Technology will dictate the shape of retail to come

Given the extraordinary pace of change in retail these days, it’s reasonable to look beyond the current circumstances and think more critically about what the future holds. There is concern as to when the current turbulence will settle, but we prefer to think less about the bumps in the road and more about the destination.

The consumer marketplace is evolving, and that evolution is taking us to some fascinating places. From changing consumer preferences to fundamental shifts in the ways we think about and use spaces, the retail is taking on a markedly different look. What are those differences?

The industry is currently on the far side of a not-unfamiliar cycle, where rents get too high before correcting and starting to come back down. But the Amazon’s role in this retail evolution makes what comes next uncharted territory. The rapid growth of mobile and online retail has been a wake-up call for retailers. As it became clear to several national brands that they needed to adjust their balance of brick-and-mortar with online, many put the brakes on expansion. Others realized they simply didn’t need as many stores as they once did.

By far the biggest challenge for retailers today is adapting to and making choices from a wide range of new technologies. The cost can be significant. Technological disruption can make optimization difficult, and the unfortunate result is wasted dollars and disgruntled customers. Retailers need to think strategically about what technological advances are right for them, and they need to do so with context in mind at all times. They need to consider how people shop, use, and experience physical stores. More importantly, they need to explore what role experience plays in a brand’s retail formula.

Sephora’s digital mirrors are merely the beginnings of a burgeoning presence of augmented and virtual reality in retail. It won’t be long before people can “walk” through a digital mall together without leaving their homes. 3D scanners and x-rays that send people their measurements and allow for precise and convenient customization will soon become standard. Digital payment apps like Apple Pay and Venmo will soon be ubiquitous. Big data algorithms will track customer spending habits and preferences with increasing precision, and artificial intelligence and GPS data will target and merchandise with remarkable sophistication.

Delivery is a brave new world for retailers. Online innovators have a significant head start, and their work has raised the bar and changed consumer expectations. Delivery by drone is not science fiction; it’s inevitable. Homes will soon be designed with integrated new technology that “knows” when you are running low on consumables and will auto-order it for you.

Physical stores will increasingly be focused on convenience, service, and streamlined experiences. Automated valet parking will use vehicle “vending machines” that save space by stacking and double parking cars. Existing parking technology to make deck parking easier (vacancy indicators, advanced wayfinding, parking apps) will continue to become more widespread. Some companies are eliminating parking altogether, paying for their employees to use Uber to get to work.

Speaking of Uber, Walmart has experimented with using ride-sharing programs like Uber and Lyft to deliver groceries. It seems clear that transit innovation will figure prominently in the future of retail. Think-tanker Tony Seba and tech investor James Arbib undertook a study on the changing transportation paradigm and predicted that the number of passenger vehicles on American roads will plummet from 247 million in 2020 to 44 million by 2030. Designs will change accordingly (fewer parking decks, more pick-up/drop-off areas), as will services (shoppers can choose to have their selections delivered, for example).

At the same time, online-only retailers are recognizing that establishing brick-and-mortar presences is a prerequisite for growth. The mattress brand Casper, for one, recently announced it will open 200 new stores. Online brands “going analog” is a great way to connect with consumers and expand a brand’s footprint. Brands with a following and a strong online presence can hit the ground running. Pop-up shops have also proven to be a great way to test new concepts, and will almost certainly become more popular and prevalent.

The clawing and scratching to get to the future first will be fierce among retailers, and we’ll likely see a shakeout going forward. But let’s sit back for a second and embrace the fact that these are exciting times, filled with so many new experiential concepts, ideas, and technologies. Brick-and-mortar retailers are no longer panicking about online competition. Instead, they are turning to innovation and creative new ways to pave the way forward.

Theresa Johnson, Jedd Nero, and Stephanie Skrbin are all senior executives in Avison Young’s retail sector. They can be reached at [email protected], [email protected], and [email protected].