After all the research and analysis that my team and I did on our 2012 version of the Future of Retail report, I sense that retail is already undergoing the same sector-wide change that the music industry went through over the last 10 years – and parallels can be drawn. While the speed of change has been slower coming to the retail sector because of the legacy realities of shopping and fulfillment, a mix of social and mobile tools are overcoming this friction to change.
Let’s consider what happened in the music industry: the sector was making money with a closed distribution model for its products until a change-maker entered the market to take advantage of technology. Napster showed music lovers that they could get their fix when they want, how they want – and at the (zero) price they want. Napster and a set of similar services set off an industry wide restructure that saw the value of sales halve in 10 years.
Services like the iTunes store from Apple appeared to create a model that provided a quick-fix to momentarily shore up the sector – but these one-click purchase services didn’t prevent industry-wide change. Music Industry sales dropped over 50% from $14.6bn to $6.3bn in the 10 years after 1999 and continue to decline, resulting in 71,000 US industry jobs lost.
More recently we’ve seen the rise of on-demand services to reinvent the category. Streaming music services such as Spotify and Pandora and their forbearers have altered the way in which music is consumed. And more-so, file-sharing continues to force business revolution in the sector: Today, files that are not paid for are shared up to three times more than purchased files. Is there any wonder why 81% of 18-25 year olds think unpaid sharing of downloads is justified and see the internet as a place of gift-giving.
If we look closer at payments, we see an aspect of retail that is experiencing the same style of reinvention and revolution. While this has been a long time coming — PayPal led the charge with its online platform that seeks to be a one-click solution that is accepted anywhere – today we see what could be considered Quick Fixes like the American Express’ Serve, which looks to offer the same level of reach and convenience, but backed by the trust and customer relationships of the legacy brand. Newcomer Square not only serves as a payment and processing platform, but also adds rich data reporting to offer merchants deeper insights into real-time on-demand transactions and service interactions, while promising customers greater personalization and efficiency. Outside of the B2C realm, Venmo is truly revolutionizing the P2P space, making transactions into a social experience that makes completing a payment as easy as sending a Tweet.
PSFK believes that retail is going through a cataclysmic change today and as this is fueled by digital and social media, there is a correlation between the changes that took place in the music industry and those currently in motion in the payments sector.
Within the retail space, I could argue that Amazon.com has been the catalyst for change. The mobile app has served as a temporary stopgap, bridging the multiple channels that exist today; but the sector is undergoing rapid transformation. Retailers and brands need to innovate in order to keep pace with the changing behaviors and expectations of their customers.
Like the music and payments industries, retail is witnessing the impact of ‘On Demand’ and ‘Peer-to-Peer’ services. In terms of the former, PSFK predicts the boom in Retail On Demand – smart shopping that offers personal product, personal place, personal price and personal promotion. And for the latter, PSFK sees the rise of the New Brand Champion – shopper-to-shopper-based selling, peer-to-peer service and group pricing.
But let’s not see these changes pessimistically. Shoppers are already using the technology in their lives to develop rich experiences with each other and organizations. They’re now waiting for the retail sector to catch up to create truly special experiences for the shopper. Read our Future of Retail report for insights into how to leverage the that change.