Like just about everyone connected to the retail industry, we at RSR have been mulling over “the future of the store “. We get asked a lot about that (as you might imagine), and I often feel that the desired answer is either, “the stores will be fine “, or “stores are dead ” (depending on who asks the question). But ultimately, after having spent most of my adult life working with and for retailers, I’ve come to know that shopping goes well beyond merely fulfilling needs- it has social and entertainment value too, and the stores play a big part in that “fun “. Failing to recognize this can carry a steep penalty. For example, the collective opinion of the RSR team is that the new management of JC Penney has destroyed the “treasure hunt ” aspect of bargain hunting there, and that’s why they tanked in the last quarter.

Nonetheless, there is no question that the widespread adoption of “smart ” mobile consumer technologies has accelerated the opportunity for new competition to disintermediate “middlemen ” that have traditionally been part of a value chain, especially for those categories of products that can be easily digitized – just look at what Apple’s iTunes has done to the traditional music distribution industry, especially after iPhone and iPad took off. But not every product can be digitized, and so (as I argued in my April 10^th RPW column entitled “Sephora and ‘The Amazon Effect’ “) the next target for pureplay digital retailers would be those categories of products where information about the product is a good representation of the product itself, i.e. there’s no need to physically experience the product in order to select and buy it.

That still leaves a lot of retail that needs stores to present the products. Bricks’n’mortar retailers for these categories of merchandise help consumers get answers to questions like “how does it makes me look? ” RSR has argued that these retailers in particular have an opportunity to lock-in consumers for the foreseeable future by harmonizing the digital and physical channels in such a way that the consumer uses both to make a selection and complete a purchase – the presumption being that ultimately the consumer would want to go to the store to experience the instant gratification that comes with instant fulfillment. Indeed, in our 6^th annual benchmark study on the state of cross-channel retailing entitled, Omni-Channel 2012: Cross-Channel Comes of Age, being published this week, we make the statement that “retailers now know that increasingly, their cross-channel shoppers are just ‘shoppers’, and that their biggest challenge is in how to merge the digital and physical selling worlds into one compelling seamless customer experience. “

Not So Fast!

That may be retailers’ biggest challenge – and the opportunity that comes from it is that some retailer somewhere is going to define the best way that the digital and physical worlds can work together (frankly, I haven’t seen it yet). But we also found in the study that although most retailers see the challenge and opportunity, customer expectations continue to outpace many retailers’ ability to deliver on a seamless experience, and consumers’ new shopping behaviors have exposed retailers’ vulnerabilities in brand and process.

In other words, traditional retailers aren’t moving fast enough in addressing the challenges and opportunities. And that of course creates more opportunity for the disintermediators and those that serve them. So when I had the chance to visit the Internet Retailer Conference & Exhibition (IRCE) event in Chicago last week, I wasn’t surprised to see that there is a considerable array of technologies available today to help digital retailers empower consumers with content, community, and commerce capabilities that rival anything out there now. Most of the dialogue at the conference was about retailing in the digital space as the future of retailing – certainly not the store-based business model, and not even giving much credence to the blended digital/physical model that RSR espouses.

New Technology Continues to Erode the Traditional Value Proposition

“Wait a minute! “, you might say, “what about all that stuff about disintermediation vs. the need to physically experience some products? ” After having walked the IRCE exhibition floor, I came to the conclusion that emerging technologies are well poised to push back the lines of demarcation between the digital and physical “sales floor “, and that traditional retailers had better take this seriously because the technology is getting pretty good. Really good, in fact. Specifically, advances in “augmented reality ” technologies are such that more and more products that used to have to be picked up, looked at, and tried on in a store can now be handled in the digital space. This makes whole new merchandise categories potential targets for disintermediation!

I’m a bit of a latecomer to this realization, at least within RSR. My business partner Nikki Baird has been talking about augmented reality technologies for at least a year. Hey! I’m a Boomer while she’s a Gen-X’er, but I should know better than to dismiss a new capability just because it seems a little too “sci-fi ” for me based on personal and professional experiences. There were people at my company back in the ‘80’s who believed that scanning data had no intrinsic value – that we only implemented POS systems “because customer expect it now “.

So I’ve resolved myself to getting to know how and where these new technologies are being used, and what they mean to “the future of the store “. “Landed ” retailers might want to think about following suit.