Future of shopping: Identity to overtake wallets, stores to survive

Thursday, 28 June 2018

It's 2040, you walk past a clothing store and a discount code for items inside it flash on your smartphone screen.

The shop sells jackets similar to the one you viewed online last week, a message on your screen tells you. 

You enter the store and try on a  jacket you like. In the changing room, a touchscreen mirror lets you swipe to swap the colour of the jacket in your reflection. 

You prefer it in red. The mirror recognises your face and scans your eyes iris to purchase it. It will be drone-delivered from a distribution centre to your home that day. 

**READ MORE:

* Here's how you'll be shopping in the 21st century

* 2018 a record year for spending on groceries and booze already

* Wave of international retail brands unlikely to be scared off by Topshop: analyst**

The technology to enable that shopping experience already exists. It is only a matter of time until it becomes the norm, retail experts and futurists say, and there are a number of other retail innovations just waiting in the wings. 

PAYMENTS

Payment technology is developing to make paying for things completely touch-free.

Paying with a smartphone via apps like Alipay and Apple Pay is here, but the next point of sale systems could use facial recognition or fingerprint scanning instead. 

Callaghan Innovation advisor Craig Shipman says cards and cash will become obsolete and wallets will be a collector's item within two decades, 

Smartphone payment systems and facial recognition technology already exist, it is only a matter of time until they become standard in stores, he says. 

By 2040, shoppers will be able to walk in and out of any store in New Zealand without stopping to pay, he forecasts. 'You may never touch money, ever. We are already seeing it.'

Instead, shoppers will be walking 'digital wallets'. Faces and fingerprints will be the key to people's finances. Cameras and facial scanners will identify people and the items they pick, deducting money from their accounts automatically as they shop. 

Shipman says banks will be a 'thing of the past,' because there will be no need for institutions to hold your funds in an account. Money 'will just be data moving around' online, he says.

The government and retailers will tap into the cameras, tracking where and how citizens are spending their dosh.

Chinese e-commerce giant Alibaba trialled its first walk-in, walk-out 'magic payment' shopping system in China in April. A homeware store in Hangzhou, south east China, was the first to test it.

Customers can leave the store with up to five products. Sensors on the exit register products and take the payment out of a shoppers' mobile Alipay account immediately.

Amazon opened an Amazon Go store in Seattle, United States, to trial grab and go shopping last year. It was the first supermarket with no staffed checkouts.

Neither technology is seamless yet and both experienced hiccups in their trials. Alibaba's system lagged in detecting a shoppers' Alipay account. 

The cameras in Amazon's store could not differentiate similar sized shoppers and the technology did not account for children moving products between shelves. 

Shipman says identification technology has to become more accurate for it to be used as part of a mainstream payment system. 

BRICKS VERSUS CLICKS

Online shopping and three-dimensional printing were once expected to destroy brick and mortar stores, but retail spending has not slowed and companies continue to open more shops.

First Retail Group managing director Chris Wilkinson says stores will continue to exist because of the ongoing expectation of shoppers who want to collect their purchases immediately rather than wait for a delivery.

Concept stores that showcase products but do not hold stock to sell in favour of online shopping, will not take off, despite a number of them being rolled out internationally, Wilkinson says.

The benefit of shopping instore is walking away with products immediately and concept stores do not feed that growing desire. But flagship, 'headline' stores are becoming common, he says. 

Futurist Frances Valintine says stores need to be destinations worth venturing to, to pull people away from screens.

She says they will have to offer an experience independent of shopping, because if people just want to buy stuff, they will do that online. 

Chinese retailers are using technology to entice shoppers to their physical stores. Shoppers play games on touchscreens to win discounts to redeem instore. 

At one homeware store in Hangzhou, shoppers can upload a photo of their living room to a screen and virtually place furniture in it before buying it.

MALLS

Investors are throwing big bucks at new mall developments, suggesting shopping malls will remain for decades to come. 

Precinct Properties retail development manager Michael Sweetman says the company's Commercial Bay mall development in downtown Auckland will transform the CBD and offer an experience, not just places to shop.

The experience will be dominated by food. 'Food is the new fashion. It is becoming seamlessly connected now to shopping. It's a form of experience and entertainment,' Sweetman says.

'If you are choosing to spend your precious time shopping, you want an experience that challenges your senses.'

Clothing retailers looking to buy space in Commercial Bay asked about the food offerings planned for the mall, he says. 

Men's clothing chain Rodd & Gunn will open a flagship store that includes a restaurant at the mall. That combined approach is common overseas.

Wilkinson says restaurants, bars and cafes pose the greatest threat to retail's future. 

Shoppers are more inclined to spend money on food and beverage every day, than buy an item of clothing, he says.

For the past two years, retail spending has topped hospitality spending by about $4 billion in March, Statistics New Zealand seasonally adjusted electronic card transaction data showed.

However, the same figures suggest hospitality is slowly but surely taking a larger bite out of our wallets.

Card spending at bars, restaurants and cafes increased by $82 million from March last year to March this year, taking total spending on hospitality over $1b in March 2018. Spending on retail that month was $5.3b.

SUPERMARKETS

New Zealanders' collective grocery bill for the first quarter of this year totalled $5.9b. 

Food is a necessity, so supermarkets are expected to have an easier ride to remain relevant in the future. 

But when Internet of Things (IoT) fridges automatically buy food online, to be home-delivered when staples run out, people will not need to visit the supermarket as frequently. 

In the first three months of this year, New Zealanders spent more on groceries than over any three month period in the past 10 years.

Wilkinson says supermarkets will face their own challenges to innovate and they are lagging behind already.

Countdown began trialling online grocery shopping 20 years ago. Foodstuffs, owner of New World and Pak 'n Save, introduced it last year. Both supermarket companies have suggested they are looking at deploying voice-ordering technology.

Foodstuffs North Island chief executive Chris Quin says his company is already preparing for what shoppers want in five years' time.

Asked if physical supermarkets will exist in the future, Quin says they will.

Within a decade, they will be seen as a place to visit for food tasting and recipe inspiration, as well as the most convenient, fast place to buy groceries, he says.

'[Shoppers] love coming instore to get fresh items, to get inspiration, to see new ideas, or just to be quick.'

Buying groceries online will not become more popular than visiting the supermarket because people prioritise convenience, he says.