Retail is dead, long live retail

December 14th, 2016 by Robbie Robertson & Peter Evans-Greenwood | Technology

It took Amazon Go for many folk to realise that the payment lives at the heart of our commercial relationships. Amazon Go's just walk out approach is seen as hugely disruptive as it eliminates the traditional purchasing processes. Pundits are assuming that this will result in job losses across retail and an upheaval across the sector as shops retool to support the new experience. We disagree.

The modern retail environment was constructed in the late 1800s in response to the emerging mass market. We all learn, from a very young age, how to behave in this environment. This environment is such a part of us that it's hard to imagine 'retail' working any other way. This is why pundits assume that Amazon Go will result in job loss and upheaval, as they assume  that while Amazon Go eliminates the point of sale, the existing retail model will remain.

We forget that money – cash – is a technology for transacting with someone we don't know and therefore can't trust, or someone we simply don't trust. Before the mass market the vast majority of people didn't use money as they had no need for it. Everyone they transacted with was known to them, and the world ran on debt. Money typically only came into play when calculating damages as part of a legal ruling. It was the emergence of the mass market, and the need to transact with a merchant that we didn't know and might never see again, that pull most of the population into the monetary system. This is where the current retail model – the buying cycle – comes from. Rather the ask the cobbler down the road to make us some shoes, we would seek out  a merchant and choose from the shoes on offer, with payment at the point of sale.

There are a number of signs that this model is breaking down. Sometime between 2000 and 2005 – when the internet, express air freight and smart phone emerged – the balance of power flipped from the merchant to the consumer. Value, which used to be defined by the market in terms of product feature-function as part of the buying process, came to be defined by the customer, relative to the customer-merchant relationship, and became multi-dimensional, nuanced and much more interesting. Communities are taking over from markets, while experience stores and omnichannel became a thing as merchants searched to ways to connect with these communities. Even our inability to clearly articulate and measure what 'good' omnichannel looks like is a sign that the old retail model is breaking down.

Amazon Go might just be the last nail in the coffin for the old retail model, a model built in response to the mass market. As we've said elsewhere the future of payments is not to have payments. The future of retail is not to treat the store as the end point of a supply chain. We don't seek out stores anymore, relying instead on the internet, serindepity, and acting on impulse. We don't compare products via feature-function, preferring to measure value relative to our relationship with the merchant (just as we did in the village). Amazon Go shows us that the last vestige of the old model – the payment – is no longer necessary. So the old retail model – need-want recognition, search, comparison and purchase, all facilitated by a payment – is dying. What will replace it?

This is where we return to the questions of job losses and disruption.

Job losses are predicated on Amazon Go ushering in something like the automats of the past, fully automatic retail environments without staff. While technology might have eliminated search and how we define value is changing, 'retail' (however we define it) is still a process of discovery with the merchant-customer relationship one of educator-student, or it might represent peers learning together. And discovery is a tacit process, and tacit processes are best facilitate by human conversations. While staff might no longer be responsible for shepherding customers through the purchasing processes, they will still be need to support these human conversation. This is something that the automats discovered, hinted at experience retailers, and which is all too obvious in Apple Stores. Staff will be redeployed, making them more sales and relationship orientated rather than simply transactional payment processors.

As to disruption. Well, yes, disruption is coming, but it won't be due to the rollout of yet another generation of retail technology. As the old retail model dies we'll need to rethink the role of the store – the physical venue – in a world where the customer-merchant relationship is not built around finding, selecting and purchasing products that we need. This suggests an even larger disruption on the horizon as the relationships between retailer, supplier, manufacturer and even brand are rewired in response.

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