonomous checkout – the customers identify themselves upon entering and leave without physically checking out or waiting in line at the cash register. The system is a complex web of computer vision, deep learning algorithms and sensor fusion.
Upon entering the store, customers commence their modern shopping experience by scanning a QR code via their Amazon Go smartphone app, essentially logging-in, and going inside the shop through turnstiles. The store is outfitted with an array of sensors and cameras that allow it to monitor precisely what each customer has taken from a shelf – or has put back. Any picked-up item is automatically added or removed from the customer´s virtual cart, depending on what the person is doing with it, thanks to high-tech in-store surveillance.
The Amazon Go app allows the customers to always see what is in their shopping cart, what they will be charged for upon leaving the store. There are no checkout lines and registers, so when the customers finish browsing, they can simply leave the store without having to queue and waste time. They walk right out, and the online cart in the Amazon Go app does the rest for them, charging their Amazon accounts as soon as they leave the premises. Sensors register which items have been taken outside the store, by whom, and send the receipt straight to the app. All this makes the Amazon Go store a very elegant shopping experience.
The company can even make sure that there is no theft, as the cameras and sensors system is watching the retail space like a hawk. The impressive tech is able to keep track of where each item in the store is located at any time. The system is not yet bulletproof, but Amazon is planning big things for its visionary project.
A new type of convenience is on the rise
Amazon´s physical retail spaces aim to make shopping in a convenience store even more, well, convenient by using modern and visionary technology. The company has recognized that contemporary shoppers are dissatisfied with the in-store experience in most retail spaces and aims to use tech solutions to improve it – and to attract more customers to its own brand.
Instead of replicating what has been done countless times before, the company is simply eliminating most of the frustration caused by a physical shopping experience, as it has done for online shopping in the past. It wants to build a loyal customer base beyond its online haven and mix up their customers´ shopping experience, transforming itself into both an online and offline retailer. Digital technology is the tool Amazon uses to make it happen. And because Amazon already has vast amounts of customer data, it knows exactly how to tailor its stock to what the customers want most, giving it a huge advantage over small businesses and other retailers who don´t have such a valuable ace in their proverbial pocket.
The company does not plan to stop at books and food – there are reportedly ideas to get into fashion retail, a 533 billion U.S. dollar industry that is expected to grow to a staggering 827 billion U.S. dollars by 2023. In this segment physical retail space is of the utmost importance, as customers still prefer to try clothes on before making a purchase – something that is also evident in the online fashion retail model, where customers from well-off markets, such as Germany, have a very high return rate (almost 45 percent).
Stores that can display additional products from the company’s selection, such as smart speakers or any other product group Amazon sets its sights on, will only serve to help the empire grow, boost brand awareness and offset shipping costs – which are actually huge strain on the supply chain. Amazon’s shipping costs rose up to around 22 billion U.S. dollars in the time span between 2015 and 2017. By eliminating shipping from the sales experience and offering products in-store, Amazon can draw customers into the shop and tempt them into spending more than originally planned, even if they only came by to pick up their online order.
As a hugely innovative and creative industry player, Amazon has changed the way we shop, paving the way for online commerce and totally reshaping the customer journey, as well as become one of the top ten most valuable companies in the world. It remains to be seen whether this titan can change the physical shopping experience.
The company is reportedly aiming to open 3.000 further Amazon Go stores in the next 3 years and wants to become a “game changer” in all of retail. So far, the Go stores have been quite small, the size of standard convenience stores. Nevertheless, the company is reportedly planning to open a huge Amazon Go supermarket in Seattle, Washington. Can such high-tech stores be successful or not? That remains to be seen. The future of retail will certainly be thrilling to watch.