Retail means the sale of goods to the public in relatively small quantities for use or consumption rather than for resale. Mobile retail, uses of sensing technology in physical stores, more efficiently delivery and the right pricing strategy would be the challenges and the future of retail. Understanding the challenges of retail is important for businesses and investors. We have seen too many retailers lost their battle because they were slow in transition or didn’t know how to adjust to the trend. Customers should have such knowledge as well since building a long-term relationship with a good business could benefit both sides in the long run. Mobile retail is the fastest growing platform for retail.
The growth rate for ownership of smart phones is the fastest among all technology devices. Only around 70% of Americans have smartphones, not to mention the rest of the world. According to co-founder and chief executive of comScore, who has a 40-year career at the C-level of corporate management-Gian m. Fulgoni and the vice president, Andrew lipsman, “Desktop e-commerce is now a well-established channel, accounting for most of the purchasing activity on digital channels. But recent data demonstrate that mobile is fast becoming the channel that will shape the future of retail.”(Fulgoni and Lipsman 346).
Applications are the platforms that the purchases take place on our mobile devices. Asta Tarute, Rimantas Gatautis from Kaunas University of Technology and Shahrokh Nikou from Abo Akademi University, Turku, Finland had a study about what features of mobile applications stimulate consumer engagement and lead to the continuous use of mobile applications. The result shows that “perception of such features as design solutions and information quality will result in higher engagement leading to continuous usage of mobile applications. Moreover, consumer engagement positively influenced users’ intention to continuous usage of mobile applications.
Inconsistent with expectation, consumer interaction and functionality features are not found to be positively related to consumer engagement with mobile applications.” (Tarute, Nikou and Gatautis 145). This is essential to understand and be taken as a strategy because the development of mobile applications can lead to great cost. Traditional retailers like Walmart should integrate mobile marketing into their marketing strategy to take advantage of digital paradigm shifts. Because “traditional retailing sector suffers with rise in real estate prices, lack of viable store locations, overhead costs, pilferage, lack of trained manpower and many more whereas the new model can be operated through a handset and is devoid of all these hurdles of the conventional business.” (Srividya 1).
The shift needs to be done quickly by the traditional retailers or they will soon be the next Sears and Kmart. In 2015, Walmart has online sales of about $13.7 billion, while Amazon has $107 billion. Warrant Buffet sold off $900 millions of Walmart’s stock within the past year. This is not a good sign for Walmart because we all know that Warrant Buffet doesn’t make such decision without concrete research and analysis. Similarly, Target’s stock price have been staying around the same level within the past few years due to the continuous earning miss.
On the other hand, Amazon’s stock more than tripled since 2015 and made its CEO Jeff Bezos became one of the richest man on the planet. In order to keep the patience of its investors, on February 28th, 2017, Target’s CEO Brian Cornell announced that they will remodel around 600 locations by 2019 but it will cost about $3 Billion to do so. Conform With The Convergence CultureWe will see whether Target’s effort will turn their balance sheet around before it is too late. Remodeling their stores and adding technology features is a good direction that conforms well with the convergence culture we have nowadays. Convergence culture is surrounding us and it also applies to retail businesses. “New media would displace old media, the emerging convergence paradigm assumes that old and new media will interact in even more complex ways.” (Jenkins 428).
Not every country possesses the advanced technology and medias like we do in the U.S. Retailers need to pay attention to the differences between regions and switch strategies accordingly. “The structure of social relations in the United States is shaped by race, socio-economic status, education, and lifestyle.” (Boyd 412). On the flip side, the social structure can easily be tracked and even shaped by social medias. In 2016, almost 80 percent of Americans had a social media profile and the user’s growth rate from last year is about 5 percent. “In the age of smartphones and social networks — that connecting is easy” (Rodriguez 415). Social medias would be the paradise for retailers to keep track of customers’ online footprint on a broader scale and provide tailored services to individuals, so it should be an area that is needed to be paid attention to.
In order to maximize the efficiency and connectivity, there should also be a good connection between different social medias and retail platforms. For instance, PayPal and Visa Checkout are integrated into eBay and Amazon, retail websites allow us to sign up with a Facebook account and many more. Taking advantages of convergence culture can be beneficial to both retailers and customers. The Use of Sensing Technology More and more purchases will be done on the mobile platform, but it doesn’t mean we don’t need physical stores anymore. In the U.S., online sales only account for about 10% of all retail sales and the growth rate is about 3% per year, which is not necessarily very astonishing.
So far, we don’t know what is the final market shares that online retail will take, but physical stores won’t be replaced by online retail completely. “Both malls and catalogs are coded systems that not only encourage us to buy but, more profoundly, help us construct our very sense of identity.” (Norton 87). Using algorithms and sensors to capture the customers’ gestures and appearance would be helpful for the future of retailers, especially for physical locations. ‘To achieve that pleasing experience, valuable insights should be provided to help clients meet their goals by introducing new ways to understand the movement of customers, intentions, and their shopping profile, and furthermore, to offer more personalized services.’ (Quintana, Menendez, Alvarez, and Lopez 3).
The online footprint can be easily tracked but it isn’t done efficiently enough in the physical stores. Sensing technology will be an essential way for tradition retailers to compete with the online ones. “The most fundamental difference between a traditional market and the places through which you push your cart is that in a modern retail setting nearly all the selling is done without people.” (Hine 114). The workflow that would enhance experiences of the consumers at traditional retail stores includes face detection, head pose estimation and gaze analysis, demography, tracking, behavior analysis and human-product interaction.
The efficiency of the system would go up with time goes by and the cost would vary by different retailers. Retailers should find out the balance point with the use of sensing technology in physical stores and the development of online retail quickly. What is the weakness for online retail? What makes you hesitate whether going to a physical store or purchasing online? A study of customers’ preference in terms of online shopping has done by N. Srividya from Institute of Business Management, NCE Bengal, Jadavpur University. Srividya suggests that the quality of the package and the delivering time are very critical for online retailers.
To minimize the cost of the delivery, electric delivering cars and electric trucks should be taken into consideration by the major retailers who control the most amount of market capital. Different locations require different methods that fit the specific situation, but trails are worth to be carried out. Walmart has done a good job in such case by testing out new vehicle technology. The company preordered 15 units of Tesla’s electric semi-trucks and also tested new hybrid trunks.
Other than the quality of the package and the delivering time, the price is one of the most important things to consider. Setting the right price for products and use the correct promoting strategies are crucial for retailers. “The best promotional effect can be achieved by concurrently optimizing price promotion and product recommendation because the loss from discount can be compensated for by the gains from the regular items.” (Jiang Shang, Liu and May 257). This came from a study about pricing and recommendation for e-commerce done by several graduate students from the Hefei University of Technology, Ministry of Education in China and the University of Pittsburgh.
Analysis result shows that online retailer has the highest profit margin when the average discount rate of all products is 3.09%. And there is a point where the total profit gain is the biggest while sacrificing the loss of the promoted products. Generally, the more discounts are given, the bigger purchase probability is reached as a result. Every retailer has its own special situation and vision, but they should take mobile retail, uses of sensing technology in physical stores, more efficiently delivery and the right pricing strategy into consideration in order to win the game of future retailing.
