The future of shopping: what's in store?

[Music] do you get a buzz out of buying something a little tingle of excitement it feels good doesn't it that's your brain producing dopamine it's the same rush you get from chocolate or sex during lockdown people were increasingly forced to rely on the internet to get their retail dopamine hits in fact over 4 trillion dollars were spent buying stuff online in 2020 almost a third more than the year before shopping is going through a radical shift right now and the pandemic has sped it up retailers have been forced to adapt and innovate driving this revolution you or to be more specific your data here's how if you went shopping in the 16th century you'd get personalized service so for example if you wanted to buy your suit of armor you would go to an armorer who would knock it up to your specifications but bespoke services came with a premium price tag then came the industrial revolution with its big factories assembly lines and automation mass production made goods cheaper but a lot less personalized and distribution was tricky products had to be taken from factories to what was essentially a small warehouse near where the customers lived basically a shop the only way you could buy was through these shops and you had very little choice actually you had very few shops near you and if you wanted something you had to go your choice was between one of those shops fast forward to the advent of superstores and out of town malls and these choices grew but everything changed when the internet came along suddenly the shopper has more choice than ever and it's really up to the producer and the retailer to offer the consumer what they want when they want it with more choice came more power for the consumer 30 years ago we in the brands used to define the brand ourselves and the product glossy ads like these have pushed products to consumers for decades and the consumers used to like so many pavlov's dogs they used to come and buy but the internet has put consumers in the driving seat calling the shots and what's cool and what's not through reviews social media posts and influencers leading the way in this retail revolution is china this is she's a huge live streaming star and now i have 1.8 million followers on red and they are just like my best friend but unlike live streaming in the west which is used mostly for entertainment or gaming gutien vlogs to vlog selling thousands of beauty products to her 1.8 million social media followers she's one of thousands of influencers also known as key opinion leaders oh my god selling anything from lipsticks to food and even plants live streaming selling has helped to make china the world leader in e-commerce it's forecast that in 2021 half of everything bought in china will be bought online for jinji and millennial like me most of them prefer shopping online and going to a physical store because of larger range of choices and lower price the chinese internet market is very very highly developed the scale of the market is over two trillion dollars worth of consumption online they have something called singles day where they do they do billions of dollars worth of transactions in an hour three huge companies dominate alibaba jd.com which combined account for almost 80 percent of the market the other thing about the chinese market that's very interesting is that whereas we have like google in search and we have facebook in social media amazon in e-commerce and paypal in payments they've put it all together in single organizations so they have entire ecosystems and many chinese consumers live their entire lives in those ecosystems [Applause] these super app ecosystems give the retailers intimate knowledge of exactly what their users like want and buy and of course all of this requires a huge amount of data and the chinese are much more willing at this point to allow data tracking of everything that they do than many people are in the west with more direct insight into customer demands retailers can maximize their margins and cut waste some chinese tech firms are even using people's digital footprint to influence the way goods are produced known as consumer to manufacturer that's really cutting out even the brands from the purpose so the factories then start dealing directly with consumers and of course can be flexing their production capacity uh directly depending on on the consumer demand western retailers are playing catch-up for years they rested on their laurels regarding the internet as secondary to the store not help perhaps by the fact that they had sunk a lot of money into store space america for example has 2.2 square meters of retail space for every single one of its inhabitants six times the level of china but western retailers also missed a big trick their customers big data retailers historically had very little data about their individual customers they used to have store credit cards that was about it but the online companies have huge amounts collected huge amounts of data about their customers when you consider that against the uh the what the retailers had the retailers and traditional brands were really flying blind and that is why the internet companies have beaten the incumbent retailers and brands for the most part over the last 20 years the pandemic was a death knell for many brands 8 700 stores were closed by big chain retailers in america in 2020 but the companies that did harness the power of their consumers data are thriving amazon exceeded 100 billion dollars in quarterly sales for the first time ever in the last three months of 2020. amazon of course wrote the book on individual customer data and its uses and of course as they got bigger and bigger and bigger they've got more data than anybody else with its established logistical system and smooth purchasing process amazon may seem a useful online platform for brands to peddle their wares but though amazon passes on the sale to the brand it doesn't pass on much of the customers data which means companies know very little about who is buying their products so some brands are cutting the amazon cord to focus on what's known as direct to consumer selling such as nike it decided to sell only online via the nike website and what it did then was it developed ways of keeping much closer tabs on its customers for example a membership program nike's loyalty scheme allows it to create customer profiles of its 250 million members 70 million of whom join during the pandemic nike's apps offer the customer a personalized experience in return for a detailed insight into their behaviour if you sign up to their app you'll give them information about how much you run every day what sports clubs you're doing how much yoga you're doing all that sort of stuff and this helps inform nike about what to produce they're able to see where you are and that also informs the way they think about where to put their stores nike's apps let users customize their own shoes and in doing so learn the customer's favorite colours and designs and by tracking how far they run can even let the customer know when it's time to splash out on a new pair of shoes you're sharing your data and your intimacy with nike it all basically creates a more intimate bond between nike and its customers as shopping shifted online the pandemic sparked a greater need for this type of direct to consumer selling enter shopify an e-commerce platform which allows anyone to set up their own online store the number of new stores set up in the first six weeks of the pandemic grew by more than sixty percent compared to the previous six weeks we saw heinz ketchup within i think a week or two of kova hitting setting up a store on shopify to sell heinz at home in the uk we saw lint chocolate go direct to consumers for the first time inspired by the chinese model shopify aims to create an ecosystem which integrates e-commerce with social media what we're trying to do is simplify all of it which want to make it as an easy thing to do to have one centralized inventory and figure out which product should get pushed where and if you're seeing traffic at your online store coming from pinterest we're going to tell you you should activate the pinterest channel and you should push product directly to pinterest to better engage with that audience but i think we're just at the early stages of social commerce and i think people are beginning to understand that there's a real opportunity here not just to meet new brands connect with new brands but also to buy from those brands by being better connected to their customers brands can work out not just what they want to buy but where they want to shop take one of shopify's merchants the shoe company all birds during the pandemic when many brands were shutting up shop all birds was opening stores you hear terms like well offline and online are competing and online is hurting offline you would never hear that from all birds because at the end of the day what they're trying to do is create a great experience build a great brand and sell you great shoes and however you purchase whatever means or channels you utilize to do so they're happy with all those kind of feed into each other the future retailers retail everywhere if you want to sell to my mom you gotta have a great brick-and-mortar experience because my mother prefers to buy that way but my sister who's in her early 20s she is looking to purchase things on instagram it means the store isn't dead it would just be reimagined to provide an entirely new type of experience they're great for providing what we call brand theater they're great for providing a live experience with the customer and to have expert sort of stylist level staff who can really help the customer in a way that the internet cannot nike has adapted its stores to create a bespoke service for the customer thanks to the information on their digital profile and the store presents yet another channel to capture their data in the midst of pandemic it opened a huge store in paris you go in and immediately it offers you interactive experiences it's mingling both online and offline data and the whole point is to make the experience of shopping at nike more intimate more direct and more kind of one-to-one [Music] in-store data can also help inform stock control ensuring less waste in the supply chain improving sustainability as well as profit margins according to one recent estimate the volume of data collected globally is expected to increase from 33 trillion gigabytes in 2018 to 175 trillion by 2025 this will be accompanied by rising concerns about privacy and exploitation of personal data it used to be the case that customers had had to exhibit their loyalty to the store that they bought from these days it's the retailer that has to prove their loyalty to the shopper and that loyalty really means looking after their data retailers will know increasing amounts about customers behavior habits and preferences this may sit uncomfortably with some but one thing is for sure the inevitability that this retail revolution will be driven by your data i'm henry tricks i write the schumpeter column at the economist you can read my special report on the future of shopping on the link opposites please don't forget to subscribe and thanks for watching

Channel: The Economist

Views: 737,962

Keywords: The Economist, Economist, Economist Films, Economist Videos, Politics, News, short-documentary, future of shopping, future of online shopping, online shopping, store, online store, ecommerce, future of shopping technology, future of shopping malls, what is the future of shopping, retail, shopping, shopping malls, future of retail, amazon go, ai, future shopping, artificial intelligence

Id: ad-GuV6YIMI

Length: 13min 57sec (837 seconds)

Published: Thu Mar 18 2021