The smooth metal casing of my fortune-telling apparatus is cool to the touch as I set it on my desk and peer deep within its glassy surface, attempting to see into the future of the retail supply chain.
Oops, I forgot to charge it.
I connect the power cord and begin my seance as my laptop screen lights up.
“Oh All-Seeing Dsco Ball, show me the future,” I mutter under my breath–a little crazy, I know, but it helps me clear my thinking.
And then it happens . . . a four-letter word forms in my mind as my hand begins to shake from excitement (and possibly an early morning coffee buzz).
I write it down on the screen . . . “data” . . .
And that, my dear readers, is the absolutely true story of how I came up with these four prognostications for the future of retail:
Prognostication #1: Increased quality and quantity of data exchange
Ecommerce has seen an average growth rate of 15.98% and currently makes up 9.1% of all retail sales. It is projected to reach $638 billion in the next five years. The bread and butter of ecommerce is data. This means that as the Internet of Things expands and sales continue to explode there will be an associated increase in the quantity and quality of data used. This will be true across the board but will especially be the case with data intensive distribution methods such as drop-shipping and ecommerce marketplaces (compared to wholesale, drop-shipping operations should already be sharing data at least 700 times more frequently). Overall, we are going to see more volumes and kinds of data shared more often with more trading partners than ever before.
Prognostication #2: Increased reliance on intelligent algorithms and machine learning
We’ve already reached the point where separating and analyzing business-relevant data from increasing quantities of digital noise is nearly impossible to manage with traditional analytical tools and models. The answer to this problem is the rise of machine learning and intelligent algorithms. Jeff Bezos (who I believe to be a machine from the future) in his 2017 letter to shareholders sums this up nicely when he refers to machine learning as one of the important trends of the future for “demand forecasting, product search ranking, product and deals recommendations, merchandising placements, fraud detection, translations, and much more.” The need for data harnessing technology will continue to grow in the coming years.
Prognostication #3: Legacy B2B communication providers will fail and be replaced
As data costs continue to fall and volume increases, legacy B2B communication providers using older technologies such as VANs and business models such as per order data fees will be unable to remain viable in this new data-saturated world. Such solutions are not only expensive and difficult to implement and operate, but also limit the free flow of data. Since information is the lifeblood of 21st century retail, anything that impedes it will be torn out and replaced. In their stead a new generation of more efficient and cost-effective solutions designed around limitless data exchange, analytics, and machine learning will emerge. Further off I can even envision a Googlization of retail data where B2B communication solution providers offer services for free and make their profits through monetizing the valuable supply chain data flowing through their platforms.
Prognostication #4: Analog will continue to play an important role
Even with the dominance of digital in retail, the virtual world won’t take over entirely. In fact, there are many signs that analog is alive and well. Independent bookstores are on the rise as are sales of polaroid cameras, notebooks, and vinyl records. This last one is interesting because music is one of those rare products that can be completely digitised, but the data says this isn’t happening—in 2015 vinyl record sales even reached their highest levels in 25 years. According to David Sax’s recent book The Revenge of Analog, this isn’t just a passing fad but reflects a deeper need in humans for the tactile, super-focused, and individual experience that analog provides. The fact that the world is pushing back against digital is super significant for retail.
Jeremy’s Secret Sauce of the Future
Given (1) the prominence of data and the digital world in ecommerce and the Internet of Things, and (2) the continued consumer demand for real world experiences and analog, the secret to success for modern retailers and brands is the creation of a synergy between the virtual data driven universe and the physical.
On the retail side this means that brick and mortar stores will have to make a shift towards the experience economy by offering live music, demonstrations, samples, and engaging human interaction, that can’t be provided virtually. At the same time retailers need to deepen the digital integration of their stores and warehouses to ultimately create inventory visibility for both themselves and their competitors, enabling retailers to work in tandem as part of a greater supply network.
On the supply side, more brands will need to sell directly to customers through virtual storefronts to supplement their physical warehouses. Pick, pack, and ship capabilities need to be developed in order to integrate ecommerce into warehouse and distribution assets. Product designs will also have to be overhauled to make them suitable for online selling.
Ultimately, the combination of physical and digital will show itself best in co-branded “showroom” kiosks, wherein retailers and brands cooperate to display items for customers to touch and feel before buying online. Such booths will be backed by data-driven distributed supply networks and drop-shipping capabilities that allow them to offer a much larger array of items than are physically present.
All of this means that both retailers and brands need to make sure that they have the technical capabilities to handle the much higher amounts of data exchange and analysis that is required in this new data driven world. Their entire supply chain needs to be turned into an intelligent cooperative network that is able to adjust in real time to real world trends and unforeseen events.
Only such a new crop of data integrated brands and retailers will be able to weather the thickening ecommerce storm (read: Amazon) gathering on the horizon . . . but that’s a prognostication for another time.