By Doug Stephens
In 1998 Wired published an article authored by the now famous Nicholas Negroponte, called The Future of Retail. I recently re-read it to determine how many of the prognostications have actually been realized these eleven years later.
In general it was a vision of consumers, empowered by online shopping options, banding together to systematically sidestep retailers and deal directly with manufacturers and online wholesalers. He suggested that we’d be having so many things delivered to our door that special refrigerated containers would be required outside our homes to hold numerous daily deliveries, including groceries. Negroponte suggested that if retailers were to survive this online onslaught, they would not only have to deliver products but also ensure an outstanding store experience. Even Wal Mart, he noted, would have to raise their game.
Negroponte was almost completely accurate in his forecast. There was only one problem: he was a decade early.
In Negroponte’s defense, in 1998 few could have predicted that North American consumers would continue on what proved to be a twenty-year spending spree fueled by an unprecedented decline in the personal savings rate. In fact, from 1985 to 2008, the rate of personal savings went from its 20 year average of approximately ten percent to less than zero percent. We were buying with absolute abandon and we were doing it with money we didn’t have.
We were increasingly empowered by the internet to make intelligent and responsible purchase decisions but were too busy buying things to bother. We were high on consumption.
What it meant for retailers was a twenty-year “get-out-of-jail free” card. Most didn’t have to begreat to be successful. Despite consumer protests about the decline of personal service, big box retail flourished. Regardless of known human rights issues among certain retailers, we willingly funded their growth. Even if we got gouged on price every so often, it wasn’t going to stand between us and the goods we wanted!
Post-crash consumerism
That was then and it seems that this could be the now that Negroponte envisioned over a decade ago. As post-meltdown consumers, we are spending less and foregoing (for the moment at least) what we cannot legitimately afford. When we do spend, we want the best value for our money. This means validating product performance claims, comparing retailers, shopping on-line and using the full power of social networks to pre-shop products and services -doing all the things the internet enables us to do.
In other words, we not only have the information to make the best buying decision but we can no longer afford not to use it.
The day of reckoning
For retailers it all adds up to an important day of reckoning. Even Wal Mart, who recently announced its store improvement program, Project Impact, clearly acknowledges that the consumer expects more… much more than they’ve been delivering. Starbucks too is retrenching, offering new products at lower price points while re-establishing service levels. High-end retailers are taking their products to online by-invitation-only sale websites in an effort to coax consumers back.
For some store brands this will be a great opportunity to shine. For others, it could be lights-out. One thing is certain, it sure won’t be business as usual.