The future of retail – what fundamentally changed in the last decades

I recently talked at a TEDx salon about the future of retail shopping. In preparation of the talk I was wondering about a very simple question I wanted to answer in the presentation: what was the biggest change for the retail merchants in the last two decades?

Ok, “online” is the obvious, yet easy answer. And I think it’s too simple to answer what happened and will happen with the retail domain. I think what really changed (dramatically) is the playground the merchants act in.

The internet made something possible which wasn’t even imaginable two decades ago. It cracked up a playground that was until then very well defined and slowly moving. The stakes in the high streets and city centres were set and the retailers had their business. Changes of property happened just once in a while. Players entering or leaving the market were pretty rare.

Earlier playground extensions like mail order or TV shopping had already some impact, but in a limited way. So overall: the old retail playground had a quite hard competition already, but in a slow moving environment with a pretty stable foundation.

Online disrupted retail so hard, because in just a few years it multiplied the retail space massively. New players entered the market on a weekly basis, competing for the same customer base. Imagine you just could multiply the retail space of major town 1000 fold. Now think of the impact for the old merchants. That is pretty much what happened (just a lot more so). If you compare the products on display you get the dimensions. The Kaufhaus des Westens (KaDeWe) in Berlin, which is one of the biggest retail stores in the world, has 380.000 products on display. If you look at amazon.de you can buy 150.000.000 products. That’s nearly 400 times more.

Also I think it’s wrong to look at online and offline as two worlds (which is pretty common), simply because there is just one retail world out there. The customer doesn’t care about worlds. He just has an urge to make a purchase, to get a product. And who ever is able to serve this need will get the sale. Be it the online or the offline merchant. A lot of customers anyway do not separate anymore today. They go with a retailer on a more classical decision base (I will cover this in a separate post soon). The factors are:

  • Service quality
  • Pricing
  • Availability
  • Shipping options

These points are the same for all merchants out there. Therefore I guess we better should start thinking of the retail space as one big playground that needs to be adressed by merchants in an individual but unified way. The customer needs to recognize the merchant easily independent of the channel of access. The customer wants to use all online and offline ways frictionless to fulfill his shopping needs. They don’t want to travel between worlds.

This one retail world just became much bigger in the last two decades and the challenge for the merchant is to find their place in this huge space. But that’s true for physical and virtual merchants. I guess that thinking of the playground as two worlds is still one major problem of the physical retailers. They think and act, as if these worlds are well separated. They still see these separate channels and most of them have their internal structures set to this. One example is that for some retailers their online shop is internally still treated as on of the physical stores – even with a turnover that’s bigger than all physical stores together.

But in the end they are all just retailers out there. Physical or virtual just sums up in a couple of advantages or disadvantages for the customer in the buying process.

I will cover some of the major challenges for retail merchants in a series of posts about the future of retail. So stay tuned.

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