BrainTrust throwdown: Is it inevitable that tech companies will dominate retail?

Discussion
Source: Amazon Go
Apr 05, 2017
Rick Moss

From its origins with the Dutch West India Company through numerous evolutions, commerce is the engine that has driven the global prominence of the U.S. economy. Still, the e-commerce revolution that caught on in the late 1990’s is so fundamentally different that the prior 400 years of traditional retail can be viewed as a prelude to the empowered, connected consumer age we exist in. We’re in the midst of a hi-tech revolution with no limits in sight.

We asked two of our BrainTrust panelists, Ken Lonyai and Ryan Mathews, to argue for and against the following premise: 

The new model for retail, as exemplified by Amazon, is built on mastery of data, AI and IT services. Legacy retail companies can’t possibly make a transition to this type of data-first company. Therefore, possibly within the next decade, big retail will be entirely dominated by tech companies.

[For the purpose of this exercise, Mr. Lonyai will take the pro position and Mr. Mathews the con. The views expressed herein are not necessarily their own.]

Ken Lonyai

Ken Lonyai
Amazon is the pinnacle of retail technology domination. Everything the company does is supported by data and technology and it’s working splendidly. Apple’s retail success is strongly attributed to changing the shopping experience by incorporating digital tools for checkout, fulfillment and support. Other tech-driven commerce leaders are emerging too. Jet.com uses algorithms to aggregate savings. Starbucks’ mobile apps/payments fuel its growth. Warby Parker, Bonobos, Rent the Runway, BirchBox, Casper and others leverage big data and technology to upend their respective markets.

None of these accomplishments would have come about simply with better trained sales associates on a sales floor. Even associates need to be well equipped with data and the means to access and utilize it immediately or today’s enabled consumer will walk. As important as human factors are, software and hardware drive user interactions, inventory, logistics, package tracking/returns, etc. It’s the absolute differentiator that will continue to distance retail winners from also-rans.

Ryan Mathews

Ryan Mathews
Arguing that tech companies are the future of retail is like saying power saws are the future of carpentry. Do they have a place in carpentry? Of course! Are they carpenters? Not even close.

We are so besotted by technology that we are blind to its essential role. At its most innovative, technology is a tool. Once it gains mass acceptance, it becomes a utility — invisible — freeing us to focus on real change drivers, like people.

Electricity allows stores to stay open later, keep products at proper temperature, illuminates the consumer’s shopping experience, fuels computing systems, etc. But it’s people that make or break retailing, not electricity or utility providers.

Technologists love process and systems. Merchants help people escape boxes. AI solves for the best choice. Retailers know the power of surprise. The future belongs to retailers that can exploit technology, not the other way around.

DISCUSSION QUESTIONS: Which argument rings truest with you? Will the tech giants (think: Amazon, Google, Apple) soon rule retail? Can traditional retailers make the transition and compete effectively in this new environment?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"The winner? Tech. The loser? Everyone who is afraid to cannibalize their existing model."
"Technology certainly plays a critical and enabling supporting role but does not define the actual experience."
"Retail is a business based on people, for people, by people. I remain aghast that the digerati seem unable to stop and ponder that reality."

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42 Comments on "BrainTrust throwdown: Is it inevitable that tech companies will dominate retail?"


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Paula Rosenblum
BrainTrust

Gosh, everyone on both sides seem to forget the “X factor” (beyond Ryan’s passing mention) — the products being sold and the skill of the merchant in selecting and/or designing the things consumers want to buy.

Of course technology is a tool. It helps us determine “how much,” “where” and in the case of apparel “which sizes and colors?” But retailers must never forget that commodities are great for — commodities.

So many specialty retailers are having trouble now because they’ve lost their merchandising touch. That’s not a technology issue.

Now, having said that, the store itself is an entirely different story. There are only so many ways we can say, beg, plead and scream that the store is desperately in need of reinvention to stay relevant in the digital age. It’s just true. And all our data tells us retailers are moving too slowly.

But stores without “cool stuff” or “great services” are boxes that can easily be replaced by Amazon or some other commodity seller.

Tom Dougherty
Guest

Can traditional retailers make the transition? Certainly. Will they? Nah.

They are too busy trying to make the old models profitable and interesting again. They won’t change until it’s too late and new shopping habits will already be formed.

The winner? Tech. The loser? Everyone who is afraid to cannibalize their existing model.

Many of the barriers for change are found in shareholders who notoriously hold onto quarterly profits and resist long-term investment. So how long would a Macy’s C-suite survive if they closed and reduced the brick-and-mortar retail space in favor of a REAL and dominant online experience? That management would get bounced out on their ears. The current model MUST defend real estate investments.

Mark Ryski
BrainTrust

Both arguments are strong, but I believe Ken Lonyai’s rings most true today. While the role of store personnel to impact customer experience and store results has never be greater, the impact that technology has had in all aspects of retailing is undeniable. Clearly Amazon is the ruler of online retailing, but I’m not convinced that they will dominate all retailing. I do believe that traditional retailers can make the transition to effectively compete in the new environment – in fact, I’d argue that technology without a solid foundational base of brand/execution will not lead to success either.

Sterling Hawkins
BrainTrust

The way retailers have historically gone to market is fundamentally changing and consumers now hold the power in the supply chain. I’m in agreement with Mark here that what the brand stands for and how they create experiences (online or off) becomes the basis for success. Technology is only a supporting factor.

Max Goldberg
Guest

Technology can enhance the shopping experience but rarely will it succeed at being the experience, and experience is what retail is all about. Traditional retailers can compete based on experience, but they need technological tools to do it efficiently.

Lyle Bunn (Ph.D. Hon)
Guest

Ryan for President! The enabling effect of technology is its strength and value. Without application, tech is a tree falling in the forest with nobody to hear it.

Gib Bassett
BrainTrust

I think they are both correct. The problem with technology is that it’s often positioned as the difference-maker by itself (remember the history of the CRM market and the challenges companies have with their Big Data projects). Instead, it takes the logical use of technology along with people and processes to make a difference in retail. From what I’ve observed, I think part of the challenge traditional retailers face is the distinction between the cultures of their e-commerce/analytics operations and their brick-and-mortar stores. The staffing of the groups, the pay scales and general work environments are so different that it’s hard to achieve the omnichannel benefits everyone is shooting for. I’d expect retailers who survive the current storm to do a good job of resolving these differences to create one face for the market. It will start with some combination of people and technology.

Kate Munro
Guest

I agree, Gib. Both Ken and Ryan make good points — human creativity and innovation are important to a retailer’s success, but modern technology has evolved in a way that drives logistics and user interactions both for the consumer and on the backend. Technology should be more than just another tool and retailers need to fully embrace it to survive. With the right technology, retailers can leverage their entire community from all over the world in almost an instant to take advantage of data and provide an on-trend end product faster. Retailers who don’t adapt to the new retail economy and implement technology that encourages co-creation will fall behind.

Nir Manor
BrainTrust

E-commerce pure players created — until now — more successful e-commerce businesses than traditional retailers. Look at Amazon, eBay, Alibaba (Tmall, Taobao) Tencent, Rakuten, Flipkart and Etsy to name a few. These are not technology companies. These are online retailers that mastered all aspects of online retailing — data science, customers analysis, UI, customer journey, payment systems, assortment, promotion, pricing, traffic generation, conversion and more. Until now no brick-and-mortar retailer has managed to transform to an e-commerce player that can match the success of these companies. However, brick-and-mortar is in the process of digital transformation, and I believe that in the coming years more and more brick-and-mortar retailers will improve their online operations and gain a stronger foothold within the e-commerce space.

Ricardo Belmar
BrainTrust
Ricardo Belmar
Retail Transformation Thought Leader
3 years 7 months ago
We are already seeing the effects of technology and digital transformation on retail’s biggest well-known brands — and it’s not a success story. While the fundamentals of retail around having the right product, building relationships with customers and delivering great service haven’t changed, what has changed is the execution in light of new technologies helping to redefine the experience. I have said here and elsewhere that retail is now a data business more than it is a merchandise business — the fact is the modern masters, e.g. Amazon and Apple, have shown us how to meld data and technology with great service, informed associates and a single view of the customer across channels in ways no legacy retailer has been able to follow. Traditional retailers have a long road ahead to break free of the legacy systems and processes that bind them, but the ones that see this challenge and react quickly and innovate will survive. The ones that don’t … they won’t last. The future of retail lies in finding the right melding of… Read more »
Richard J. George, Ph.D.
BrainTrust

While I tend to lean toward Ryan’s position that people make the difference in any business, I am not so sanguine that traditional retailers are able to make the change in their models and thinking to compete effectively in this new environment. King Kullen introduced the first supermarket in 1930 and the first Walmart Supercenter did not arrive on the scene until 1988. Supermarkets were basically unchanged for almost 60 years adding SKUs and featuring low prices. Eventually, traditional supermarkets realized that they could compete with the Supercenters on strategic issues other than price. However, under this scenario they realized that by being better merchants they could compete with the Walmart crowd.

It’s not the same since Amazon was founded in 1994. Amazon and others represent a real paradigm shift in which all players, including the veterans, go back to zero. If traditional retailers do not realize and act on this, Ken’s view of the retailing world of the future will prevail.

Charles Dimov
Guest

Ken, as much as I am a tech fanatic too — I have to agree with Ryan. The technology is to retailers like water is to fish. It is the medium in which they exist, yet it is not the core of their existence.

Retailers definitely have to keep pushing the boundaries of using retail technology or Amazon will do so and leave everyone behind. However, to Ryan’s point, the key factors in retail are the people, the products and connection with the customer (brand, etc).

Technology is key to this engagement — but ultimately retail is about people buying things — online, in-store or otherwise.

Ian Percy
BrainTrust

If the universal mantra is “Give me data or give me death!” … I’m about to choose death.

It seems we long to return to the Newtonian mind set where the world is simply a collection of metrics and algorithms. Why would we do that? I suggest it’s because we can’t deal with the “noumenon,” it’s just too powerful and we aren’t up to it. This reciprocal world, the world of possibilities, of sensing and knowing is the space from which everything has come and from which our future is waiting to come. We are afraid and so reject the joy of that power like a child afraid of the rollercoaster who because of that fear stands while others ride. The book of Genesis does not begin with “And God said let there be data,” it starts with “And God said let there be light.” So many still don’t see it.

Jon Polin
BrainTrust

Technology is critical to all industries, but that does not mean that all industries must become technologists. First and foremost, retail will continue to be about products consumers want at prices those consumers are willing to pay. Second, smart retailers will figure out how to use technology as an enabler of improved business, whether that means marketing or operations or pricing or something else. But technology as an enabler can be outsourced — it does not need to convert retailers into technologists.

Dave Nixon
BrainTrust
Dave Nixon
Retail Solutions Executive, Teradata
3 years 7 months ago

I have to agree with both, but technology is an enabler and not a replacement. Done well it becomes seamless and invisible … but let’s not forget personal customer experience will still drive deeper loyalty and advocacy. One-to-one retailing is NOT DEAD!

Ben Zifkin
Guest
3 years 7 months ago
Yes. Of course I am not arguing that retail will disappear and be replaced by tech companies. However, I think the main point is, are decisions made by humans backed by tech tools or are decision made by tools back by retail gut instinct? It will be the latter. Although I see where Ryan is headed with the power saw analogy, I am not sure it is a complete analogy in this situation. If a power saw were just a power saw, then yes. But with the technology available today, that wouldn’t be the case. Imagine if the power saw remembered all of the movements it made on every single project it ever completed. Now imagine that the power saw had access to the billions of other projects around the world and throughout all of time. Imagine that the power saw had all of the reactions from the people who commissioned the work to know how well they did. Imagine, as you start a new project, that your power saw knows everything about what you… Read more »
Ian Percy
BrainTrust

I totally get your point Ben and you put it excellently. All metaphors and analogies break down at some point, but stretch your thinking to the arts. Can we already use AI to paint us another Mona Lisa or carve us a statue of David? Absolutely. We could do that by the thousands. But what would we have? They’d be all lined up with seashell lamps and black velvet Elvis paintings in retail shacks along the beach boardwalk.

I guess I come down on my interpretation of Ryan’s point … are we sacrificing soul for automation? I think yes. Like the Blues Brothers — I’m a soul man!

Adrian Weidmann
BrainTrust

The art of both retailing and shopping cannot, and will not, be derived, resolved or created by computer programs and high-resolution screens. Technology has and will continue to amplify and accelerate shoppers’ expectations. We live in a nanosecond world in which we expect instant gratification yet Jeffery Sears and his three partners created PIRCH — a brick-and-mortar store experience which completely turned the shopping and purchasing of kitchen and bath fixtures and appliances on its head. You can actually test 13 to 15 different shower heads in an actual shower — a truly immersive sensory experience.

Technology certainly plays a critical and enabling supporting role but does not define the actual experience. With more than $3,000 in revenue per square foot, PIRCH is second highest in retail revenue in its category. This model will dominate the retail landscape. The winner of the battle this round is Ryan.

Steve Montgomery
BrainTrust

Retail therapy does not happen when buying online. To have it occur you have to get out of the house, go to a store and touch and feel the merchandise. The issue for brick-and-mortar retailers is if they can continue to provide an environment where people want to go. This involves not only the physical place, but having the right merchandise whether it is clothing or major appliances.

Susan O'Neal
BrainTrust
3 years 7 months ago

I love this question! Ryan and Ken are both right. Both technology and data are only as good as the objective they are applied against. Amazon uses technology to capture the value of efficiency (time and money). Traditional brick-and-mortar retailers use people to capture the value of human relationships (trust and loyalty). Can technology replace relationships? Yes, sometimes. Can relationships trump technology? Yes, sometimes. At the end of the day the entities that best respond to what the consumer needs and wants will thrive — just like always.