THE END OF THE MIDDLE How social capital and emerging ethics are changing the way we shop

If you’ve ever looked at all the receipts stuffed into your pocket, you may have noticed that we spend most of our shopping budget on everyday goods: groceries and daily consumables. Getting these things usually involves a trip to a supermarket, possibly a mall, after work or on the weekend – which is a pain. It’s called ‘convenience shopping’ but it’s only convenient in comparison to how we shopped in days of yore, waiting weeks for our provisions to arrive at the general store.

Over time, we’ve upgraded from general stores and country markets to supermarkets and malls, and now we’re upgrading to the net. As online shopping starts to take over, commentators everywhere are predicting the approaching retail apocalypse. But I believe we’re at the starting point of a new global culture that’s not just going to change the way we shop; it will change our lives.

WELCOME TO THE END OF THE MIDDLE

The retail sector, a term I use broadly for the shopping industry, mirrors our society’s division between the industrial and innovation mind-set. On one side, we have automatic, ‘industrial’ shopping: struggling for parking, shuffling through crowded shops, waiting to pay at the end of it, all for things we can get in any supermarket. There’s nothing memorable or exciting about this simple machine: money in, stuff out. You don’t even need a human teller.

Shopping online follows the same model – browse and buy – but minus the car trip, crowds and queues, which saves a lot of time and effort. The fact that you can buy everything from makeup to cars online indicates how innovative brands have capitalised on our demand for (genuine) convenience.

Meanwhile, some companies are actively connecting the two models. Amazon Go lets you walk into a store, load your basket and leave. An app linked to dozens of cameras tracks what you pick up, and you’re billed as you take things off the shelf – no more standing in line at a cashier. Amazon has also tested Dash, small buttons for specific items at home that you would press to reorder when you were running low. It’s already out of date; Alexa and automatic reordering are replacing it.

Then there’s Alibaba’s Hema store franchise in China. Visitors shop via an app, scanning barcodes and paying for groceries on the spot, and have the option of building shopping lists and profiles of regular purchases that can be ordered for delivery next time around.

The varying solutions these companies are offering may look the same – digitally driven responses to meet consumer needs – but the difference between innovation and disruption quickly becomes apparent. On one hand, Amazon and Alibaba are using technology to make the existing experience faster and less of a hassle; on the other they are making the transition to predictive ordering based on customers’ needs, an entirely new form of retail. This ability will only get more advanced as the Internet of Things makes our data profiles so rich that brands can start reacting to our needs before we acknowledge them.

Suggestion metrics are algorithms that analyse information like average spend, purchase frequency and what we’re buying to build data profiles that can be used to predict what we’ll want and when – because what we buy tells stories about who we are. Buying nappies every week? You’re a parent. Bought golf clubs and tees over the past few weeks? Wannabe Tiger Woods. No meat on the menu? Probably vegetarian.

This data profile will become increasingly clear as we interact with new technology around the home. Smart fridges will be able to sense when we’re running low on nut milk and veggies, and order more. Smart TVs will pick up that we watch family films on Netflix every Friday, and make sure we’re stocked with popcorn and wine gums.

It runs deeper than that. Broadcasting a traumatic event like a break-up could trigger a flower delivery. You might watch a video on how to cook a recipe and have the ingredients delivered to make it as you watch. Always listen to a specific song when you’re sad? Your significant other could get an alert and order something to cheer you up.

Once we start living lives where we are connected to the brands that supply us, and our data profiles become detailed enough, retailers won’t wait for us to decide what we need – they’ll work it out for us and send it over.

FOR SALE: EXPERIENCES

Experience shopping is that little bit of shopping that we actually enjoy; the shopping that retailers try to prolong rather than speed up. Brands operating in this space have an understanding of two key concepts: our need for communal connection and for entertainment.

The local weekend farmers’ market is a chance to spend your money on fresh stuff and great food, but also to meet people: the farmer selling organic apples, the small start-up team selling Fairtrade coffee. It’s a far more appealing, human experience than the supermarket – and big brands are taking note.

Nike recently opened a concept store that doubles up as a community space. The global hotel network Ibis has transformed its positioning to encourage a sense of shared space and connection. 3Den in New York is a co-working community designed around bringing people together, complete with spa, yoga studio, standing desks and sleep pods.

Visiting these spaces isn’t about just buying sneakers or enjoying a service – it’s an experience in itself, and you get to connect with like-minded consumers who hunt down the cool, too. It’s also a way to boost your social score, which brands are increasingly aware of.

Going social

Back in the day, the brands we wore were a badge. We boasted with little logos (that got progressively bigger), which reflected our social status at malls and parties. Today social media has revolutionised this process. Now it’s not just your immediate circle who sees what you’re wearing and what you’re doing; you can broadcast your image to half a billion active daily users on Instagram alone.1 And it’s becoming less about boasting about a brand – endorsing corporate culture is falling out of favour – and more about sharing experiences and movements to build social capital.

But posting pictures of the salad you’re having for lunch or a blurry party video doesn’t cut it; for something to be worthy of the Gram, it needs to be unique. The more out of the ordinary or fringe, the better – preferably something with a deeper moral purpose.

Social media has become the obvious space for innovative retailers to operate – but it is a complex and fast-shifting space. Some of the moves seem standard; for instance, employing armies of influencers, from local tweens who are given free stuff to promote, to the big leagues where Kylie Jenner gets paid $1 million for sponsored Instagram posts.2 But brands need to be careful to position themselves, not oversell (see p115/SHOT 9), as they make retail experiential.

Get it wrong and there can be serious blowback. Various Kardashians have taken heat for endorsing products in a way that seems forced and inauthentic: for instance, pushing weight-loss products without mentioning the role their personal trainers, nutritionists and surgeons may have played in helping them to slim down.3 The Kardashians will always survive; the products perhaps not.

Modern consumers want real human connection, which they can then choose to broadcast themselves if it adds to their social clout. Brands need to be able to deliver both: a chance to be part of a community that’s unique, and matching experiences that are dramatic enough to enhance social capital.

NEXT CUSTOMER PLEASE

Brands that haven’t been able to meet the audience’s appetite for experiences and connection are really up against it.

Clothing giant The Gap is scheduled to close 230 locations in the next two years.4 Similarly, JC Penny is due to close 19 stores in 2019. Kraft Heinz, one of the biggest names in food, lost $12.6 billion in 2018, and will lose more in 2019 (with related stock-price plunges).5 Campbell US, the soup that inspired Andy Warhol, has been in decline for four years.6

Compare this with brands that have embraced the consumers’ need for experience and built businesses around pain points.

Meal-kit service Blue Apron fused convenience with fun, delivering ingredient-and-recipe meal kits, valued at $2 billion in three years.7

Domino’s is effectively a tech brand that sells pizza, creating loyalty through tech innovation that allows you to order on social media using the pizza emoji. Even though you may think Domino’s pizza is average to bad, the company’s stock has soared since 2010, outperforming Amazon and the other tech giants8, and that’s because they’re tapped into the pulse of what people expect from brands today – which includes predicting and recommending what we might want, and then getting it to us as effortlessly as possible.

In a different industry but similar vein, Spotify is an amazing example of a company that can tell its customers what they didn’t know they wanted. Personally, Spotify has introduced me to worlds of music that I would never have found alone. Netflix does the same; the way you watch and what you choose plays a big role in what they recommend you binge next – and how often do they get it right? Almost always.

THE BOTTOM LINE

Selling products and services is yesterday’s business. Although there will always be a market for certain products and services, commodities will be disrupted first and frequently. The new customer looks for social capital in other ways.

Selling memorable experiences is today’s business, and brands that are offering that to their consumers are winning right now. That said, I believe that the customer-experience approach will also become commoditised and markets will become savvy to it.

The next evolution, then, is the creation of brands that offer a genuine connection based on our values. Within that world, business is far less about products and profits, or even building experience platforms that boost consumers’ online profiles. This is an opportunity to stand for a cause, and attract people to your business based on morals and values.

That man Elon Musk, as controversial as he may be, is a shining example of this. Interested in reducing your carbon footprint? Buy a Tesla. Worried about our planet’s future? Follow SpaceX. Unsure about humanity’s future in the face of exponential tech? Check out Neuralink.

Musk must still contend with the challenges and doubters that come with the old way of thinking, but I back him to succeed in the long run. He has created brands that people support because their values and concerns resonate and align – and that’s what cult brands do. They go beyond the norm and redefine our expectations of what brands are. They focus on the long game, turning moral momentum into social movements – and that’s the business of the future.