The particulars of the retail business are always derivative.
The nature of what is sold, and where it’s sold, and at what price, is always derived from the nature of other things.
For example, consider a little black dress.
Its value is never inherent. The whims of fashion play a role. As does the price of the commodities used to make a dress. So too does scarcity, because the rareness of an object generally correlates with its price. So a dress of cotton, worn by a celebrity, and made in limited quantities at a time when the price of cotton is high, will generally cost more than a dress of polyester, made in mass and worn by the masses, at a time when oil is cheap.
But let’s put aside the price of materials, the mysterious nature of fashion-consciousness and trend-following, the rise or fall of labor costs and look at the one factor that overrides all other factors in retail: Transportation.
As long as man has sold things, the act of selling has been dependent upon the transport of goods. Whether you’re talking about ox-driven carts of food, caravans of merchant goods moving across the ancient world, containerized cargo bringing finished goods from the Third World to the First, or digital downloads and cloud-based access to software, nothing is sold unless it can move from Point A to Point B.
So here’s the thing:
The very nature of how things move from Point A to Point B is about to change. And that will change the retail industry every bit as much as did the creation of the Roman merchant fleet, the opening of the Transcontinental Railroad, or the birth of the Interstate Highway system.
Brace yourself for the world of the driverless car.
This article isn’t about the particulars of driverless-car technology. Suffice it to say that Google is already testing autonomous cars, Apple and Tesla might make them soon, Volvo has said it will have them by 2017, and the rest of the world’s automakers are scrambling to catch up. If you want to learn how they’ll work, you can read this simple explainer or this moderately complicated one or you can tackle this 214-page treatment from the Rand Corporation.
Regardless, all you really need to know is that driverless cars are coming. Luddites, nervous politicians and protectionists might be able to slow the arrival of the technology, but driverless cars will be everywhere soon.
So what does that mean for retailers and the companies that sell through retail?
Change. Lots of it.
And it’s coming at the exact right time for the retail industry.
Here’s why: take a look at the chart below.
What the chart shows is that the two channels of retail are on a sort of collision course. Buying visits at brick and mortar stores are falling rapidly, while buying visits online are rising ever higher.
As those two lines grow closer, the retail world is entering an entirely new era with entirely new challenges.
For online, the big question becomes how can retailers possibly deliver all the goods ordered online as the delivery system reaches capacity? And given the increasing importance to online buyers of free delivery, it’s hard to imagine a scenario where online buying visits can continue to grow at such a rate.
For brick and mortar, the question becomes how can any real-world retailer survive when the trend line looks so bleak? What segments can carry on? What segments become nothing more than showrooms for online sales? And what segments will disappear into history just like general stores, five and dimes and record shops?
What’s fascinating to think about, however, is that the one thing that could affect both trend lines -- boosting real-world visits to stores and adding capacity for deliveries from online orders -- is the arrival of the driverless car.
How could robot cars do that?
By altering these four areas of the supplier/retailer/customer world:
Logistics -- It seems reasonable that businesses will adopt autonomous vehicles at a faster rate than consumers. While a parent of small children may be a bit worried about handing over control of a vehicle to a piece of software, businesses won’t have the same level of emotional concern.
For business, the decision to use driverless vehicles will be based largely on costs. And that means that driverless trucks are likely to fill the highways before driverless cars do.
- Look for interstate transport companies, which are struggling with a shortage of skilled drivers, to be early, and widespread, users of the new technology.
- Expect large-scale logistics companies such as DHL, which have the ability to test driverless vehicles inside massive warehouses, port facilities and intermodal yards, thereby reducing the risk to human life while amassing data about the vehicles’ capabilities, to be the standards setters in the industry.
Home Deliveries -- Just a few months ago, it seemed possible that retailers of the future would use airborne drones for delivery. But the recent decision by the FAA seems to have put that idea on hold.
Enter the driverless delivery car. Early reports are that Google hopes to use its driverless vehicles to support a competitor to Amazon Prime’s same-day delivery service. Meanwhile Uber, which has launched a package-delivery service in New York and a food-delivery service in Spain, is opening a testing facility in Pittsburg to build robotic cars.
- Look for a surge in such small-package delivery services -- particularly from retailers who have the resources to buy a fleet of driverless cars or can sign on with companies that can deploy large fleets for hire -- whether that’s Uber, Lyft, UPS or some company not yet in existence.
Errand running -- When you own a car, it tends to sit around a lot. It sits in the garage when you’re at home. It sits in the parking lot when you’re at work. If you bought it on credit, you pay for it all the time, but you only use it part of the time.
Companies like Zipcar have built a business around getting consumers to see the downside of such an arrangement. Why own a car, they ask, when you can simply rent one for the brief periods of time when you’re actually inside a car?
But what if your car was productive without you?
What if, for example, when you went into the office, it went grocery shopping. Then it picked up the dry cleaning. Then it picked up the kids at school, took them for a snack, dropped them at the park and sent you a video of them playing baseball, sounded its horn when playtime was over, got the kids inside, drove back to your office, picked you up, then took everyone home before starting its second job as a pizza-delivery vehicle for the business down the street?
- Look for the rise of the driverless car as employee -- more robot than robot car, doing all the things you can’t do or would prefer not to do.
- Expect employees of brick and mortar stores to spend an increasing amount of time interacting with customers’ vehicles, rather than customers.
- And look for these butler/nanny/assistant cars to cause major congestion on the roads.
Customer service -- Imagine a world where robot cars have made same-day delivery common and where running errands is something that the car does, not you.
That’s a pretty cool world if you’re a consumer. And it’s a pretty cool world if you’re most retailers.
But it’s decidedly less-than-cool if you own a brick-and-mortar store that depends upon impulse buys. Because in a robot-car world it’s possible for a consumer to never, ever enter a retail establishment of any kind. Ever.
So to get customers to actually visit a store, retailers are going to have to offer something more than they do now.
- Look for high-end retailers in particular to use robot cars of their own to pick up their preferred customers and return them home.
- Expect all retailers to begin offering deep discounts, coupons, contests, sales, etc. that are limited to consumers who visit a brick-and-mortar site. And such offers will have to be far superior to those offered by today’s click-and-collect retailers who only need to lure consumers out of the car.
- Look for a rise in retailers who offer a carefully curated “experience” for consumers -- something that changes on a regular basis but that can’t be predicted or easily duplicated, like an edition of a magazine.
- And place your bets on retailers who have adequate space to offer unlimited free parking. Because we’re going to have to put all those driverless cars someplace.