Future of retail: efficiency or entertainment?
In this short essay Ching-Hung Lin asks what the future of luxury retail looks like. Ching-Hung is a current Master of Research in Architecture student at the Royal College of Art.
i. How retail changed
Retail is the process of selling consumer goods or services to customers through multiple channels of distribution in order to earn a profit. There are various factors which influence retail. The first is technology. According to Prof. Dan Hopping, the history of retail is also history of the role of technology in society.
In today’s digital age, there are various things which influence consumption decisions. First, customer behavior can be influenced by new technologies directly, like the Internet and robots. Secondly, customers are also affected by newer business modes such online shopping and mobile applications. However, technology is just one key factor in retail.
The scholar Dion Kooijman argues that the history of the shop is in general terms the history of the interaction between the retail area/presentation and the ‘consumer’. In the 19th Century, this interaction was achieved using imagery. In the 20th Century, the palette of stimuli has been broadened substantially. Apart from imagery the consumer is also stimulated by texture, smells, sounds and so on.
Furthermore, there are three main stages in the history of retail. The forms of retail have not only changed in time, but also in terms of space and business models. The first retail revolution took place through an evolution in the distribution sector. This revolution followed the French Revolution and the Industrial Revolution. In the 19th Century, the distribution sector became an independent economic entity from the production sector.
The second retail revolution appeared between the 1950s and 1960s. In this revolution, the majority of advances were about efficiency. This came about in terms of technological efficiencies — self-checkout systems, and distributive efficiency — and efficiencies of scale, like increasing the number of chain stores and therefor reducing associated costs.
‘Mix’ is the keyword in the third retail revolution where leisure and urban entertainment become fundamental. This revolution sees the emergence of new types of retail: mixes of supermarket and shopping malls; and new consumer behaviour — day-to-day shopping mixed with leisure and recreation; and new suppliers — shopping channels, and more recently online shopping companies.
ii. Current retail trends
There are five main kinds of retail: food, soft-line, grocery, hard-line and specialist retailers. According to the McKinsey retail report in 2017, food, grocery, hard-line and specialist retail were surpassed by e-commerce in 2011. However, e-commerce sale of luxury retail was only 3% of total sales in the same year. It is interesting to note that the majority of luxury sales remain through the physical store rather than through online shopping. For this reason, this research project aims to investigate luxury retail.
In the EY 2018 retail sector trading report, they argue that consumers will become asset-light, and will shift towards choosing a smaller number of items to own. This is because a large number of consumer decisions will be done for them by algorithms. The survey argues that therefore the competition of small choices will be more intensive than before, and consumer business will need to focus less on products and even more on lifestyles. The EY retail report shows that shopping experience is the top influencer with 86% of consumers noting it in relation to their buying behaviour. 82% of customers consider that the purpose of the brand is the second factor. Retail, then, is not only the process of purchasing a product but is itself also a part of our lifestyle.
iii. Luxury retail in the digital age?
The main question I ask in this research project is what is the future of luxury retail in the digital age? On top of a survey on the history of retail, I plan to do case studies in four luxury brands: the LVMH Group, Chanel, Prada, Burberry. The idea is to focus on how bricks and mortar retail can remain successful in an increasingly digital world and how they can even become more relevant. Focusing on this relationship might help to find the gap between the design of existing retail stores and their possible future form. Here, I plan to conduct semi-structured interviews with interior architects and designers who work on luxury stores. Finally I aim to compare the data from retail reports with the designers’ insights to lay out perspectives about the future of luxury retail.
There are numerous business reports which are relevant with the future of luxury retail; however, there is less attention from a design perspective. This research aims to bridge this gap in the field.
Bibliography
Ernst & Young (2018) UK Retail sector: trading in 2018.
Hopping, D. (2000). Technology in retail. Technology in Society, 22(1), 63–74.
McKinsey & Company (2017) Perspectives on retail and consumer goods.
Wittig, M. C., Sommerrock, F., Beil, P., & Slbers, M. (2015). Rethinking Luxury. LID Editorial.
