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The future of retail

By Andreas B Fornell

What’s the future of retail? How will e-commerce affect physical stores? Is retail dead? These are questions we have been discussing diligently the last few years.

Seven years ago, Boston Consulting Group released a report on the millennial consumer which investigated the behaviours, lifestyle choices and values of the generation which has become the most influential/strongest of all consumer groups. —Born between the early 80s and mid 90s, this group is now peaking in its consumption and companies have to rethink their business models and marketing strategies accordingly. The report stated that the group behaves differently than previous generations in various ways. The biggest difference is that they grew up with the technology that we are used to today — most importantly the internet. They have always been connected and social media is a big part of their lives. They are a part of a community and they are influenced by each other in a more significant way than before. Millennials are a social generation — and they socialise while consuming products and services. The salient messages in the report, which turned out to be vital for anyone in retail and advertising, were that millennials, —Are not as loyal to brands as the previous generation, but this generation engages with brands, channels and business models in new ways limited only by the rate of technological advancement and innovation. They collaborate and cooperate — with each other and, when possible, with brands. Millennials have a positive, community-oriented ”we can fix it together” mindset. They don’t necessarily see a clear boundary between the customer and the brand, the customer and marketer, and the customer and service provider. The report goes on to define in detail the key characteristics and consumer behaviour patterns of millennials, saying, —They’re passionate about values, including the values of companies they do business with. Millennials are a highly values-driven generation, specifically in terms of the values that relate to good citizenship. Sustainability and fair production are becoming more and more important for these consumers. Millennials are the most selective so they go shopping quite frequently, but purchase at a significantly lower rate than older consumers. They are fairly likely to wait and save up before buying anything in the luxury category. E-commerce is growing stronger and most people do extensive research before entering a store. The physical retail environment has to provide something the consumer cannot find or experience online. Everyone in the retail business absorbed this prescient report and acted accordingly. Today, it is the standard. You cannot find a single self-respecting retail manager who doesn’t talk about juice bars, yoga, Instagram, coffee and ”magic mirrors,” when handing over their brief for a new project. A lot of it is true and we can measure the impact of some of it, so of course we need to adapt. But, it remains important that the experiences are relevant to the products to ensure that the consumers are there for the right reason. We can add juice bars, the best filter coffee or a robotic mannequin to retail spaces, but if they have nothing to do with the product we’re trying to sell, chances are we’re just attracting a bunch of people not willing to buy the products. E-commerce has been growing exponentially and was in 2017 1/9 of the global market ($1000 million). Some forecasts show that it will pass traditional retail in 2024. It is a fact that people buy more and more online. Can we firmly predict that physical stores will become obsolete and won’t exist in the future? Not necessarily. A lot of studies show that retailers who open stores in a specific area will see online traffic from residents in the area to its e-com platform increase by more than 50 per cent, and this happens within as short a time-span as six weeks after opening day. Another popular tool for pushing product and gaining sales is collaborations. Many brands work explore different categories to cast a wider net of associations and therefore potentially a wider target group. We see fashion labels working with a wide variety of musicians, actors, athletes or other artists. All to create a lifestyle or a community that the consumer wants to buy in to. In contrast, a successful brand often has to be aware of which consumers it does not want to be associated with and therefore to repel certain groups. In general, the wrong consumer might not be a problem, but when your product is linked to a less credible celebrity, it can be damaging. For example, Abercrombie & Fitch offered money to Mike ”the Situation” Sorrentino, one of the stars of MTV’s Jersey Shore, to not wear the brand’s clothes. The company was actually willing to pay him to wear anything but its clothing. Another cast member, ”Snookie,” was sent a Gucci handbag. Allegedly by one of the luxury brand’s competitors... subversive tactics. However, a great example of a collaboration is the one between Patagonia and Danner that was announced last year. Together they created a fly fishing boot. The brands intend these boots to be the ”last ones you’ll ever need to buy.” Patagonia and Danner designed these to be re-crafted with age. That means cobblers can repair any damage that comes with time. I find this collaboration interesting. It is probably the only way to go considering the fact that we need to buy and produce less. I’m convinced that the strong environmental movement among our kids and their generation will push for a change in our shopping behaviour and accordingly also rewrite the rules of retail and by extension retail architecture. For sure there will be judgements for changing and building new venues, according to trends and short term goals. The fact that you can order a t-shirt from America to be delivered in Europe by air-freight in the same week, try it on and send it back by air, will probably be heavily scrutinised and maybe banned in the future? Do we really want to buy everything off Amazon? For the last couple of months, we have been working with Swedish Label Diemonde. It is super inspiring to hear the founders Angelo and Kevin talk about social collaborations and creating a stable building ground for the next generation. It is about local production and collaborations between industries and artists on a super local level. They are challenging old conventions. Maybe we do not need to buy apparel that is produced and shipped from somewhere other than where we live? Can we take it even further? With all the new inventions arriving and superior technology continuously being refined, it is now possible to 3D-print furniture and components for an interior on sight, without any shipping and less environmental footprint. A world of possibilities unfurls when will we apply ”open source” thinking within the retail industry? By making products and designs of a higher quality we will slow down the pace of production and at the same time create an awareness of how to cherish our apparel and possessions, this would eventually allow us to have more free time to spend on social work and local adventures. Many companies are afraid of this kind of thinking and how it could affect revenue, but we will, in my opinion, need to adapt and share the income between the many, rather than creating monster corporations that grow unceasingly at the expense of the environment and our individual health. As an architect, I always want to go forward and create new expressions and solutions, but at the same time the only place for inspiration and knowledge is through history, that’s where we can find the ideas for the future. This doesn’t mean that the end result will look archaic or obsolete, but it is where we can find a few answers and the inspiration for the modern world.