Industries of the FutureWhere today’s innovation will take you tomorrow

Retail...from main street to smart phones

Developing the Virtual Market

In today’s world, you can purchase just about anything you need or want at any time from anywhere. With online retailers catering to the increasing demands of consumers on the go, purchasing and checkout are at your fingertips. Now more than ever, technology is driving the industry.

Retail businesses are employing technological innovation and data collection into their operational, customer service and cost-saving strategies. Their investments in technology rank second only to their inventory costs. The use of cloud computing helps companies con-nect with manufacturing and supply chain operations, and drives sales and competitive advantage through online shopping.

As more people shop online or via smart devices, top retailers maintain advertising, mar-keting content and product reviews on their websites. By providing transparency about their wares and services, the retail industry as a whole has become much more com-petitive. In an environment where consumers are hyper-selective, creating an engaging customer experience is important to retain customer and brand loyalty.

Economics of Retail

Tens of millions of U.S. jobs depend on the retail industry. With approximately 3.6 million businesses engaging countless suppliers and distributors, the retail industry’s direct and indirect activity supports 42 million jobs and annually accounts for $2.5 trillion of the nation’s gross domestic product. In California, retailers’ direct activity generates $121 billion or 6% of the state’s gross output.

The Labor Force

About 95,000 retail businesses employ close to 1.9 million workers throughout the state. The industry’s labor force consists of a wide range of occupations but is dominated by their sales force, accounting for more than half of the employment in California. In addi-tion, the retail industry increasingly relies on the skills and expertise of in-house personnel, and external consultants and firms working in marketing, merchandising and e-commerce development.

Retail Retail Marketing Sales MerchandisersSalespersons Managers Specialists Managers498,300 232,500 67,800 65,200 11,600126,700 33,500 23,100 2,900 2,900$22,920 $33,000 $66,800 $98,200 $27,500

jobs in 2011openings thru 2016

median annual wage

STEM in 20 is a research project of the California Community Colleges’ Centers of Excellence, in collaboration with the Institute for the Future, to identify industry innovations affecting workforce trends in the next 20 years, focusing on science, technology, engineering and mathematics.

In California, retail is

$127 billion in revenue

1.9 million jobs

44,200 e-commerce jobs

94,600 establishments

1,790 e-commerce firms

$34,200 average annual earnings per worker

In California

Retail Innovation Meets Consumer Trends

Today’s retail industry is implementing innovations that affect our daily lives — such as our commute to work habits, weekend schedules, online experiences, and more. Shopping is now a combined digital and physical experience enabled by mobile de-vices, social media and other new technologies. Emerging from the Great Recession, the business model for retailers is leaner, smarter, faster and, more than ever, in-vested in consumer engagement.

Conscious capitalism • In an era where awareness, mindfulness and capitalism merge, the term “conscious capitalism” has been coined to describe a value-based con-sumer philosophy. According to the 2010 Cone Shared Responsibility Study, 84% of Americans believe their ideas can help companies create products and services that are a win for consumers, business and society. For example, retailers like Whole Foods and Patagonia appeal to consumers that desire organic or natural products and value responsible environmental practices.

Recommerce • It has never been easier for consumers to unlock the value in past purchases. Novel buy-backs, exchange schemes, online platforms and mobile market-places offer smart and convenient options for consumers keen to ‘trade in to trade up,’ alleviate financial strains, and/or quell environmental and ethical concerns. Consumers have always resold large, durable goods like cars and houses but now, thanks to the recession and cash-strapped consumers, almost anything is ripe for resale (as in eBay and Amazon) or buyback (as in T-Mobile, Verizon, Best Buy or Walmart).

Payment Reimagined • The long predicted cashless economy is slowly becoming reality as consumers’ desire for convenience coupled with technological advances continues to drive innovations in cashless transactions. Recent successes include the Starbucks mobile app that creates a personalized 2-D barcode to be scanned at the counter and Google Wallet, an Android app that turns a users’ phone into a payment device by tapping the phone on Mastercard paypass terminals.

Curated Shopping • Beyond branding, curated shopping connects people to taste-makers, experts, designers or celebrities who inspire them, building off the same energy produced by Twitter or Facebook accounts. Not restricted to an online com-munity like Pinterest or e-tailers like OpenSky or OneKingsLane, curated collections are being integrated into large retail settings like Target and Macy’s.

Autonomous Robots • With technology connecting consumers so effortlessly to the pur-chase of goods, it is often easy to overlook the delivery of goods. As fast as goods can be purchased, consumer demand for speedier delivery is driving innovation in warehousing. Intelligent warehousing machines like those from Kiva Sykstems enable more accurate orders and less expensive shipping.

The Industry of Today...integrating technology and meaninful consumption

SquareSince launching in 2010, Square has evolved from just a payment plug-in tool for iPhones to an integrated system, including an iPad app and a Card Case app to bring the future of the digital wallet to smartphones. [square.com]

PatagoniaAs part of its Common Threads initiative, Patagonia launched an eBay storefront where consumers can sell secondhand clothing. The outdoor-apparel company has also expanded into music downloads that benefit environmental charities and even a sustainable salmon jerky in an effort to promote sustainable causes. [patagonia.com]

ShopkickLaunched in 2009, Shopkick has redefined the check-in-to-reap-re-wards game by eliminating a step: the act of checking in. It works by installing a hardware system in each of its partner stores that picks up signals from smartphones that have installed the app. So users start ac-cumulating “kicks,” or rewards, the moment they walk in. [shopkick.com]

With more technology has come greater need for skilled workers – people who can use data to improve customer service while also protecting customer privacy... In the retail sector, these problems are magnified by the fact that many IT specialists continue to see us as more brick and mortar than bits and bytes. As a result, the demand for new technologies from consumers has grown faster than our supply of IT workers.

— Vicki Cantrell, Senior VP, Communities and Executive Director, Shop.org, National Retail Federation

Retail in 2032

Over the next twenty years, economic conditions will continue to reshape retail spending. The volatility that has created consumer uncertainty for the last several years during the Great Recession has already influenced long-term retail spend-ing patterns. Moving forward, massive trade deficits and debt-to-asset ratios across industrialized nations, both individual and corporate, are likely to continue to reshape retail spending.

Emotional effects of products will drive consumption. In the future, retail consumption will be defined less by the simple purchase of material goods and more by the personalized, emotional, experiential, and symbolic effects that goods and services can deliver.

The identity and emotional experience that retail goods evoke have long been the focus of advertising and marketing. Now, new tools and technologies are taking this strategy to another level.

Neuromarketing, for example, is an approach to advertising that uses MRI images of people’s brains as they encounter products or advertising, so that marketing strategies can be precisely calibrated to align with deeply rooted desires and urges. Similar neurological findings are being used to design retail spaces.

Increasingly, consumer data will be used to tailor buying habits. Consumers are automatically generating a massive amount of individual data as they go about their normal shopping behavior. Far more data will be created as retail transac-tions continue to move to mobile devices.

As a result, analysis of personalized buying patterns and behaviors is moving toward a more individualized understanding of the shopping experience. Future retailers are likely to take advantage of this kind of information to tailor ad-vertisements, and even products, to an individual’s liking. In many cases, mass markets will be segmented down to “markets of one” through guided selling and personalized promotions.

Sensors and geo-processor locations will increase virtual goods and services con-sumption. An increasing amount of retail will center on the creation, sale and purchase of virtual goods and services. This shift in development will be accel-erated by the ubiquitous deployment of sensors and processors into everyday objects and the built environment.

Already there are tools that allow consumers’ own photos, videos and favorite themes to be incorporated into retail products at the touch of a button. This tran-sition toward what might be called an “experience economy,” or even a “dream economy,” may be critical to changing consumption patterns if financial, logistical, or environmental pressures force a reconsideration of current approaches.

and Tomorrow...envisioning neuromarketing and big data applications

Insider PerspectiveSteven HillVice President of MerchandisingZappos.com

On innovation todayOnline retailers are creating new shopping enhancements for the con-sumer designed to personalize their experience with the product and create social interaction around the shopping experience. Virtual try-on is a current technology innovation that lets customers see how apparel fits and moves on their body without ac-tually having to be physically fitted with the garment. Social shopping engages customers to share their pur-chase experiences with others, either anonymously or with friends.

20 years outWe’re just at the very beginning of the growth of e-commerce. Our in-dustry barely existed 20 years ago. But with new technology inventions and more consumers turning to on-line retail, we think e-commerce will continue to grow and will eventually reach 30% of commerce in the U.S. The technology inventions that drive the retail industry 20 years from now most likely have not yet been invented or even imagined.

Impacts to workforceThe online retail workers will need to continue to innovate and adapt to new technologies to meet the retail customers’ needs.

Implications for Education

Demographic shifts, a deluge of data, smart machines, and new forms and tools of production are just some of the drivers that will reshape many aspects of work in California in the next twenty years. Not only will the content of work change,

but many new occupations will arise that are not even in existence today. Science, technology, engineering and math fields will continue to drive educational priorities for the next generation. These knowledge areas are increasingly important for the retail workforce.

Looking forward, the retail industry will continue to grapple with creating a seamless integration of e-commerce and brick and mortar stores. Driving marketing, merchandising and growth to new heights will require a multi-faceted workforce — such as sales staff who combine customer service with technological adeptness, marketing and merchandising personnel with the ability to visualize the next e-commerce trend, and information technology support who understand the business applications of big data.

STEM to STEAMFor workers in STEM fields to realize their full potential as engines of social innovation and business, they will need to be able to communicate their work in compelling or artistic ways. Visualizing meaning and connecting data will be as equally important as producing and analyzing data with rigor and repeatability.

Virtual Large-Scale CollaborationMuch work in the future will be done by ad hoc, virtual teams joined together based on algorithms that optimize reputation, skills and group dynamics — similar to how online job posting and job seeker matching is already done today.

Computational ThinkingThe logic and language of digital data, even if humanized and made user-friendly, will pervade our lives. Even non-technical fields and endeavors will need to utilize and harmonize with computational systems in order to function effectively. When everything is programmable, almost everyone will need to be a programmer.

Industries of the Future

Where today’s innovation will take you tomorrow

Acknowledgements

The COE would like to thank Steven Hill and Zappos.com for contributing to this report. Concepts and content pro-vided by Institute for the Future [ifif.org] and other sources [view complete list of sources]. The STEM in 20 project was made possible by an SB70 grant from the California Community Colleges Chancellor’s Office.

Want to learn more?Access the complete Industries of the Future series and related projects [coeccc.net/STEMin20]

Visualizing mean-ing and connecting

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