It is a well lamented fact that the brick-and-mortar retail industry faces a crisis. The fundamentals in big, bellwether markets are nigh-on disastrous, and have been since the retail apocalypse began in earnest in 2015. This onslaught has brought many business leaders and policymakers to advocate for protectionist action — yet it is with technology, not tax, that the solution lies.
The rot is setting in far and wide. In the U.S., a stock price crash at the tail end of the year affected retailers across the board, underlining the fragility of the industry. Over 8,000 brand chain stores had closed their doors in 2017, compared with 6,000 closures in 2008. In Britain, Sports Direct boss Mike Ashley warned that the High Street risks being “smashed to pieces,” saying, “November 2018 was the worst on record, unbelievably bad.” And it’s not just the Anglosphere that’s suffering — Europe is struggling too. Seven of its nine major economies posted negative year-on-year footfall growth in Q4 of 2017. And in Sweden, for example, world famous H&M closed 170 stores in 2018.
Clearly the broad push behind these negative trends is the shift of shopping habits online. In the U.S., in-store sales rose 3.3% over the holiday season, yet online sales grew six times faster. In the UK, footfall on Black Friday dropped 5.4% compared to 2017, but online sales had skyrocketed 46% year on year by 4 p.m.
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It’s in everyone’s economic interests to salvage retail: the Financial Times reports that for every $1 million of goods sold through shops, 3.5 people are employed, versus just 0.9 people on Internet sales.
Sadly, the solution most immediately bandied around by those that matter is in line with current protectionist measures popping up in the wider economy — a tax on online retailers. In the UK, the Chancellor Phillip Hammond commented that “temporary tax measures to rebalance the playing field” might be required. The ever-present Mike Ashley told MPs that they should impose a 20% tax on online sales in a bid to save brick-and-mortar stores in a recent testimony to a parliamentary committee. And in the U.S., the momentum is towards greater tax burden, with the Supreme Court ruling in 2018 that states may charge tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state; and more than 30 states do collect it.
Whilst it is true in certain instances that certain online stores ought to be brought in line with standard tax rates, levying further punitive taxes is regressive and simply serves as a bill for consumers, picking winners in the retail market.
The solution and onus lie instead with retailers to improve the shopping experience, to make shopping just that — an experience, not a boring chore. The High Street has to change what it offers consumers. As consumers change, as their tastes change, so must retail. I firmly believe that people will always want to shop — but retailers must ensure that we are innovating the experience and using the tools at our disposal to make the journey better.
In response, retailers must look at two things. One, what do online retailers offer that makes their service competitive? And secondly, what complaints do consumers have with brick-and-mortar retail?
One pivotal advantage that e-Commerce sites have is their accumulated and advance understanding of the consumer. Web sites know a lot about the customer before they have arrived. They can be led to their interests immediately, and the site can be ‘stocked’ for them. Here, technology can help retailers catch up. My firm has created technology that identifies a customer’s age, gender and even mood as they enter the store. Having this information means better, more personalized service, allowing retailers to change signage in real time, optimizing design and store layout, ensuring the right products are stocked as well as choosing assortments according to live visitor demographics.
Consumer complaints often center on queuing times and stockage issues. While the best-selling items are frequently missing from the best-selling stores, unwanted items pile up on the shelves elsewhere — and must be marked down. For this issue, something as basic as knowing how many people are in a store at one time really helps. To address this, retailers can use technology that provides a person-counting function, reducing queues in the checkout process by allowing stores to optimize staff operation. We have also designed a people mapping function, allowing retailers to improve the store layout by analysing intricate customer movements and making active, real-time decisions about product placement.
These solutions are just some of the consumer-focused innovations which can revolutionise the industry, and the experience, for weary consumers. Our goal must be nothing less than frictionless shopping, but first we must understand the causes of the retail apocalypse, and work with consumers, not against them.
Demirhan Büyüközcü is the Co-Founder and CEO of V-Count, a global technological leader of visitor analytics solutions. He is also the Co-Founder of Onedio.com, which is the third-most-visited web site in Turkey, with more than 80% of Turkish Internet population visitors monthly. He holds a PhD in Artificial Intelligence and has worked extensively on developing computer vision and machine learning solutions for retail, military, security and automation industries over the course of 13 years.
