The last quarter-century brought seismic changes to retail. Sarah Butler asks industry leaders what the next 25 years might hold.

Payments in shops could be made through wearable technology such as Google Glass in the future

The year is 2038, human beings have travelled to Mars and back, fission energy is powering the world and Africa is challenging the global dominance of China and India. But what about the big question - where is everyone shopping?

Almost certainly the answer involves a lot more of the internet. Those entering middle-age in 25 years’ time will have no sense of life before the world wide web existed and younger consumers are likely to see technology as a seamless part of their world.

Buying music, books or film as physical products will be a niche hobby pursued by purists, while the majority of electrical goods, homewares and everyday groceries is likely to be ordered online and delivered to homes or convenient spots nearby.

Tim Steiner, chief executive of online grocer Ocado, predicts as much as 60% of groceries will be sold online within 10 or 20 years. He says Ocado is still experiencing double-digit growth in parts of London where already 10% of groceries are ordered via the internet.

Even a more conservative 10% or 20% shift online would have huge repercussions for grocers, with big out-of-town stores likely to suffer the most. If shoppers no longer need to use a car to pick up their bulky basics, they’re likely to buy top-up items such as milk, wine or fresh fruit at a local convenience store.

Steiner says: “Good convenience helps our proposition. You don’t have to get in your car to buy one or two items, you can make do until the next Ocado order arrives.”

Redefining the high street

It’s not just the grocers. The future for all large out-of-town stores is under question, closely linked to the future of cars.

“The assumption around out-of-town complexes is that you can drive there. But with potentially fuel prices going up and car ownership going down they become a lot less economically viable,” says Nicola Millard, a futurologist at BT.

Local high streets are at present struggling to redefine their role, but if bulky shopping is handed over to etailers’ delivery vans they could be a much more attractive proposition - a place to enjoy recreational shopping, to access services such as health and beauty treatments and socialise with friends or family.

On the other hand, there will be fewer stores overall in the UK.

Traditional high streets will shrink to make way for housing and local services as major retailers focus investment on a relatively small number of experiential stores in cities where shoppers can seek inspiration or test out the things they want to buy.

Lucie Greene, editor of Lifestyle News, the forecasting division of The Future Laboratory, says: “It is going to be like Disneyland, a place to be wowed and to hang out and play. It won’t be about shopping but about brands competing to create a more and more theatrical, convivial and immersive experience.”

Putting on a good show will be important because retailers will need to develop a strong brand in order to survive competition from natural monopolies such as Amazon and Google according to Tony Stockil, chief executive of omnichannel retail advisory firm Javelin Group.

Stockil also foresees an explosion in international trading. Brands from India and China, fuelled by domestic growth, could heat up competition in the UK, while retailers from the UK will move more boldly overseas, he says. “Many more will be generating the majority of profits outside the UK,” he adds.

A question of cash

However, none of these businesses is likely to be taking much cash. Tills, coins and paper notes could be consigned to history. The trend towards wearable computing technology such as Google Glass (a wearable computer with a head-mounted display) or the much-rumoured iWatch (a wristwatch-like device that operates like an iPhone), and the development of payment using facial, thumbprint or iris recognition technology, might mean shoppers can confirm a transaction with the wave of a hand or the blink of an eye.

Millard says the prevalence of mobile gadgets will also mean retailers will be able to instantly compare prices with rivals, creating greater transparency. She observes: “There is a huge debate about whether prices will become irrelevant. Will you ever be able to get a bargain again?” And if price becomes a pointless battleground, then Millard suggests retailers will be competing on terrain such as service.

Service is also likely to be more important, particularly in the UK, because about 60% of the population will be over retirement age, according to Greene. Although elderly shoppers of the future will be tech-savvy and able to use the latest gadgetry to organise the services they want, they are still likely to struggle with health and mobility issues.
In that environment, customer relationship management will be key. With so much happening online, retailers will have a clear idea of their shoppers’ wants and needs and will be able to second-guess shopping missions using algorithms to analyse customers’ digital footprints.

“Big data will be used to create interactions on and offline that will become highly personalised to a point where the retailer will almost know you better than you know yourself,” says Greene.

Geolocation services and near field technology, which turns smartphones into gadgets that can make payments, will help retailers personalise the experience in-store as well as on the internet. Advertising and point of sale could alter depending on who is walking past, for example.

Global stability

Personalisation of products themselves will also be much more widespread. As 3D printers evolve, they could enable shoppers to order items made to their own specifications. Holding warehouses full of stock or negotiating global supply chains might become a thing of the past in some retail sectors. Printing of shoes, for example, could make today’s sizing system redundant.

“Footwear and clothing sizing is quite crude and there is huge scope with 3D printing for personalisation,” says Greene.

However, these technologies and the vision they create assumes a stable global environment. If scientists are right, and no solution is found to global warming, extreme weather and rising seas could fuel greater competition for resources from crops to natural fibres.

Some retailers are already preparing for a world in which more expensive and limited resources mean that shoppers are not able to buy as much as today. That trend could be exacerbated as young people’s disposable income is squeezed by carrying the burden of an ageing population. If that’s the case, borrowing, hiring and recycling will be a much more important part of the distribution cycle in future.

Retailers have survived for hundreds of years by adapting to changing markets. Over the next 25, they will have to keep up with a pace of change that will be faster than ever.

Future Retail - what to expect

  • Convenience stores will flourish as shoppers buy bulky goods online, but high streets will change as major retailers invest in fewer, more experiential stores to build brand awareness in cities.
  • Cash and tills could disappear as wearable technology such as Google Glass or the iWatch becomes the way to pay.
  • Price will become less of a battleground as mobile gadgets provide total transparency. Service will be more important as a result, particularly given the UK’s ageing population.
  • Personalisation will be prevalent as 3D printers allow goods to be made to order in a swift and cost-effective way. Retailers will use data analysis to adapt marketing and point of sale to suit individuals as they move around a shop.
  • More retailers will trade internationally, and brands from China and India will launch in
    the UK.
  • Greater competition for resources may mean retailers switch to hiring and recycling goods rather than simply selling.