Modern retail as we know it had to start somewhere. From price tags, coupons and shopping carts, to customized in-store experiences, the “endless aisle” and zero-waste supply chains, the industry has evolved beyond our wildest imaginations. But how did we get from retail 1.0 to where we are today?
Modern Retail is Born
Retail began with minor evolutions in the late 1800s when the Quakers incorporated price tags to eliminate price discrimination. First done for religious reasons, price tags would fundamentally shape the evolution of retail. Soon after, Wannamaker Department Store in Philadelphia and Macy’s in New York City adopted the practice.
As for coupons, retail can thank Coca-Cola. The beverage giant created the first mailed coupons in 1887, offering a free Coke for customers to try out and purchase the product.
Come 1930, the first “supermarket” — King Cullen in New York City — launched. While shoppers typically ventured from store to store, making individual purchases depending on their shopping list, King Cullen created the “one-stop-shop.” Speaking of grocery shopping, in 1937, the Humpty Dumpty supermarket chain in Oklahoma City created the shopping cart. Paired with the increasing rate of cars and refrigerators, shopping carts allowed consumers to buy more at one time.
At the end of World War II after years of rationing goods, consumers released their pent-up product demand and drove supply. In post-war America, the suburbs were born as families desired more land, bigger houses and more stuff. With the newly freed up manufacturing capacity, retailers could increase their supply to meet this newfound demand.
The Dawn of E-Commerce
By the 1950s, television was Western society’s primary form of media. Advertising and branding firms began to educate and coerce their target markets to try out and purchase new products. As the new technological revolution began, the first electronic cash register (ECR) was installed by IBM in Pathmark, N.J. From 1970 onward, retailers began demonstrating electronic shopping, rapid response to trends and fashions, and online browsing. The cost of operations significantly decreased, product prices dropped and the next generation of price wars was born.
Retail 2.0 meant variety — the ability to host a wide assortment of products without the physical constraints of a store, not to mention the savings from fewer physical locations and employees. For ultra-specialty stores, having an online presence made it easier to offer niche services and products to a specific market, something brick-and-mortars historically couldn't afford to do.
It’s no surprise, then, that Retail 2.0 created Walmart and Amazon.com: the largest brick-and-mortar and e-commerce shopping retailers in the world, respectively.
3.0: Retail Everywhere
Characterized by mobile devices and social media, Retail 3.0 today is an extension of 2.0. While standalone e-commerce retailers still work, standalone brick-and-mortar retailers don’t. Brick-and-mortar is evolving — not dying — and retailers must pair their physical stores with a digital strategy. Pop-up stores are a good example of merging online and in-store to create an “omnichannel” customer experience.
On Cyber Monday this year, consumers purchased $6.59 billion worth of inventory online. Smartphone purchases also broke a record with $2 billion in sales. Buy online, pick up in-store (BOPIS) is growing with services like Walmart To-Go, where customers shop from their smartphones or laptops, and have their purchases bagged and ready to be brought out to their cars upon arrival. Peapod and other leading grocers have taken that concept a step further, delivering groceries to consumers’ homes. The amount of shopping is increasing, without consumers ever having to leave their couch or car. And consumers are definitely getting used to it.
“Category killers” like Toys"R"Us and Best Buy were once criticized for pushing mom-and-pop shops out of business. Now, we’re seeing the opposite. Instead of retailers offering a broad range of seemingly random products, they’re focusing on one specific category and becoming efficient at it.
Brands like Casper (mattresses) and Lola (tampons) sell just one category. The brands and their development teams are dedicated to one product category. These specialty retailers are cleaning up the mess of undifferentiated stores.
The Future of Retail
Call it optimistic, but the future of retail has endless possibilities. We will see more personalized product design, efficient production with zero waste within the supply chain, and greater efficiency and customization.
In Retail 4.0, expect to see the bifurcation of product offerings, with less volume in the undifferentiated middle of the road. Retailers like Walmart and Target will get even more efficient, enabling ever better, lower-cost commoditized products. On the other end, brands like Patagonia and Stuart Weitzman, which offer highly differentiated, segment-specific, higher-end offerings, will also thrive.
There are bound to be a continued string of losers that cannot satisfy omni-availability and product-specific needs, and store closings may continue to rise. However, many other retailers will launch and adapt to the new world. Products will evolve in terms of materials, durability, utility and end-of-life disposition so that customers can use them longer, for more things, and ultimately buy less. Retailers that can figure out how to thrive in this scenario and serve their customers’ needs better than anyone else will be the winners of the next chapter.
Kathleen Egan is vice president of customer success at Wiser, a company that collects and analyzes online and offline data with unmatched speed, scale and accuracy for brands, retailers and more.