Imagining the future of retail

If ever there was an industry ripe for innovation and redesign, it’s retail, a sector brought to its knees multiple times over the last couple decades.

This isn’t news to anyone who works in or follows the retail industry, but the meaning we apply to it—consumer preference for digital platforms and the rise of e-commerce—has become distorted. The unraveling of traditional retail began long before Amazon. It began, in fact, at a time when the retail sector was at its most profitable.

To design the future of retail, we need to understand how we got here.

A brief history
Modern retail was born of the Industrial Revolution, when the manufacturing boom created a higher standard of living. Department stores and specialty merchants answered the tastes of a more affluent population, and retail shifted from a simple utility to a means for fulfilling desire. The economic prosperity of the post-war period, and with it the migration to the suburbs, brought about the first shopping malls and laid the foundation for a new era of retail as destination and entertainment.

By the end of the 20^th Century, price and convenience had become the primary drivers of retail. Corporate chains had increased buying power and were able to drive down prices while still achieving record-breaking profitability. The 1980s, ‘90s and early 2000s were marked by mergers and acquisitions, rapid expansion, and a frenzy of store openings as large retailers grew larger and sought to maximize growth, until hitting a wall of market saturation.

Amazon launched in 1995, but wasn’t considered a threat as it merely sold books and music. In fact, Amazon’s model had little to do with what it sold but rather, how it sold —less a retailer than a platform. Like the big-box retailers before it, Amazon traded on price and convenience. But in the future it was defining, these were table stakes; Amazon’s real business model was understanding customer behaviors and preferences at such a granular level as to be predictive.

Customer connection through experience design
Retail’s “success,” at the height of its growth and expansion, focused on profit over innovation and neglected to consider consumer needs. Consumers were left with a sea of sameness, with little differentiation between competitors—a landscape ripe for disruption. The explosion of online direct-to-consumer brands (DTC) answered people’s desire for products and experiences that felt unique, personal and in tune with their individual needs.

Early DTC brands like Casper, Everlane and Harry’s built disruptive business models by putting service design at the center of their offerings, creating a frictionless online experience that feels both personal and intuitive. These brands disrupted the status quo by returning to old-school customer-centric fundamentals and set a new bar for high-touch customer experience in the digital age by:

• Building personalization into the shopping experience and the product experience.
• Using data to make predictive recommendations that feel personal.
• Establishing trust through authenticity and transparency.
• Fostering connection through shared missions and values.
• Concierge-level customer service.

Designing the future of retail
COVID has shaken the sector, but the constraint of store closures has triggered and accelerated innovation in myriad ways. The brands that are thriving responded to the changing needs and expectations of consumers and used technology to rethink what’s possible, evolved their service design and put customer experience at the center. Trust has been at the heart of retailer-customer relationships since the earliest times, but the sentiment has taken on fresh meaning during the pandemic.

Designing for trust can take different forms. In the old world of mom-and-pop shops, it was built over time through one-to-one interpersonal relationships and community standing. In the heyday of corporate retail and mass media, trust was built through brand messaging and the delivery of consistent experiences. But in the digitized future, trust is built by reducing friction, putting the customer at the center and anticipating their needs and desires in every interaction.

As retailers look ahead and consider the investments they’ll need to make to future-proof their brands, these are some of the principles of service and experience design they’ll need to consider:

• Know your customer and focus on clearly defined segments, using qualitative data to reveal insights.
• Design services and experiences based on customer needs, rather than internal needs of the business.
• Include the customer as a collaborator in the design process and utilize ongoing feedback loops.
• Design experiences to create customer value.
• Use data and machine learning to reinvent personalization through personal data points, habits and interests.

The future of retail will manifest in different forms, with blurred lines across physical, online, social, mobile and virtual spaces. But the common thread is that people must be at the center. Retail is in service to the customer. And trust is (always has been, always will be) the most important currency in the exchange of money for goods.

Hunter Sunrise is head of strategy at Modernist Studio.