Retail Expert: Main Street Will Go “Bit & Mortar” Whether It Wants To Or Not

Retail Expert: Main Street Will Go “Bit & Mortar” Whether It Wants To Or Not
Retail

KKLD* Creative Strategist Logan Woods explains how the storefronts of Main Street will need to embrace the digital revolution in order to survive, and an unlikely alliance might provide them all the tools they need to do so, while taking on a mutual enemy in the process

PSFK Op-Eds
  • 25 january 2018

Retail lore says it was a 10-pack of Wrigley’s gum. It cost 67 cents and was paid in cash at 8:01 am at a Marsh’s supermarket in Troy, Ohio on June 26, 1974. The pack itself is on display at the Smithsonian.

Now universally known as the “barcode,” the IBM technology was used for the first time in that transaction and ushered in a revolution of retail. Though very slow to take hold at first, by 1980 nearly 8,000 stores per year in the US were converting. Today, nearly every transaction from the mom and pop shop on Main Street to the US Department of Defense uses the same technology. In less than a decade, the beep of the checkout became synonymous with our daily bread.

In the era of Amazon’s brick and mortar bid, the adoption and eventual ubiquity of the barcode holds valuable lessons.

In early 2017 at 2131 7th Ave, in Amazon’s headquarter city of Seattle, a new wave of retail will again hit American storefronts. Through an unprecedented merger of motion tracking, camera, and scanning technology, Amazon Go is the first to promise a shopping experience that eliminates the most dreaded part: the check-out.

It’s the latest bit of evidence proving Marc Andreessen’s 2011 prediction that software is eating the world.

Like the barcode revolution that preceded it, the stores of America’s Main Street and big box retailers alike will all need to go increasingly “bit & mortar” in order to survive. The opening of this shop could mark a sea change and there’s a lot on the line.

“Just Walk Out Technology” as Amazon calls it—the Millennial-tech lingo that will upend the U.P.C. (Universal Product Code) coined by the acronym-loving generation before it—has been approaching over the horizon for a while. From the manual checkout lane to Apple Pay and the behind-the-scenes players of online payment processing like Square and Stripe, grab-and-go was a predictable conclusion. That Amazon would pioneer it is hardly a stretch. From the Kindle to drones, Echo and even Bezos’ Blue Origin rocket, Amazon’s R&D creep into the world of atoms instead of bits has long signaled an appetite that goes well beyond the web’s orbit. At this point a brick-and-mortar stand against the incumbent monolith, Wal-Mart, seems equally expected.

But unlike Amazon’s meteoric .com rise, which came at the expense of traditional merchants, retail history, and actually Amazon itself, both hint it is possible that Main Street will, eventually, get in on this new venture and reap some of the rewards.

2-mike-petrucci

Nearly two decades ago, Amazon took ecommerce affiliate marketing mainstream with its Amazon.com Associates Program. Bezos gave an army of niche bloggers the tools and the incentive to sell his products for him. As the master of exploiting the long tail, Bezos’ assessment of Main Street in the US economy is most likely to be nothing short of prime real estate. According to the US Census, 99.7% of US companies are small businesses, qualified as having less than 500 employees, with 89.6% of those having less than 20 employees. While many may be service providers and very few are Fortune 500 juggernauts, there’s a considerable group of vendors that collectively pack a punch.

Imagine if, after Amazon Go’s initial pilot phase proves its value, that grab-and-go technology was opened up to corner stores and small town mercantiles at little to no cost in exchange for a nominal percentage being sent to Amazon HQ, similar to credit card transaction fees. How exactly installations of the new systems would be done may not yet be clear, but at this point we can bet on Amazon’s ability to innovate a trickle-down-tech adoption model. Doing so would pry open a hidden fortune, and that doesn’t even account for the other likely possibility of Amazon’s own brick and mortar experiments eventually dotting the nation with the same tech but its own inventory.

So there are several indicators of how and why Amazon would apply this “Just Walk Out Technology” to its tried and true business model beyond its own outlets. But why would Main Street go through the costly trouble of rebuilding its entire retail experience from the ground up?

For starters, they’ve done it before. At the time, making the switch to the barcode was cumbersome and didn’t prove immediately lucrative. A critical mass of retailers needed to adopt it in order for that return on investment to kick in, and it wasn’t an easy sell at first. Nobody wanted to be the first to jump. Two years into the barcode experiment, Business Week declared summarily The Supermarket Scanner That Failed. A year after that, in 1977, there were still fewer than 200 grocery stores that featured the technology. Yet only 3 years later the adoption rate rose to that 8,000 a year mentioned earlier.

What lead to the coveted hockey stick growth? In short, basic math. Once installed at a store, it took just 5 weeks to see, on average, a 10-12% increase in sales and a 1-2% drop in operational costs. Early adopters earned their edge by lowering prices, drawing a greater market share, and punishing the competition. Laggards were left in the dust. Soon the new tech was not only clearly profitable, but essential. We’ll soon learn the precise margins that grab-and-go will bring.

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This Adds Up to One Big Prediction

Amazon looks poised to co-opt an army of mom and pop shops across the country to take on the Walton dynasty, one pack of Wrigley’s at a time. With Amazon’s corner on this new technology market, Wal-Mart and every other major retailer may have no choice but to either adopt Amazon’s own equipment, or join forces to develop competing technology.

It should come as no surprise that Amazon is not looking for the biggest slice of the pie, but rather the whole dessert menu. Those who learn the new rules first will come out on top, but eventually everyone will have to play the “bit and mortar” game.

And what does that mean for Main Street? Hopefully, a more level playing field with big box retailers, revived downtowns, and the kind of innovation and entrepreneurism we’ve long seen in the blogosphere; but also would-be cashiers acting more as shopping assistants, storefront designers, and as an ironic coup de gras, greeters.

As a creative concept strategist, Logan Woods’ work revolves around conceptualizing global campaigns for premium brands with an emphasis on digital. Strategy, creative direction and copywriting are all part of his toolkit. When not clacking away at a computer or storyboarding a project, he can be found exploring somewhere far beyond the reaches of the Internet. He graduated from the University of Wisconsin-Madison with a BS in Art. A native of Wisconsin, USA, Logan now resides in Berlin, Germany with his wife. 

Image 1: Scott Webb
Image 2: Mike Petrucci
Image 3: Clark Young

Retail lore says it was a 10-pack of Wrigley’s gum. It cost 67 cents and was paid in cash at 8:01 am at a Marsh’s supermarket in Troy, Ohio on June 26, 1974. The pack itself is on display at the Smithsonian.

+amazon
+Amazon Go
+brick and mortar
+future of retail
+op-ed
+Public
+retail
+technology

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