Retail is dead, long live retail

March 13, 2012: 11:02 AM ET

The future does not belong entirely to a Jetsons world of machines and robots and data aggregation. Stores will still matter. But we'll all be affected by these changes.

By Neil Parker, chief strategy officer, Co Collective

Off to the store?

FORTUNE -- Just a few months ago, I witnessed retail's present and future collide in a Best Buy (BBY). It was ugly. A twenty-something couple fiddled around with the flat screen TVs on display; mauling the remotes, thumping the speakers, and generally behaving like carefree shoppers. When they settled on a Samsung LED model, the guy whipped out his phone, captured a QR code on the TV, and beamed it up to the web to check for more favorable prices.

"It's 49 bucks cheaper through Amazon," he said to his girlfriend.

They rubbed salt into Best Buy's wound by ordering the TV online while still standing in the store, enjoying Best Buy's endless display models, all to the benefit of Amazon (AMZN) -- and themselves, of course.

Even though this story contains many elements of retail's future, like hand held devices, the web, and empowered consumers; this isn't sustainable for retailers with boots on the ground. Fantasy futures aside, real-world stores are here to stay.

Death of retail, really?

Back in 1998, Nicolas Negroponte predicted the death of retail as we knew it. While he was correct to say that the Internet would transform shopping, he was wrong to think it would be the end of physical stores. Still, they are changing, no doubt. For instance, there's the Shopbox, a self-conscious Brooklyn pop up store selling that borough's playful bohemianism in the form of products like the Thing-o-Matic and Wiffle balls. The showroom is a shipping container, with a big picture window and no clear entrance. Recently, when the store had to move, a crane just picked it up and carried it to a new spot.

You are not going to be flirting with any sales clerks at this store. Instead of stepping inside, you examine the goods through a window. When you want to buy something, you text your order to Shopbox and they ship the stuff straight to your house.

This ties in nicely with the fairly common practice in Europe of paying for goods via cellphone. Korean grocer, Home Plus, a division of English giant Tesco (TESO), pioneered this concept. To expand their market, they set up 2-D posters of a typical grocery aisle on the walls of commuter rail stations. They included milk, juice, dumplings, bibimbap sauce and everything else you'd expect from a grocery store in Korea. Except none of it was real. Feed an item's QR code into your smart phone, and that food goes into your online shopping cart, to be delivered straight to your home. Why waste time in a store when you're already wasting time at the train station?

In a way, these examples flip the recent retail experience on its head, so that the goods seek out the consumer, rather than the consumer going shopping. It's almost like the days when men drove wagons from farm to farm, pots and pans clinking to announce there were dry goods for sale. Of course, a big difference is that the proprietor of the traveling general store had to guess what his customers wanted, and his customers' wants were pretty much limited to the proprietor's offerings. There was little back and forth.

Given the way technology moves, it's easy now for retailers to target us with specific goods that we will want as we move through our lives, based on our previous purchases and our interests, and the fact that our behavior is often traceable. In the future -- and sometimes even now -- our every step will be studied for opportunities to sell, and offers and coupons will flood our phones as we wander from neighborhood to neighborhood. The phone (or whatever device replaces it) will know when you are thirsty, and guide you towards an organic smoothie cart.

Soon, an actress may appear on your TV screen wearing a great pair of shoes that seem perfect for you. Rather than waiting patiently to go online or, God forbid, visit an actual store, you'll be able to wave your phone at the screen and buy the shoes instantly. Curiously, your neighbor, watching the same show in her own apartment, will see a different pair of shoes that suit her perfectly.

Farewell physical store? Not so fast.

But the future does not belong entirely to a Jetsons world of machines and robots and data aggregation. Stores will still matter. People will still exist. But we'll all be affected by these changes. For instance, car mechanics are already starting to install video links so customers can monitor what they are doing to their engines (Google "trust car mechanics" if you want to know why.).

Stores offer things that the online experience just can't match -- like actual clothes to try on. In Spain, Diesel stores already offer dressing rooms with Facebook links so you can poll your friends on the looks you're trying on. Websites like gotryiton let you poll your social community for opinions on the outfit you want to buy.

In-store communities are playing a bigger role, too, as retail outlets build loyalty, trust and sales by fostering genuine communities. It's not necessarily done with online tools, either. Repeat Tour de France champion Lance Armstrong owns a bike shop called Mellow Johnny's, in his hometown of Austin, Texas, that offers free showers for bike commuters, free classes, and even a café where you can recharge before going on one of the shop's group bike rides. And community members are even starting to determine what gets made and sold at some stores. Made, a U.K. furniture retailer, already lets customers vote online for which pieces of furniture it should manufacture. This is a disruption of the classic top-down, designer-to-consumer model, and the start of a genuinely new retail hierarchy.

In a potentially powerful twist on this trend, there's carrotmob. This group was formed to influence corporations to behave in ways it thinks are ethical by rewarding good corporate behavior with good, money-spending customers. The idea is that the old technique of boycotting stores is negative, antagonistic, and ineffective. But rewarding them actually works to foster change.

Linking all these examples is a new challenge for retail brands: shift from being the source of great goods or great prices, to being the curator of a unique set of experiences that connect people with each other as well as with products. A good example of this is Wal-Mart's (WMT) Shopycat, a gift-selecting service that recommends presents based on the recipients' "Likes" and online behavior.

It's a form of branding that's a lot less about logos and advertising, and a lot more about storytelling through utility -- less about the "positioning" of a store brand, and more about investing in innovative services that help the customer wherever they are.

So, maybe the future of retail will involve stores behaving like horses, chasing the carrots that consumers offer them. Sounds positive. And if it's lucrative, all the better.

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