Let's try to think of retail 2020 without rhetoric nor idle words. One obvious fact: in the decade just ended, the rise of the Internet has changed the "path" of purchase and the role of the store. This is a trend that will persist in another decade, with both winners and losers as in the past ten years, described as "apocalyptic" by many. For many, even "apocalyptic".
The pace of technological breakthrough is high, and change is ever faster. This will also be the case for retail in 2020 and following years. However, what we are witnessing is not the first major change in the industry's history. To mention just a few, the launch of supermarkets, bar codes scanning and self-service have also been crucial in distribution and shopping.
Digitization, where it has not yet been fully consolidated, is an inevitable and widely recognised goal. eCommerce will soon no more need the initial "e". It will only be a part of commerce as a whole, yet more advanced, and the market leaders themselves will have no reason to highlight an allegedly different nature. It is, as for now, the most efficient way to sell and deliver goods with the aim of increasing volumes, safeguarding profitability and satisfying the customer. That' s it.
For real estate agents, retail 2020 will focus on convenience stores in urban areas, outlet malls, luxury and leisure stores. Along with catering industry as main business: the newly established shopping centers will provide food courts for up to 25% of the total area. Starting from coworking to entertainment, social interaction, cost-effectiveness and experientiality will boost shopping centre visits, thus accelerating the replacement or renovation of last century's shopping malls.
Retailers will need to invest time, resources and money in the strategic advantage of new technologies. The store preserves a distinct advantage for the consumer: the chance to interact with competent staff, evaluation and test of products, and pick them up immediately. Benefit also goes to the retailer, as the growing affirmation of click & collect and electronic payment makes the purchase easier, faster and more attractive even at the shop counter.
The front-end will further strengthen the trend already introduced in our Milanese "exhibition" in September. We are talking about login through facial recognition, scanning items via label, product information via QR code, virtual shopping cart and check out via smartphone, which will hopefully establish itself as a shopping method in the store.
Deliveries and logistics
In retail 2020, the war of delivery will continue and worsen. In the U.S., logistics and shipping activity is changing Amazon's role from customer to competitor to all major carriers, from postal service to Fedex and UPS. The war will be comprehensive, and strong responses, such as insourcing by major players in the market for the last mile, can already be seen.
Retailers compete on the attractiveness and simplicity of the service, including costs. Given the need to have goods in strategic locations and with efficient courier facilities, warehouse construction has grown at an average rate of 29% over the last 5 years. Shopify plans to incorporate seven new warehouses in 2020, investing $1 billion to meet the needs of over a million merchants using its Fulfillment Network.
Nevertheless, it should also be pointed out the growing concern of public authorities for the problems of traffic congestion and pollution caused by the widespread use of vehicles on the road for home delivery. Road transportation regulations in cities will inevitably become increasingly restrictive, with serious consequences for the management and cost-effectiveness of the service.
Food and beverage
Food delivery is always at the top (although contradictory on the profitability of the service and work ethics) but must answer for the sustainability of delivery in 24 hours at a competitive price. The size of the investment is crucial, and the combination of subjects is inevitable. "Dark kitchens" are rapidly growing, with no customers and waiters, only chefs and delivery men. Many hotels are considering using them to compete with traditional restaurants. These, on the other hand, will find protection in technology: kiosks, self-ordering and self-payment apps, integration of orders to suppliers and home delivery services.
Today, more than 40% of eCommerce transactions worldwide take place in China, compared to 1% in 2005. China's "digital nativity" has enabled the development of purchasing, payment and order fulfillment, automation and personalization technologies at much higher rates than in the West. While two-thirds of American mobile phone users are still unwilling to use mobile payment, the adoption rate in China is 100%.
We are talking about a market larger than the US, UK, France, Germany and Japan combined. Inevitable, in the medium and short term, the influence on Western technologies and business models. Although not the whole European area will be able to claim the same level of penetration as the United Kingdom (now at 20% of total distribution), the retail 2020 will still see the share of online commerce grow, although with different estimates of the actual incidence in different countries.
Will Amazon's will last forever? Antitrust and tax evasion aside, there are also opposite signs. Several brands are beginning to question the value of the partnership, and renowned Wall Street analysts like Randy Konick openly say that "brands don't need Amazon". In November, Nike announced the end of the business relationship and the removal of its entire offering from the platform. Even heavier still is the stance of the American Apparel & Footwear Association, which represents over 1,000 brands including Adidas, Gap and Target. Amazon is accused of creating a black market for counterfeit products.
Ours, to retail 2020 operators and retail workers. There is a need: outside the store, the world does not seem to be getting better. Far from it.