Napoleon once dismissed Britain as “a nation of shopkeepers.” The description is still apt, but if researchers are right there may soon be a lot fewer of them.
The Centre for Retail Research’s analysis of how UK retailing will change by 2018 predicts that total store numbers will fall by 22%, from 281,930 to 220,000 with over 300,000 job losses. The High Street will continue to suffer with around 41% of town centers losing 27,638 stores in the next five years.
The economy is not the only thing to blame. Shopping habits are changing radically as more people buy online or via their mobile phones. Indeed, the share of online retail sales will rise from 12.7% in 2012 to 21.5% by 2018, according to the Retail Centre’s 2013 report.
“There is a revolution going on,” says Paul Coby, IT Director at John Lewis, a British High Street retailer that opened it first store in 1864. Online-only stores such as the UK’s Net-aPorter are opening pop-up brick and mortar outlets. And retail stores are going digital.
If pundits are right soon anything you have earned in the online or offline world will be digitally recorded and automatically deducted at time of purchase, no matter where you buy.
And, since payments are mobile, soon they will no longer be tied to old-fashioned cash registers, freeing sales assistants inside stores to help customers check out and pay from the aisle or the changing room, according to predictions made by PayPal CEO David Marcus.
Window shopping is set to take on a whole new meaning: city dwellers out for a stroll will scan items on mannequins with their mobile devices and click to buy and ship, even if the high-street store is closed for the day. And context-relevant location-based shopping experiences are expected to become the norm. In an aisle of men’s suits, for instance, a consumer could pick one out and the sensor on the garment would interact with the shopper’s smartphone to direct him to a nearby rack for a recommended accessory, such as a tie or a belt, including personalized content.
In this new world merchandise and promotions must not only be consistent across all retail channels, adapting to consumers who want to use different channels simultaneously, brick-and-mortar retailers will need to personalize offers according to a consumer’s purchase patterns, social network affinities, website visits, loyalty programs, and other information gleaned through data mining.
Against this backdrop, John Lewis has decided it should bring innovation in from the outside, engaging with start-ups for the first time, via an incubator.
“We have no monopoly on good ideas. JLAB [its incubator] is about what we don’t know,” says Coby, the retail chain’s IT director. “It is about genuinely opening up to what tech can bring and opening ourselves to what customers want from us. We know our customers want to buy things and want a relationship with John Lewis and we want to give them as seamlessly as we can a great assortment of products across all channels.”
The company has made a good start on adopting an “omnichannel” strategy that blurs the lines between mobile, Web and HighStreet outlets, he says. But it needed to find an efficient way to interact with young tech companies on what’s coming next.
JLAB “was really born out of frustration and guilt,” says Coby. His inbox is always overflowing with pitches from start-ups. “I think every salesperson in Western Europe must have gotten my email,” he says. “There was frustration in knowing there was gold and uncut diamonds in all those emails and guilt because it was impossible for me to give them the time they deserve. What I wanted was to create a structure, an innovation funnel for all those great ideas.”
More than 200 start-ups applied to be part of JLAB. With the help of mentors, John Lewis whittled that number to five finalists.
The incubator is a chance for John Lewis to figure out if what’s hot in tech makes sense for its customers. Take the case of Beacon, a low-energy Bluetooth technology, which is being promoted as a way to offer real-time personalization and customization of offers for customers in-store. Coby is approaching the technology cautiously. “We have to look at how to engage customers in-store,” he says. “But I think we have to ask, ‘Is the technology adding something the customer wants? Is it going to help their shopping experience?’”
Today legacy cash register systems are not Internet-connected, putting bricks and mortars at a competitive disadvantage. When you shop online a site knows every detail about you. You could enter a brick-and mortar-store every day for a week and they wouldn’t know.
If Beacon technology is not the answer to engaging customers in-store something else might be. “Creating an incubator is a great way to understand all the ideas that are happening out there and expose ourselves to those,” says Coby. “We are hoping to build great companies and great products out of it but most of all we want things that will delight our customers.”