Industry Division G is about retail trade. Its about the purchasing and on-selling of goods to the public, where those goods do not undergo any significant transformation. It is an industry that has had a very long history. Picture, if you will, how it used to be: itinerant peddlers trudging along ancient trade routes. To how it is now – a panoply of goods moving quickly from one part of the globe to another. Much has changed – the market is now full of people and organisations selling bits (digital goods), as well as atoms (physical goods). And so, that is what this article is about – change. Specifically, what could happen in the retail industry over the next 10 or so years? From an individual perspective (eg. career prospects) and from an organisational perspective (eg. business prospects) it’s a look at what is likely to change as time progresses. These are Insights from a futurist on this industry – a perspective on what could be.
As with other articles exploring the future for different Industry divisions, the focus is just on the impact of two global megatrends – computerisation and climate change. Societal and demographic global megatrends are other global megatrends (eg. global population is set to reach about 10 billion by mid-century. And religious affiliation is shifting from its current 31% Christian, 24% Muslim, 15% Hindu, & 16% unaffiliated to 32% Christian, 31% Muslim, 14% Hindu & 13% unaffiliated at about the same time the 10 billion figure is reached). These other megatrends may not have as much influence on retail trade as the two that are
the focus of this article.
About the global megatrend of climate change
Through observations, we understand that ocean temperatures are rising and that the number of extreme weather events are increasing. What has also been a slow but sure drift in what has been observed of local weather patterns. These are measurably shifting, with a consequent impact upon local economies – whether they be in rural or urban, coastal or inland locales (eg. over the last 50 years the region that is classified as “the tropics” has expanded poleward by between 110 and 320km).
And so, without a globally significant and sustained effort at combating climate change we will witness a rising intensity and frequency of heavy precipitation. Likewise, we will experience a continual increase in land and ocean temperatures over coming years, as well as continual degradation of the ocean’s acid-alkaline balance (eg. over the last 200 years, surface ocean waters have become 30% more acidic as the amount of CO2 in the air has risen).
About the global megatrend of computerisation
As the capacity of computer chips has increased over the decades, so too has the capacity of sensors. Consider the current models of smartphones and their ability to detect and monitor what is happening. Commonly included sensors include those that detect motion (tilt, shake, rotation, swing), those that convert environmental measures (temperature, humidity, pressure, light), determine location (proximity, geomagnetic) and human factors (fingerprint, iris). A veritable treasure trove of data!
Each of these sensors are able to convert a physical quantity (analogue) into a series of bits (digital) for processing. However, the more bits that are able to represent a given physical quantity the greater the quality of the data able to be processed.
For example, when the MP3 standard was first published 16 bits were used to convert audio at a rate of 8,000 times per second. Compared to today where that same piece of audio is converted using 32 bits at a rate of up to 320,000 times per second. Quite a lot of data, and quite an improvement in quality.
It is the same for sensors – the first image sensors, which were developed in the early 1970s, had an image resolution of .01 megapixels. Compare this to the 12 megapixel cameras available in today’s smartphones. Compare also early digital temperature sensors that only had a resolution of a single degree, to current models that measure down to 1/100th of a degree. The same trend applies to other sensors (including those listed above for the smartphone) – a history of improved accuracy and resolution. With a consequence that more data flowing to the processor and software for analysis.
The impact of these two influences
Turning first to the impact that climate change has upon the retail industry.
Setting aside logistics, which will be covered in another article, there are two main aspects of this industry that are, and will continue to be, affected – what is being offered for sale, and who is offering the goods for sale.
For time and again, surveys of customers report that a majority want their products to be eco-friendly and they want those that sell merchandise to do more than simple green-washing of their products and processes.
Customers have real climate concerns, and they go beyond how and where clothes are made.
Now, retailing covers quite a number of products: food from supermarkets and specialist shops, motor vehicles and the fuel they need, electrical and electronic goods, home handyman products, items to furnish a house, things that you buy for camping, for sports and other recreational pursuits, and so on.
Apart from fashion and technology trends (eg. nowadays braces and bowler hats aren’t worn that, and Wi-Fi has replaced blue ethernet cables for home networking) responses to climate change will affect some retail segments more than others. We can make the case that the market share of combustion engine motor vehicles and fuels will diminish over the next decade as government policies take affect. We can also make the case that the range of food on offer at supermarkets and specialist retailers may change in scope and price due to climatic trends on the agricultural sector. And finally, we can potentially see a shift in the demand for different types of home handyman and furnishing products as changing weather patterns impact upon the structural integrity and ongoing livability of domestic dwellings.
And then there are the retailers themselves. The stories they tell their customers and the general public about themselves and their offerings. For climate change is influencing the message that is marketed, the reputation of the brand. It is also influencing the location of shop front and back-office operations – primarily centred on energy demands of the operations. And it is is having a bearing on how much effort went into sustainability with respect to the construction of the buildings that the retailer uses.
The other global megatrend is that of computerisation.
It hardly goes without saying, but computing has significantly changed the way retailing works. From the introduction, and now dominance, of electronic commerce to the real concerns and crystallised losses from cyber-crime. From the efficiencies gained in stock management, to the digitally-creative messages being pumped through a plethora of marketing channels.
We’re seeing IoT sensors being used to map foot traffic in shopping centres and pedestrian malls. Technologies such as virtual reality, mixed reality and smart mirrors are being used to help customers “try on” clothes before they are purchased. And then there are the cashier-less stores that are enabled by an abundance of cameras and sensors, all run using quite sophisticated algorithms.
Now, if we re-frame our perspective of a retailer to that of a matchmaker for producers and buyers, then we can begin to understand how digital technologies will be used enhance the efficiency of this matchmaking service – think micro-targeting of custom-designed advertisements and re-location of storefronts in malls and main-streets to match the demographics of the foot traffic. Perhaps even closer and more responsive ties between stock levels on the shelf and production runs on the factory floor.
And we haven’t even touched the possibilities offered by next generation 3D printing offering located in “community maker centres”, of the advances in materials science offered by quantum computing that would show up in domestic products, and the deeper understanding of any customer’s psyche afforded by artificial intelligence
So we can see that for the global megatrends of climate change and computerisation the impact upon the retail industry will felt for the foreseeable future. Climate change will impact individual market segments differently, but operations more broadly. Computerisation will continue to force innovation throughout the retail value chain.
What are your prospects
From the preceding, and from a career perspective, there are several observations that can be made:
If you are more the “get it done” type: you’ll be provided with quicker responses from software systems, and your knowledge of the real world will become more valuable
If you are more the “thinking” type: there’ll be more data and a greater need to analyse data from a systems perspective in order to manage operations, customers and regulations
If you are more the “creative” type: you’ll have richer data sets that include observations of the human psyche, thus opening up unique business model opportunities
If you are more the “helper” type: you’ll be needed to maintain the skills of those within the industry and develop pathways for those entering it. Digitally-enhanced networking skills will be used to open and manage increasingly distributed supply chains
If you are more the “leader” type: you’ll need to be very comfortable with leading people in an industry that is providing quicker answers. Profitability will be increasingly linked to flexibility and responsiveness
If you are more the “structure” type: you’ll be faced with increased product customisation and supplier range. Technology will make more decisions on your behalf
Overall, from a career perspective, in the years ahead you’ll need to comfortable with an industry that will continue to evolve. Stability is not an option, how you do things will be forever updated.
And from a business perspective, like with other industries, when it comes to responding to climate change it is all about mitigation (ie. shifting focus to reduce risk) and resilience (ie. fortification to handle risk). And, when it comes to computerisation, its all about automation and using data. So, for those operating within the retail industry, likely business prospects are along the following lines:
Mitigation: modify range of goods offered
Resilience: quicken response to weather events, de-concentrate supply lines
Automation: increasing digital integration of all aspects of operations
Data analysis: expand data sources, timely responses to newly discovered value in data
Overall, and quite obviously, for businesses there are both risks to be aware of and opportunities to exploit in the change that is happening.
The retail industry, like all other sectors of any economy, is being affected by the global megatrends of climate change and computerisation. While climate change will continue to influence what is being offered for sale and the buildings from which retail operates, increasingly powerful computers together with richer data flows will significantly assist in the responses that any business undertakes.
For available resources and services to assist you with conversations and actions related to this article, please navigate to the "strategic foresight resources" page.