Retail as we knew it is dead – time to start discussing its rebirth

Retail as we knew it is dead – time to start discussing its rebirth

In retail today, people have become accustomed to hyperbole. Consider, for example, the tiresome manner in which ‘revolution’ gets appended to any term imaginable (eg the mobile / digital / AI / vaping revolution), the way in which every brand claims to be offering the ‘new’ way to do something (diet / exercise / eat / drink), or the total saturation of the concept of disruption.

The truth, however, is that most of the time there is very little genuinely revolutionary happening and things continue on broadly the same as before. Which, in retail, is toward a cliff edge. It is barely even evolution, let alone revolution.

It’s a shame that this marketing maelstrom numbs us so, because retail is in serious need of actual revolution. It is, as many of the performance indicators suggest, in absolute freefall. Sales growth rates and shopper confidence leading into the crucial Christmas trading period in 2019 are both very low; it seems likely that Q1 of 2020 could be a brutal time for retailers. Even the biggest and most successful are finding it tough.

And yet we can’t claim to be surprised that it’s come to this; we haven’t done anything to stop it. It has been coming for years because the models we have persisted in using are based around 20th century values and processes, with 21st century technology appended to them. The two, unsurprisingly, don’t equate to great efficiency; the technology should be the focal point, with values and processes built around what it can do.

We have to go much, much further than the usual marketing platitudes if we are to make retail appropriate to the modern age; because it isn’t retailers who need to change – it’s retail itself.

What has gone wrong

One of the primary areas where we can easily see why our model of retail is out-of-step with the modern age relates to how we measure success – retail is still based around selling more stuff, continuously. If sales are up, things are generally considered healthy. The markets are content, no scare stories in the press, everything is as should be.

But simply having a model that rewards selling more stuff all the time actually feels a bit archaic today. The promise of having so much data available is that we could sell the right stuff to the right people at the right time – the old retail mantra – which should invariably mean selling less stuff, just more efficiently. If we consider the intense pressure on businesses to improve environmental performance, this seems like an approach that would tick several boxes there. Problem is, the markets and the media would regard that as indicative of poor trading performance under current rules.

In many ways, the technology to enable this more focused approach to be possible is already out there; what is lacking is the systemic prerogative to collaborate around data, so there are blind spots everywhere. So much of what we do can be, in many cases is being, tracked. But each of the companies that hold that information tend to keep it to themselves, creating the greatest structure of data siloes imaginable. It’s difficult to think of a model less collaborative, efficient, environmentally-optimised or 21st century in nature.

Again, current retail logic would find this idea absurd; sharing information with a competitive company would traditionally be considered tantamount to madness. But we can’t sell the right stuff to the right person at the right time if our view is so myopic. The fact is, digital technology gives us a possibility that tends to get precious little focus – the near total eradication of the generic in engagements between business and customer. Not tomorrow perhaps, not next year, but at some point over the next few decades it will start to seem incredibly inefficient to try to provide customer experiences that are uninformed by vast and disparate datasets. And that demands a model of data-sharing that would be unrecognisable from how we operate today.

Rather than just trying to put retail back together again, in the hope that everything returns to normal (put it down as a Brexit blip, perhaps), it would make sense to start pivoting toward getting an appropriate infrastructure in place that can enable 21st century customer experiences explicitly because it is collaborative, efficient and environmentally-optimised.

Genuine personalisation as more than a marketing term

Of course what we are talking about here is, in a retail sense, known as personalisation. In a nutshell, it currently means connecting someone to something of more relevance to them, as opposed to showing everyone the same selection every time. In terms of its practical application, how effective it is at doing this directly correlates with how granular and varied the datasets are that inform it.

We have to remember that ecommerce is only 25 years’ old; any sophisticated version far younger. Ten years ago, personalisation meant using someone’s name in an email in place of ‘Dear Sir / Madam’. It has come a long, long way since then; where it will be, what it will mean, how useful it will be in another ten years is dependent on what we do to enable, or indeed hinder, it.

All the various data that exists in siloes (or: companies) on individuals, if put together, would likely map out each individual in ways that would make profound understandings of them possible. And that’s today, right now; imagine the extent to which that will multiply in five-to-ten years, then again in 20 years, as our use of digital technology increases and more and more smart services become available. Using that information in a cross-referenced way, across and between all businesses, both in the interests of the individual and to greatly enhance the efficiency of those businesses, would seem to suggest a future model for retail wholly appropriate to the challenges of the age. Maintaining our current approach, where millions of businesses act as millions of little siloes, each shielding their own little jigsaw piece of each individual, essentially ignores what digital technology does.

Genuine personalisation, when you really think about it, at scale and intelligently implemented, feels less like a marketing term, more like a governing system.

Changing the rules

Of course, this level of change seems very radical, but actually all I am suggesting is we follow rational retail principles. The current solutions to the high street tend to focus heavily on making retail more amenable for business (reduce rents / taxes, force people back into shops etc). The focus of retail has always been, and should always be, on the customer. That logic doesn’t need to change.

What does need to change is our reliance on marketing terms as a replacement for actual, meaningful shifts in operations – talking about ‘customer-centricity’ or whatever the buzz term replacing omnichannel is this week. It means picking out some of the conventional wisdom – the things we assume to be natural or inevitable – and assessing whether they are still, in fact, valid. Because at the moment, they aren’t doing a great deal to reposition retail for the 21st century.

Retail, today, remains a game of accidental connections; we manufacture and supply things based on perceived demand, which is by definition a generic concept. An infrastructure in which everything that happens turns into data to be cross-referenced, contextualised and understood demands a reappraisal of the fundamentals that underpin it, because the system of value we use currently was not designed with it in place.

To start this process, we have to consider whether conventional retail business logic still stacks up, otherwise we know that we will be trying to rebuild retail on shaky foundations. And the most fundamental of these relates to how we determine value.

Interactions between business and individual

Under a monetary system, a thing is said to be ‘worth’ something. Value has to be situated within that thing – it has to exist somewhere for it to be calculated consistently. Hence we say ‘this car is valued at £5,999’. That is what it is worth, based on a number of factors relating to its manufacture and supply, and an individual needs to be able to possess that amount of money (or be able to qualify for sufficient credit) to purchase it. That is where value sits; in the transaction.

Is that location still relevant, given the changes brought about by modern technology?

The individual, in this context, is defined as a ‘consumer’ – a pre-web definition of individual, who exists in a complex supply chain but is always positioned at the end of business sequences, where they consume the products and services that businesses have created. They are not recognised as individuals and have no direct involvement at any other stage of business processes – such as planning, design or supply.

When an individual can be understood comprehensively, they cease to be the end-consumer. They instead can potentially become, by virtue of their connectedness to everything, involved in the planning, design and supply of products and services – consciously or unconsciously – because there is an on-going and, arguably, endless stream of information created that says what happened before, during and after the connection was made between individual and thing.

In this situation, it doesn’t make sense for retailers to own the information about that connection (the ‘during’), and ignore the ‘before’ and ‘after’ because other companies (or: data siloes) own that information. The retailer takes on a level of responsibility, so they are able to assess the accuracy and relevance of the connection made. If an individual purchases an item due to the way it was cleverly marketed to them, but never uses it, there is very little value accrued for any business – or individual – involved. The whole process was, in essence, a waste of time and resource, but if when such mismatches are made the retailer takes it back to find a better connection, value can start to be produced again.

Only through looking at the full end-to-end lifecycle of each item in detail can we begin to understand value in a modern sense. ‘We sold this at X price’ seems wholly insufficient now as an assessment of the value produced.

Metrics should be specific to individuals, not businesses

Central to enabling this is a shift in where metrics apply. Even in a situation today where all data siloes within a business have been removed (ie all systems communicate seamlessly, the underlying processes between departments support it etc), the accuracy of that personalisation is still highly restrictive – due to the fact that the view the specific retailer has of that customer is necessarily limited to engagements they have had with them. It does not cover engagements that customer had in the lead up to, or subsequent to, the interaction between retailer and customer, perhaps involving multiple other businesses.

The most logical way to remove such unnecessary inefficiencies – given that so much complementary data exists elsewhere – is to acknowledge that metrics can only reveal accurate readings if they are specific to each individual rather than specific to a business’ engagements with that individual; so the success of any business activity only has any value in relation to what it achieves for a specific individual, not what it achieves for itself in the process.

In the 2020s retail is going to change past recognition; over the past decade it has evolved in a way that hasn’t really taken the customer with it. Shifting higher volumes of items at lower prices, faster and faster, was a successful model for a period, but that approach is simply not consistent with the extreme pressure retailers are now under to greatly improve their environmental performance. Retail appears to be heading toward some kind of low point at the moment, but that doesn’t suggest a bounce-back is imminent; the change has to be a lot more profound than any plans have seemed to date.

This institute has been set up to explore these ideas in detail, to stimulate debate and identify models for retail in the 21st century that are, admittedly, radical, but necessarily so – the model we are operating today, and principles that inform it, has become so obviously redundant that radical approaches actually seem more rational. It is the sensible, tried-and-tested, slow-and-steady, easy-does-it approaches that are foolish in this context.

People working in business today often tell us that data is everything in the modern world. This institute exists to extend that logic – because, if that is true, then businesses don’t need economics to determine value anymore; we need to acknowledge that data can be an end in itself.

Find out more – visit our research section

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