Following World War II, i.e. the last event of a similar magnitude to what the world now faces with coronavirus, the United States was focused on controlling the spread of communism. One popular theory at the time, domino theory, suggested that the rise of communism in one nation could quickly spread into other nations. And, while this Cold War-era paranoia is no longer relevant in today’s day and age, the concept is nonetheless still useful in examining what impact the events of the last few weeks will have on the future of many industries, especially retail.
Like dominoes lined up perfectly one after another on a floor, the coronavirus will begin to knock down the various barriers to change that have held almost everyone in the retail industry not named Amazon back over the past few decades. One by one, new innovations will take hold until retail’s future looks quite different from the world everyone knew as recently as last Valentine’s Day. Some of the impacts are already taking shape, while others are still years away.
Mark it down: The virus has already pushed the first domino over, momentum has swung in a new direction, and what follows is a description of the sequential path of change that will likely ensue. There are no buzzwords, no BS that could be written at any time, like consumers will begin to value authenticity more or that experience will matter more than ever. No, on the contrary, what follows is just hard pointed predictions about how retail is going to change.
The only real question will be just how fast it will all happen. Today In: Retail
1. Direct-to-consumer grocery will accelerate
This headline is almost a foregone conclusion already. Grocery and healthcare were the last bastions of strength against the rise of e-commerce, but the coronavirus just bent the slope of the adoption curve decidedly more upward. Earlier this year, FMI revised its estimates for U.S. e-grocery sales to almost $150 billion, up from $100 billion just three years earlier, and now both of these estimates look about as pedestrian as Billy Crystal and Bruno Kirby speed walking through Central Park in When Harry Met Sally.
With many consumers already or on the precipice of being sheltered in place, digital grocery has become the only option or at least a more desirable option, even in just facilitating order pickup, than going into an actual grocery store full of other, potentially virulent people to shop.
Target, a company who has historically struggled in grocery, has seen its grocery business explode. Amazon seemingly cannot keep up with its grocery demand (which is just about the most un-Amazonian thing ever said), and even H-E-B has created a special order delivery service just for seniors.
Maybe the fear of god is one hell of a motivator against the age old, silly argument of still needing to feel one’s avocados?
Or, maybe, in other words, all the holdouts will finally realize what they have been missing. Grocery, like every product category before it, will finally go digital once and for all.
2. Payments will become contactless
This trend too is now in full gear. Walmart announced, in a speed of light fashion, that its customers can now pay in store and pick up their order deliveries “contact free.” As opposed to touching screens or anything else, Walmart customers can now simply use Walmart Pay on the Walmart app to initiate payment by way of a barcode scan.
It is a capability similar to what Target and other establishments, like Starbucks and Chick-fil-A, have had in place for years, but Walmart’s announcement means the idea has now gone mainstream and that it likely will be what pushes the whole concept over the edge and across the entire retail industry.
From here, other forms of mobile payment, beyond just retailers’ apps, will also become more mainstream.
According to a Bain study in 2018, credit cards are the most popular form of payment in the U.S. (80% of consumers use them), followed by cash (79%), and then debit cards (59%). Apple Pay, in contrast, is only used by 9% of the population.
Given the choice — touch a screen, enter your phone number for perks, etc. — it makes no sense that consumers will opt for the old way of doing things in the long-run when better, more contactless options, whether they be retailers’ own apps or inventions like Apple Pay, can take the psychological worry of what a point-of-sale terminal looks like under a black light completely out of the picture.
3. Checkout-free retail will become the preferred norm
Touching other people’s screens and devices is one thing, but interacting with actual people is something else entirely. Many stories have made the rounds these past few weeks about retailers putting up plexiglass shields at their checklanes to protect consumers. Kroger, for example, was one of the first retailers to adopt this practice.
Now, if the image of a sneeze guard on a salad bar does not make you feel better, don’t fret. You are not alone.
Fortunately, there are better options out there in the long-run — namely, checkout-free retail.
Checkout-free retail already comes in many shapes and sizes. It can come by way of mobile scan-and-go setups, like what one finds in Sam’s Club Now down in Texas (video below), or it can come by way of an Amazon-Go like experience, where one scans a barcode to get into a store, like getting on an airplane, and then just takes whatever he or she wants off the shelves and walks out. Both are effective, both have their pros and cons for different situations, but both setups mean consumers don’t have to interact with human beings at all.
Amazon has already opened 20 plus Amazon Go installations throughout the U.S., there are reports of additional stores in London, and Amazon also plans to license its Amazon Go technology to other retailers.
In essence, checkout-free retail was already moving at a rapid clip prior to the coronavirus.
Sneeze guards will only hasten the pace.
4. The “S” in BOPIS (buy online, pickup in store) will take on a new meaning
Put simply, conventional definitions and the industry’s collective language around the word “store” will begin to change. A “store” will no longer be a place to shop, but more about a “somewhere” or “something” through which one can acquire goods anywhere and at any time.
The prairie fire of change is just beginning to spark on this idea, too, but it will take more time and coordination than what is required in the first three changes mentioned above for it to happen though.
The kindling was lit, however, last week: Kroger announced its first pickup-only store for click-and-collect orders; Starbucks announced plans to make all of its stores to-go only for the foreseeable future (see video below of Starbucks’ Pickup Only store in New York City); and Walgreens announced that it too will convert its 7,300 pharmacy drive-thru windows in the U.S. for grocery pickup.
The key ingredient across all these examples is that whether a customer ever steps foot inside a Kroger, Starbucks, or even a Walgreens is no longer relevant.
What the coronavirus has elucidated is that one of the most important jobs a retailer does is to help its customers to acquire products. That’s it. It is to get people what they need quickly and easily, case closed, and, especially right now, at a time when people cannot touch or talk to anyone.
Riding this wave, “stores” will over time begin to take on more of these aspects. They will begin to behave more like large (or small) automated vending machines placed in the “somewhere” or “something” where people need them most, e.g. near their offices, outside their gyms, in the basements of their apartment buildings, etc. These installations can and will begin to take many forms, from reformatted stores a la Kroger above, to pick-up lockers, to porch safes, to large automated drive-up vending machines (yes, this last point is real).
Retailers save on labor costs and shipping costs, and the customer also wins because he or she gets the added convenience of acquiring goods not just when he or she wants them but where he or she most wants them and with the piece of mind that human interaction is no longer a take it or leave it proposition.
5. Automation will take people out of harm’s way
One of the big unknowns right now is what happens if COVID-19 takes over or shuts down entire warehouse or grocery store operations in local communities. If coronavirus (or any virus to come, for that matter) ever hits such a tipping point of no return, then supply chains could shut down or at least back up, thereby making it difficult for people to get the products they need to survive.
In addition, and as many worker furlough programs announced this week indicate, the day-to-day costs of running a retail operation under shelter-in-place conditions is almost untenable.
The only real future proof solution is to figure out how to do more with less.
Therefore, robotics, long a staple of warehouses, will begin to move downstream. First, they will begin to inhabit the backrooms of retail operations. Hyperlocal micro-fulfillment, i.e. the act of putting a small micro-warehouse onsite of a retail operation, will gain even more momentum than it already has and move beyond the grocery industry (where it started) and into all aspects of retail, including mall-based retail.
Second, certain in-store operations will be replaced by robotics and drones. With advances in computer vision, it makes no sense that workers, in the future and under virus conditions, should have to go into a store every night, clean it out, and restock its shelves without any transparency surrounding the possible degree of their virus exposure. Smart robots and/or drones should be able to wander the store, identify shelves with the most instock needs for triage purposes, pinpoint which areas of the store are most at risk for infection based on foot traffic and observed customer actions, and possibly even do the cleaning themselves.
Third, as reports of worker strikes at Instacart highlight, delivering orders during these times is also one scary proposition. Smart retailers will start to plan for a future that doesn’t require such a burdensome ask on either third-party or on its own delivery resources.
Smart retailers and local governments will see that autonomous vehicles, similar to the ideas posited in the video below, offer a means for local retailers to connect with their customers in a way that still feels authentic.
It may seem crazy at first, but rather than having to use Instacart or Shipt or coordinate a pickup delivery at your local grocery store, imagine instead that an autonomous vehicle was stocked up by that very same grocery store and that it just roamed through your neighborhood at your beck and call, similar to how one calls a Lyft or an Uber. And, out of that vehicle comes a robot that leaves what you want at your doorstep, on your curb, in a locker, or wherever you want it, and you get alerted the very second a drop off is made.
Now, does this dream mean less jobs? Possibly, if one takes the narrow view.
Zoom out though, and it also means less people get put into harm’s way, that business models can continue to function for the good of all involved, that capital can still flow and labor can be redeployed, and that the retail industry, as a whole, will be better prepared if and when this virus thing ever happens again.
I am a leading expert and influencer in omnichannel retailing, with nearly 20 years of experience across nearly every discipline within retail. Currently, I am CEO and founder of Omni Talk, one of the fastest growing blogs in retail, and Third Haus, a retail technology lab and coworking space in Minneapolis. I also sit on the advisory boards of Xenia Retail and Delivery Solutions. Previously, I was the vice president of Target’s “Store of the Future” project and also the vice president of merchandising for home furnishings on Target.com. I began my retail career at Gap, Inc. and hold a BA from Stanford University and an MBA from the Harvard Business School. Read Less