Magazines Archives - 2006 January

Technology for the future
Story 4

Success in retail has been getting harder to achieve each year. The consumer is actually changing faster than retailers can change their stores or systems. Retail technology expert Dan Hopping shares his views on how this change in household demographics worldwide is impacting a change in lifestyle and buying habits and how this will impact the store of the future.

Just think how much has changed for the global consumer in 20 years. Digital camera, cell phone with camera, 60GB iPod, short message service (SMS), personal computer, e-mail, commercial use of the Internet, the graphical Web, Web browsers, PDA, laptop computer, cable TV, broadband service, wireless network in the home, the mobile worker, casual dress in the workplace, outsourcing, the contract worker — all of these have evolved over the past 20 years.

The cell phone, which is taking over society, is more powerful and has more features than the best PC of 10 years ago. Teenagers around the world are now carrying a music appliance in their pocket that has more storage than the biggest companies of only a decade ago.

There are now more mobile phones in China than in North America; in North America, there are more mobile phones than households. Just consider for a moment what those items have done for (or to) our lives. Remember the old days of carbon paper, white out, typewriters and pay telephones everywhere? That was the 1980s.

Today, Japan’s DoCoMo phone, which is connected to the Internet, is a credit card, a wallet and a camera.

A consumer can walk into a store, scan a bar code on an item with the phone and find out who else is selling the item and for how much. The consumer can then decide to buy the item either in the store he is in or online, or go to another store to buy. And payment can also be made with his phone.

This dramatically changes the relationship between the retailer and the consumer.

Payment by RFID contactless key fobs are now common enough that I pay for my lunch in our company cafeteria with my American Express ExpressPay key fob. I can buy gasoline with my Visa RFID key fob too. Soon, more mobile phones will function as a credit card, debit card, smart card and loyalty card.

How we live, how we work and how we buy have all changed. And the rate of change is increasing. We are predicting more changes in our lifestyle and expectation in the next five years than we have seen in the past 20 years. I am sure the same may be said of the five years after that.

The changes in the next five years will be in part due to three emerging technologies that are enabling the explosion in pervasive computing. Everything will be available everywhere, faster.

These technologies are Bluetooth, the Semantic Web, and the next-generation Internet.

Transformation for the future

We are seeing a significant increase in the number of retailers interested in planning for the future. Retailers in every country and in every segment are involved with projects to define the ‘store of the future’.

This increase in projects to define the ‘next-generation store’ highlights the awareness in the need for change — not just a little change but a transformation.

This transformation must be based on the future consumer as well as the retailer’s ability to forecast and create demand.

You cannot build the store of the future now. The store of 2010-15 will be using an infrastructure that does not exist yet. It will be enabled by technology that is just now in the research lab.

The primary goal of the projects should be to better understand what business you want to be in and design the store architecture that will allow smooth evolution to the ideal store of the future, without wasting money or resources.

This means that the store architecture should be open enough to embrace the new technologies that will become available without having to throw away old technologies before they are written off by accounting.

Working with these next-generation store projects that look five to 10 years ahead has taught me that it is not about thinking outside the box; it is about the size of the box that you are thinking outside of. Many retail projects are basing their vision for the future based on the technologies that are currently available or are published in magazines.

This is thinking outside of a matchbox and will not get them to the successful store of the future.

The best of the projects I have seen are thinking outside the solar system and are imagining uses of technology that will truly change the retail experience and the industry. I think the final result of the real changes of the next 10 years will actually be more dramatic than we can now imagine.

Privacy and security will be part of the price of admission to be a retailer. The most important factor in de-signing the next-generation store will be the culture of the consumers using the store — and it is not wise to evolve the contact point faster or slower than the consumer’s culture.

The consumer will participate in the decision of what is sold in the store.

And the store will still be where over 90% of goods will be exchanged.

The IT capability of the store will be significantly more powerful and significantly less expensive. Small retailers will be able to do things in the store that only the largest retailers could do in the past. Point-of-sale devices will still need to be enhanced and will have an intuitive user interface.

Human imagination may be limitless but the pace of technological evolution is limited by the available infrastructure. You will have to have the data to make decisions from it. Maintaining timely, accurate data will still, unfortunately, require dogged human discipline.

Role of technology in retail transformation
Advances in technology have allowed retailers to do things a little faster, a little smarter, a little cheaper. Periods of change used to be measured in centuries, then decades; now they are measured in months.

We must remember that the technologies that have made the biggest impact on retailing have not always been exotic. Things that we now take for granted were at one time a controversial new technology such as the telephone.

Sometimes, I long for the good old days of slide rules, mainframes, timesharing and the birth of LANs. We thought it was quite complex at the time. Boy, were we naive. We think that things have now really gotten complex, but it looks like things will continue to get more so.

When IT has to deal with three or four devices active for each user and seamless, wireless LANs are the norm, the infrastructure will be the critical factor. When the retailer has to put Java CRM (customer relationship management) applets on consumer devices, customer service will take on a whole new level of complexity.

At the current rate of increase in complexity, we will soon run out of people capable of keeping things operating smoothly. This has a large impact on retailing as the assets of the company usually go through the store system and disruptions in the infrastructure are going to be costly.

The technologies that increase reliability and productivity will have the most impact.

Think back to 1990. The research and government communications network (the Internet) had just been opened to commercialisation; it was textbased and ran at up to 4,800bps. You needed to know Unix commands to get it to do very much and there were no service providers yet. There were also no retailers on the Internet.

If someone came along then and explained what you would actually be doing with it in 2005, would you have believed him?

Today, we can browse a multimedia database on a palm-sized computer, and download music and movies from interactive websites. Wherever we go we can remain personally linked to more information than what existed 20 years ago.

So what technologies will we be impressed with in 2015?

The store of 2015 will be online to the next-generation Internet at 1,000 times faster than is available now. The Web will know what you want and the browser will understand the content of the screen it is showing you. It will not matter where the information is processed or stored. The infrastructure will be very high speed, very secure and very reliable. The Semantic Web will enable many new capabilities and functions that we cannot now imagine we will need.

The future consumer will be carrying a personal wireless device/phone/PDA/ jewellery that the retailer will be able to communicate with. This device, which will have the CRM/loyalty connections, will be part of the payment system.

Consumers will be able to shop and check out with the device, which will enable the retailer to recognise its best customers when they walk into the store. The retailer can also interact with the customers while they stand in front of the merchandise with money in their pocket trying to make a decision.

One new technology by itself rarely impacts the retail industry. The UPC (universal product code) bar code was the result of the convergence of 16 IBM patents, lasers, computers, improved printing technology, split-beam mirrors, sensors and dozens more.

For there to be an impact, several new technologies must mature at the same time that there is a problem to be solved and at the same time that we will culturally accept the solution.

Pervasive computing requires the convergence of Bluetooth, wireless LANs, XML, Java, the Semantic Web and the Internet2 in order to create an opportunity for retailing.

The business environment of the successful future retailer will be different from the environment of today. The delta will be much greater than the difference between the business models of today and the models of the 1970s. We will never have enough information to be comfortable with our decisions; however, decisions will have to be made much faster.

Technology will enable a retailer to continually enhance the core competency while anticipating the needs of the consumer and building the future business.

The point, however, is not just the technology, but also the use of the technology, to allow a human to make a better decision, more quickly.

The late Stanley Marcus of US-based premier luxury retailer Neiman Marcus Store once said that there would always be room for the best store on the block. He will still be right in 2015.


2006 January Stories:

Central redefines food retailing in the region

Retail outlook: The year ahead

IHHS’ new expo to provide buyers with more focused sourcing

Thailand launches campaign to promote premium rice brand to the world

Technology for the future

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