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Unfinished products

It’s very clear that we are now living through a multi- generational shift – a change an epoch few people get to experience in their lifetimes, and this change is the shift from the industrial age to the technology age. Given the change, it is easy to get tricked into only looking ahead. We become so obsessed with what might come next and disrupt our business that we forget the lessons from history. Retail is no different. The history of retail is telling. Retail has always been about

For most of the post World War II pre-internet era, retailers had natural protections built into their business models.

They had natural geographic boundaries, exclusive access to the supply chain, greater share of voice through mass media, and consumers had limited knowledge and options available to them.

Retail was less complex and protectable.

During the good times, retailers got enveloped in a product and price spiral. But as many retailers have found, competing on price becomes a race to the bottom, and the problem with the race to the bottom is that you just might win.

What platform can we compete on?

While we can all now agree that neither physical or virtual retail is superior to the other, there are certain things that each has natural advantages in.

The question all retailers must be asking is,‘what can’t the other channel do, and if we play in both, how will our execution differ in each?’

Product

Physical retail simply cannot compete on breadth of product range.

The limitations of store size are a reality that will never be avoided, but it is possible to compete on uniqueness of product and the product delivery environment.

Price

It’s hard to see physical retail competing successfully on price in the long run. It has an extra step in the supply chain. The economics of price competition just don’t make sense.

If we pay close attention to the ‘what and how’ delivery of the product instore, then the price question can be reversed.

Instead of seeing how low we can go, the question becomes what premium can be charged for the uniqueness of what is delivered in the physical location.

Place

When it comes to location we need to flip our thinking away from online, or retail, and instead to where people want to undertake this experience – is it a delayed or live experience?

Bricks and mortar retail needs to become a live event, an interaction more than a trade.

It should be an event you simply have to be at the coal face in order to experience.

How could a physical store become a place of entertainment, education, socialisation and co-creation?

Promotion

The best bit about physical retail is that cool things that happen at a retail location get shared, most often immediately, with trusted personal networks who live in the same city.

What a boon for retailers who have the courage to deeply differentiate their offer. So how is such differentiation possible in a hectic, everything available from around the globe, on demand, at the cheapest price possible business environment?

Retailing unfinished products

If we have learned anything from the social web and the maker movement, it’s that people like to be part of the creative process.

We are creative beings, and while consuming and shopping to buy is nice, it’s starting to lose its shine in a world where we have everything we need.

The old world of the pre-internet era was all about the separation of producer and consumer. The job of the consumer was to buy what’s hot.

After 20 years of reframing the commercial relationship, the new order of the day is co-creation. We are now deeply inside the age of the ‘Prosumer’.

Prosumers don’t just absorb products, but participate in the design and making process. They both produce and consume.

If we look at every successful web or technology business, the end users are also creating the products. It’s not just sites like YouTube and social media, where crowdsourcing is obvious, but even Google is a crowd sourced forum.

The primary function of Google’s search results success is that it uses the links people create.

In simple terms, digital products are not finished until the end consumer interacts with them and redesigns and customises the end product.

No two smartphones look the same once they are in the hand of the end user.

It’s now time for retailers to undertake the same philosophy – to hand over some parts of the production process to the consumer.

The future of physical retail is about selling unfinished products.

Virtual = physical

What if physical retailers undertook the same level of thinking and made their store a platform for creation?

It’s easy to think that this couldn’t work in the real world and is the domain of the virtual, but real world examples already exist of this transformation taking place.

When retailers said that customisation for big non-virtual brands wasn’t possible, Adidas was not listening.

The My Adidas online store allows customers to design their own kicks with the colors they want and even their name on the side.

There are also stores in Tokyo in which customers help make their own shoes – and pay a premium for becoming the labour.

At this point the customer gets much more than a customised product – they also get a story worth sharing.

This story has a natural viral loop built into it, in that the custom shoes story gets told every time they are worn. It gives a whole new meaning to the phrase ‘foot traffic’.

There’s probably a version of this thinking in every product. The real question is not if it’s possible, but if the effort needed will be undertaken.

If we trust our customers enough to let them be part of the process, they will show us how we can transform what we sell and help us enter the malleable marketplace.

Beyond instore

There are significant clues for the future of retail in emergent coffee culture.

The average cup of coffee in a café costs more than 100 times the price of one made at home. The product being sold is much more than what is delivered in the cup.

It’s the accumulation of the physical environment, socialisation, and the custom nature of our favourite brew, watching the artful barrista in action and the ritual.

It’s even the people who frequent the store that make it what it is. It’s theatre at retail level. And it’s highly profitable.

All these human, emotional connections we make ensure we’ll pay a premium in physical retail. It’s what a homogenous product at a sharp price point can never be.

If we want to escape the commodity race in retail, then a great place to start is by ensuring our product can’t be complete without our customer’s input.

In fact, the only thing that is unique these days is the mind and creative input of the crowd.

Steve Sammartino is an expert on the shift to the digital and connected economy, and loves helping people make sense of it all. His new book, The Great Fragmentation (Wiley), is available in bookstores.

This article first appeared in Inside Retail Magazine’s October/November 2014 issue. Click here to subscribe.

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