The Future of Retail

During the e-commerce boom of the last 15+ years, online grocery shopping has been the holdout. The final bastion, the ultimate obstacle to the tipping point. The tipping point has now arrived. Bank of America card data from May 5, 2020 indicates e-commerce is now at 30% of all retail, up from 15% March 1, 2020, in large part due to online grocery. COVID changed things overnight. The shift to e-commerce has suddenly accelerated. What does this mean for the overall future of retail?

1. Commercial real estate becomes more easily accessible to startups: Pop up stores offer flexibility to try different permutations of models, necessary for a fast-paced small org trying to find its way quickly. Pop-ups also provide much needed liquidity that long-term leases do not, something especially attractive to cash poor startups. To attract startup tenants, commercial real estate developers may partner with or acquire distribution service solutions to entice brands with out-of-the-box distribution services. This may be key to onboarding and retaining smaller brands. If switching costs are high, then the quality of the distribution solutions could become a key differentiator among real estate developers.
2. The new department store model: E-commerce combined with smaller format stores may be the new norm — think of the City Target models rolling out nationally, but with much less floor space as the inventory for purchase will not be on the floor. Focus within these stores would be a rotating set of featured brands, most popular items, and essentials. Store’s purpose will be for customers to browse, discover, and experience products. Conversions to purchase will take place primarily online. I foresee limited inventory on site and most products shipped from distribution centers directly to consumers.
3. Curbside pickup and returns: This has accelerated during COVID and I expect that momentum to continue for purposes of both convenience and hygiene.
4. Mobile checkout: This is a no brainer and I’ve wondered for years why it’s taken so long to gain traction. This creates a better customer experience and increases revenue by removing unnecessary roadblocks on the path to purchase.
5. Better, faster, cleaner shipping: Free, fast shipping will become table stakes, thus the need for shipping solutions that can keep up with the business’s needs. As always, the faster the better and the more transparency for customers the better. Moreover, customers will begin to demand low environmental impact packaging and transparency on carbon offset programs and such.