Evolution of Retail Over One Hundred Years (1919-2019)

evolution of retail
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We are all connected, connected through the retail industry. One way or another we all happen to participate in retail in our everyday routine. But how has this phenomenon evolved over the last 100 years and developed into the 5 trillion US$ in revenues[1]? 

How was retail going in hand with technology development? Let’s take a glimpse.

What Exactly Is a Retail?

Let's agree on the meaning of the term. By definition, retail is the sale of goods or services in small quantities directly to consumers. [2] [3]

Retailer is the last mile of the supply chain from supplier to consumer. When you're acting as a seller you are initiating consumer engagement with the healthy aim to earn profit. And when you're acting as a consumer, you're being engaged in receiving the product or service for consumption. And we are living in a consumerist society nowadays. [4]

Retailing is known since antiquity. Through the ages, it had developed in a strong correlation with transportation, technology developments and culture. As technology revolutions one by one were transforming our civilization, retailing by no difference was going through a series of upheavals as well. With each “know-how”, speeding up and becoming more cost-effective, retail was rising the rivalry among the entrepreneurs. 

20th century has witnessed the last two technological revolutions, which have a great impact on our civilization.  And the development of the retail sector was fully supporting these transformations.

The 1920s-1930s: The Rise of Consumer Culture

The first decades after World War I, already had a good basis for stimulating the ongoing evolution of retail.

Introduced to wealthy Europeans at the end of the 18th century, the so-called shopping arcades gave way to almost modern department stores after half a century. Le Bon Marché in Paris, which is considered the first department store in the world, was opened in 1852 by Gustav Eiffel. Yes, the same Gustav Eiffel who constructed the Eiffel Tower.

The first complete idea of a self-service grocery store – a supermarket – was successfully brought into life by Clarence Saunders in Memphis, the US, in 1916. Later this first supermarket grew into the first true supermarket chain “Piggly Wiggly”.

evolution of retail first supermarket piggly wiggly

Image source: https://www.pigglywiggly.net/

In the 1920s, such a commercial basis was only reinforced by multiple changes in social relationships, gender roles, and cultural values. People wanted liberation from the restrictions of the past. So, business and advertising couldn’t but respond to the updated needs of consumers providing more liberal shopping experience.

What’s more, with the help of marketing, business began updating and even influence consumers’ needs. 

Along with socio-cultural impulses, it is crucial to mention the fact of technological developments. Retail and innovation are interconnected. According to Schumpeter, one of the most influential economists of the 20th century, innovation is a critical dimension of economic change. [5] He presented a thought that economic change revolves around innovation, entrepreneurial activities, and market power. 

Generally, new technology systems modify not only ecommerce and business, but also the institutional and cultural sphere. 

World saw Ford automobile, electric railway systems — all improving the logistics inside retail operations. Take an invention of bulldozer. That innovation accelerated the construction and therefore made an impact on building previously mentioned shopping arcades and supermarkets. 

Frank Woolworth’s simple yet genius idea of taking products from behind the counter and displaying them on the shelves played its role. People became more interested and more eager to buy having an opportunity to touch and experience the product. 

An invention, seeming to be widely known today, was a big breakthrough back when it was launched. For instance, a plastic bag or even plastic in general (which I personally regret),  but It allowed retail to cut costs at all levels, transfer products more safely and later benefit to online deliveries as well, and many more. 

The 1940-1960s: The Post-War Retail. Shopping malls

World War II naturally caused a drop in global commerce sales. Peter Vanham, the Media Lead for the World Economic Forum, claims that by 1944-1945, trade as a percentage of the world’s GDP had decreased to 5%. That was the lowest threshold in more than a century.

Despite such an indicator, the end of the war marked a new development stage for the world’s economy. The technologies became more available, like the airplane and the car, which were gradually becoming more and more available outside the military, contributed to the post-war evolution of retail trade. Also, restoration and reconsideration of social and cultural values couldn’t but alter the needs of shoppers and their expectations on shopping experience.

In the first decade after the war, while the popularity of supermarkets was growing, a concept of a shopping mall was introduced and brought into life.

During the Fabulous Fifties and Stormy Sixties, shopping was transforming from a necessity into entertainment. Big shopping complexes are being built on larger territories in suburbs, as more people start purchasing cars and become more flexible in commuting to far distances.

1940s-1960s saw a range of technology breakthroughs paving the trail to a new phase in retail. Transistors, which revolutionized electronics, later - color TV, microwave, and a hard drive (HDD) introduced by IBM in 1954. These advances accelerated the commerce pace, presented retailers with a new range of products to sell and fulfill people’s desires. When it comes to technologies, it is crucial to acknowledge that the innovations are born with a merged work of various agents. These are, but not limited to, engineers, suppliers, marketers, users, producers, etc. This was named as a national system of innovation. [6] This reminds us of the interconnectedness of all spheres, and that retail should not be studied as a separate entity.

The 1970-1980s: Gradual Automation of Retail

1970 is marked as the start of an Age of Information and Telecommunications. Appearance of EDI (Electronic Data Interchange) in 1970 enabled the execution of all business transactions electronically. An ecommerce world saw a more profitable and revolutionary invention - Intel microprocessor. A small chip had a capacity to transform the whole economy of that age. This techno-economic paradigm had the ability to frame the series of the next changes in all sectors of economy, letting the retail gradually step into the age of computerisation. 

Automation gave the rise to coining such a notion and experience as ecommerce. And a first brick was laid:

In 1972, a group of Stanford students used the Arpanet (the grandfather of the Internet) to sell some marijuana to their fellows at Massachusetts Institute of Technology. The successful (and yet funny) experiment proved that in the evolution of retail technology, curiosity is a driving force.

This sales transaction marked the start of a brand new ecommerce era.

By the 1980s, on the other edge of the Atlantic, British inventor Michael Aldrich came up with the idea of “teleshopping”. He used a phone line to connect a modified domestic TV to a transaction processing computer. The users of his invention could see items from the local supermarket on the TV screen, select what they wanted, and make an order.

It became the first working and selling prototype of a modern ecom retail business.

On the other hand, on 80s the marketing comes into play. Supermarkets are competing on prices and pushing brands for a better fare. So to win buyers marketers create all kinds of campaigns and techniques. Sounds like an early stage of personalized, direct marketing, right? 

Except for the Intel microchip, the age of information revolution induced an appearance of a range of other important technology innovations. Computers, software, telecommunications, computer-aided biotechnology, etc. were speeding up ecommerce game.

Let’s take a simple, yet influential example. The first-ever email was dated back to 1971. And it’s hard to overrate the importance of electronic messages in formation of ecommerce. Today it is one of the main vehicles of communicating between businesses, achieving new clients, etc. So let the ecommerce race begin.

 

 

The 1990-2010s: Online Shopping Becomes a Reality

The introduction of the Internet, and later DLS connectivity (a high-speed internet connection), caused a new era in the retail environment. The Secure Socket Layer (SSL) protocol was developed to provide safe data transmissions over the Internet, and to dispel hesitations in security and safety of ecommerce and online shopping.

 In 1995 was a year of emergence of prominent ecommerce companies. Amazon launched the first online bookstore. The same year, eBay (initially AuctionWeb) launched as the online space for selling and buying used stuff. Shopping with a personal computer became even more convenient after PayPal introduced the online payment system in 1998. Nowadays, PayPal boasts of a user base of 277 million accounts, generating billions in revenue and making it easier for online stores and marketplaces to finish the sales deals.

The first decade of the 21st century was a time when thousands of sellers and retailers were doing their best to earn a place in the boundless “net”. Some of them, like Etsy, Groupon, and Jet.com have evolved into large online marketplaces, providing new opportunities to individual shoppers and ambitious businesses.

Beginning of the 21st century saw dozens of ecommerce services. American dream concept evolved with online food ordering and online payment methods making it easier and faster to make a purchase decision. Advertising and media saw new tools like online ads (take Google Ads) and streaming (ex, Netflix). Forward-thinking entrepreneurs start realizing the future belongs to online marketplaces as we see Amazon, Alibaba, Zappos, Shopify emerging one by one. Along with B2C evolves B2B retail. Costco launches its own business-to-business online shopping system.

The Years 2010-2020 and Its Trends

The changes that started in the 2000s progressed. An expansion of the Internet has greatly influenced each aspect of our lifestyles, including our shopping habits. 

Payment methods saw a major launch of a bitcoin — a cryptocurrency that would change the whole perception of money. Google launched a new payment system - Google Wallet, Apple Inc. developed its own analog — Apple Pay. And what is not less prominent - social media becomes a full-fledged participant in a world of online sales. Sellers now have the ability to sell and advertise products through social platforms, such as Instagram, Facebook, etc. Each year the technological progress accelerates online retail with such a pace, not leaving a second for a marketer to breathe. New tech allows to make a sales transaction and delivery quicker and more cost-effective, satisfying both a buyer and a seller.   

Mobile commerce allowed an average buyer to easily control the purchasing process: choose and research products online, compare prices and qualities. In their turn, marketplaces got this information to later analyze and put the recommendations right in front of the buyer’s nose. 

Cloud-based solutions opened up wider horizons of managing huge amounts of data remotely, sharing access with participants of a retail process from almost any device.

These are the notions and trends of 2019. Now the question arises: what tech innovations will make it to 2020 and on, which new features would they acquire and how it will blend in with an ecommerce of the future?

The Future Evolution of the Retail Sector

The future of online retail is promising yet. What would the results of the mutual forces of ecommerce and technology innovation would bare?

Robots as sales assistants, drone deliveries, smart mirrors, devices with voice-based search and digital beacons are no longer a Netflix sci-fi but a day to day life. Shopping using the augmented reality, buying process by setting up a face-based payment, first starting out in China, gonna be soon spreading West. All these technological advances already exist in the world of online commerce and are changing the way businesses compete and perform.

Future holds a perspective of quantum computing solving and processing data faster. And when we say “faster” that means crunching hundreds to thousands of variables at once! It would push logistics and optimization on a totally different level. Quantum computing should be able to solve such complex questions, as how to deliver billions of orders in a mad holiday season in the most cost-effective way. This is also a big deal for cybersecurity of the future, as well as retail in general. Such companies as Microsoft, IBM, Google, HP, etc. are performing their experiments on the development of quantum technologies in a race to beat the ecommerce game of the future. 

We also could expect shakeouts and M&A, as the innovation pace is increasing every year. The larger the company is the slower decision- making process will be, which means some existing larger retailers will either have to transform themselves to be more agile or experience difficulties with keeping up to consumer moods. 

Existing dominators of the market will pursue highly technological companies to secure their leadership and obtain access to new markets. And that is happening already. 

Think of Staples acquiring Essendant & HiTouch in 2018, Nordstorm buying MessageYes and BevyUp, Amazon buying Ring, Walmart buying Flipkart, etc.  

But everything has its consequences, it's not enough just to acquire a hi-tech to stay on top. One would have to properly integrate the diverse businesses into existing businesses, and that may require changes in organization. Which is always difficult for giants.

5G internet, quantum hyper-speed computers, big M&As. Ecommerce has evolved from a garage start-up to an imposing hazard to ordinary retail. The future of ecommerce is about to bare a revolution. Thus, today an economic share of online commerce is no more than 15%, the pace of implementation of the “technologies of the future” is accelerating online sales. Faсе-to face communication, which was previously an advantage of the traditional retail, in 5-10 years would be balanced out with artificial intelligence. 

And how do you imagine your business striving in a quantum hyperspeed field of ecommerce?

References:

[1] https://www2.deloitte.com/content/dam/Deloitte/at/Documents/about-deloitte/global-powers-of-retailing-2018.pdf

[2] https://www.etymonline.com/word/retail

[3] https://www.thefreedictionary.com/retail

[4] https://en.wikipedia.org/wiki/Consumerism#In_the_21st_century

[5]  An Introduction to Economics with Emphasis on Innovation, Pol, E Carroll,P, 2006

[6] List, Frederick (1841), The National System of Political Economy, English edition 1904, London: Longman

evolution of retail
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