The end of retail as we know it. A scenario of virtualization.

21 03 2010

Health toilet in Japan - Source: ideaconnection.com

It is always interesting to see how pushing some trends to the limit create challenging scenarios. While most people will agree about the existence of a trend, few will care to walk through the unintended consequences. Here is a great example of how our mental models if unchallenged can leave some gigantic blind spots in our understanding of what the future may hold.

Pr. Sanjay Sarma from MIT recently gave a presentation to an audience of supply chain executives on the state-of-the-art of sensing. Sensors are now ubiquitous: in you car, your house, your cell phone, etc. There is a clear consensus that this is just the beginning. More complex sensors are becoming more affordable everyday. The computing power and infrastructure to handle the data is also getting exponentially cheaper. With your IPhone, you can already scan the bar code of the product you want to buy, and search on the Internet where to find it at the cheapest price. We are just a couple of years away from sensing appliances in our homes. Your fridge will sense when you will be out of milk or Diet Coke and will signal it to you. The sensing toilet is a reality in Japan. After analyzing your “body fluids,” the toilet makes recommendations for your diet and will give you information that you used to only get through a blood test i.e. sugar level, etc.

Everybody in the audience bought into a future where sensing was omnipresent. The supply chain executives could already experience in their businesses how sensing has become a pervasive innovation – from GPS tracking to RFID tags. However, when asked about the potential implications in such a future, they quickly concluded that dynamic routing would be the most important impact in their respective industries. Sure, being able to reroute your fleet to avoid congestion will allow saving a lot of money. But, is it really the most dramatic impact you can think of for this type of technology?

Even the most well-known or obvious trend can generate a challenging future if you care to open your mind. A simple exercise is to put yourself in the shoes of your future self. In this case, I live in the future and sensing is all around me. I have data on almost everything available at my fingertips. My fridge tells me when to shop and my toilet has become my nutritionist. Ads on TV or the web put me one click away from receiving the product the next day at my doorstep. In such a world, why would I want to take my car, beat the traffic and go to a crowded retail store? One, if not the only reason, would be price. I would still want to do that if it is cheaper. Yet, Amazon and Peapod have proved that home delivery can be price competitive. Of course, I will still go to a retail shop to buy “things I need to touch and see for myself” like vegetables but for the rest, why bother carrying around two gallons of milk?

An obvious question then becomes: why do Peapod and other online grocery shops struggle so much? Like in my previous post on electric vehicle, it is all about customer experience. Right now, if I want to use these services, I have to chase the information. I need to find what I need to buy and search for the exact same reference in the online store. As I tried to it myself, it takes so much time! The future of sensing will package the information for us and make decision making one click away on my fridge’s screen. That makes all the difference between a success and failure. Talk to Apple about the Newton and how they provided the first PDA before everybody else; but failed to get people’s buy-in because of a subpar customer experience.

Thus, I can definitely see a future in which most of the grocery shopping will go online. Large supermarkets will disappear to become closer to urban communities and more centered on convenience shopping. The trend is already happening in Europe where the size and number of hypermarkets (largest retail stores) is on the decline. So, is dynamic routing the thing you should be really thinking about?

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