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Econometric Advisors' blog

The Shopping Journey of the Future

Dec 27, 2017, 09:34 AM by Wei Luo

Now that holidays are behind us, it's time to think about the money and energy we spent and how to invest them more wisely next time. Year over year, holiday retail sales rose 4.9%, according to Mastercard SpendingPulse—the largest annual increase since 2011. For all parties on the retail supply-and-demand scales, however, the question of the future remains.

I recently sat in on a presentation by venture capitalist Skyler Fernandes, on the future of retail. An assertion of his really struck me: that right now, finding more touchpoints is the most important thing for businesses to be doing.

The touchpoint—“any way a consumer can interact with a business, whether it be person-to-person, through a website, an app or any form of communication”[1]—is a familiar concept to VCs. Identifiable touchpoints help investors quantify and predict the success of a startup or feasibility of a business model. But for those of us who look at business through the lens of real estate, finding touchpoints did not seem to be our business―until now.

With the ongoing blurring of the line between brick-and-mortar and e-commerce, the clear division between retailers’ and landlords’ business is dissolving. Real estate is probably more a part of brand-building and merchandising than ever before. “The days when you could lease out the space for 10 to 20 years and just collect rent checks every month are long, long gone.” says Jodie McLean, CEO of EDENS. “Landlords and tenants have to be partners.”

The various businesses involved in the process of selling a product to customers (i.e., retailing) comprise a team. Each offers one or more touchpoints that may inspire a purchase. At which point does the sale occur? Online or offline? It won’t be practical to tell. But in the long run, does it matter? E-commerce—including mobile commerce—is not an enemy of brick-and-mortar; rather, they make a full picture together.

A full instance of shopping will consist of many touchpoints, starting anytime and anywhere. Imagine: notifications of available stock or discounts arrive at a mobile device; a car (or helicopter!) to pick up the consumer, paid by a retail landlord if spending exceeds a certain amount, is minutes away. When consumers enter the store, they can check out the pop-up and incubator space by different retail operators. Digital displays and interactive gadgets like VR glasses let them learn about and experience new products and emerging trends. During this shopping journey, transactions can occur anytime, anywhere, through any variety of trusted payment methods.

Sound futuristic? Stores like b8ta, which gather new and cool things all around the world for customers to try before purchase, are growing rapidly. Real estate investors, with their capital and resources, can lead this evolution. We are seeing real estate budgets created for lift services and experiences designed to draw shoppers out of their homes. Landlords and tenants are both expected to contribute to these budgets; percentage rents will be collected expressly for the same purpose. The return on investment for this combined budget will be measured in omni-channel sales growth. The sharing economy will also play a significant role. Rental services can help improve inventory management and create new revenue streams.

From the consumer perspective, this future will be spectacular; from the retailer perspective, there will be winners and losers, as always. Everything considered, the cost of evolution is high, but the cost of not changing is even higher.

 


 

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