The Third Wave of Retailing: The Efficiency of the Shopper
Efficiency and convenience are the flip sides of the same coin that birthed retail at the dawn of history, with vast increases over the past 100 years. There is good reason to believe we are on the verge of a five-fold acceleration of efficiency, convenience and retailing.
The economic division of labor created the need for the largest industry in the world, retailing, thousands of years ago. The basics of the process changed little over millennia, until the early 1800s, with the Birth of Plenty (Bernstein) in England, leading to a century of massification.
Mass production, and mass distribution led to mass retailing — self-service. This led to a "new" business model for the world’s first billion dollar business, of low margins and limited capital to deliver massive efficiency (and sales), with A&P at the forefront.
The resulting "creative destruction" (Schumpeter) revolutionized the supply chain and forced efficiencies in manufacturing, but created massive opportunities for growth in both industries. Shoppers loved the exploding assortment of high quality merchandise at plunging prices.
Retailers became merchant warehousemen who managed the logistics of stores and supply chains, with shoppers self-managing the sales process. Decades after A&P’s heyday, Walmart picked up the efficiency baton and created the new "world’s largest business."
"Selling" was redefined in retailers minds as price-promotion — paying shoppers to buy. Brand suppliers cooperated with this in-store approach, and moved their own "selling" to mass media, radio and TV. Mass media is emasculated selling, since it cannot "close the sale," which is done in-store.
One would have to live in a cave to not recognize the growing impact and potential of personal electronic communication on shoppers. In fact, there will be a continuing Convergence of Online, Mobile and Bricks-and-mortar retailing (COMB retailing). But a great deal of the millions of dollars being invested in this currently is misguided, through a misunderstanding of what the real inefficiency problems are in shopping.
At the same time, there is a genius in our midst — Jeff Bezos — displaying qualities of his predecessors: the Gilmans, Hartfords and Waltons. Consider this statement from someone who worked while the foundation of growth was still being laid:
"We used to joke that the ideal Amazon site would not show a search box, navigation links, or lists of things you could buy. Instead, it would just display a giant picture of one book, the next book you want to buy." — Greg Linden, former Amazon programmer
This is the sheer genius of a salesman, not to ignore the 50 million books he has on tap, but to realize that his job is to sell just one! And then to consider selling another … and then another and another, until the shopper is sated … for now. This is the "efficiency process" that self-service bricks-and-mortar retailers have almost totally ignored, and which is the key to massive increases in sales and profits in the third wave of retail.
Discussion Questions: Do you agree with the author that retailers such as Amazon offer a model for bringing the art of selling back to retailing? Do you see a “third wave of retailing” coming based on the new consumer connectivity/empowerment?