Knowledge hub

When you do things right, people won’t be sure you’ve done anything at all

The future of retail

Business 15 Mar 2018 by Anders Härén

In the next 24 months CMO Council reports that 75% of global marketing spend – 600 billion USD will be invested in digital channels. The big winners in this shift so far are Google and Facebook who today get 46,5% of digital ad revenue and stand for 99% of the global growth. In Sweden for example, Google takes every forth Swedish krona spent on marketing. Despite incredibly detailed user data, these two giants can mainly focus on consumer intentions. Transactional data online is safe-guarded by e-commerce players. In physical stores, payment data is stored in legacy systems such as POS (Point of Sale) or ERP (Enterprise Resource Planning). These legacy systems are rarely equipped for real-time data processing or predictive analytics, and only a handful of merchants globally have been able to combine online and offline consumer insights to produce a 360° customer profile.

A guiding example of a company that have managed to shift its marketing spend to tech spend with impressive financial result is Starbucks with metrics like 17+ sales increase (Apple Report, 2016), and 10 million active users generating 4 million transactions a week. Despite early days e-com success prophecies, 90% of all retail purchases are still done in physical stores and according to Google that number will still be as high as 85% in 2020.

Meanwhile, according to Google and BGC, mobile internet users are expected to reach 3 billion by 2020 (65% of adult population) and 80% of internet access will come from mobile devices (where 58% are smartphones). By including IoT, M2M services and mobile broadband, TechCrunch predicts there will be 26 billion connected devices before 2020. According to the Google / BGC report, digital payments that today stand for 22% of B2C transactions will surpass card payments by 2023 and merchant acceptance expects growth of 10X by 2020.

Make no mistake that many retailers are sweating over these statistics right now. They have but a few years to undergo a vast digital transformation in order to reap the benefits of this digital revolution. A revolution that according to Accenture will present a cumulative value of 2.95 trillion USD by 2025. But make no mistake that even more startups and tech giants are pondering the exact same question. Companies with little or no legacy, born in a digital era, queens and kings of big data. What should scare merchants and retailers worldwide even more than this shift is what has happened to other major industries who have gone through similar disruptions: The loss of first-hand relationship with the consumer. Take media for example who have been reduced to content-providers dependent on platforms such as Google and Facebook, fighting for table scraps of digital revenue. The main reason this shift hasn’t already happened in brick-and-mortar stores and restaurants already is the above mentioned technical debt. It’s a tedious journey for a big retailer to change all their POS terminals. But the investment will be worth it.

Take another example for instance: Disney World. Starting in 2008 the company invested 1 billion USD to enable its visitor wrist bands called MagicBands to communicate over Wi-Fi and via sensors. Now MagicBands can be used for pretty much everything visitors do at the park and Disney World resorts. Besides tremendous increases in customer experience Disney can also credit impressive numbers to the empowered MagicBands. Disney for example, in 2015 reported that the profits for their US parks division was 3 billion USD which was a 14% increase from the previous year.

Abraham Lincoln allegedly said ”The best way to predict the future is to create it”. I believe that’s what we’re doing right now at Leeroy. We believe that marketing is broken and needs to be fixed in a way that creates a win-win for both consumers and retailers. There are no winners except the tech giants if physical retailers are reduced to product providers and loose the direct relation with their customers. And it’s not just a prophecy, it’s already happened in other disrupted industries like Music (Spotify), News (Facebook), and Hospitality (Hotels.com).

Our product is a platform that enables retailers and restaurant owners to get real-time insight into their business and their customers and to run their business like a tech company. That’s why our tagline is Merchants best friend.