What the Future of Retailing Has “in Store”

What the Future of Retailing Has “in Store”

Digitalization is changing our shopping habits, and not just since the outbreak of COVID-19. Online shopping is the dictate of the moment. Brick-and-mortar commerce must further evolve in order to have a future. What that evolution might look like can already be seen in Düsseldorf and soon also in Zurich.

Everything in Zurich is close by, including the path to the future. Just a few hundred meters away from Zurich’s main train station, the shopping experience of tomorrow – BRIDGE – is coming to life. BRIDGE is the latest shopping and dining project by Migros, Switzerland’s number one retailer.

The “most exciting retailing spot in Switzerland,” as the Swiss business newspaper Handelszeitung dubbed it, will open at the start of April 2021 right next door to Google, the very epitome of a futuristic enterprise. On a floor space of 2,000 square meters, many answers to the question of how brick-and-mortar commerce will evolve in the years ahead will be discovered. 

We project that retailers around the world will generate 40% of their sales revenue online in 2030, compared to just 16% in 2019.

Alexander Verbeck, SIX

SIX, too, examined this question and wrote up its findings in a white paper titled Future of Brick-and-Mortar Commerce. “On the basis of relevant studies, we project that retailers around the world will generate 40% of their sales revenue online in 2030, compared to just 16% in 2019,” says Alexander Verbeck, Head Cash Ecosystem in the Banking Services business unit of SIX. “At the same time, though, brick-and-mortar commerce will retain its reason for being because sometimes nothing beats live experiences in the real world,” he adds. Physical stores could survive, he says, particularly if they offer “experiences that can only be immersively enjoyed in full with all five senses in person on-site.”

BRIDGE will deliver exactly this kind of experience. If you want to, you can order the steak purchased at the meat counter to be grilled right away in-store. The thirdparty app TableSnappr routes it directly to your seat. Would you like even more individualism? The FoodLab offers four modular kitchens that can be rented for a cook-off between friends, for example.

Retailing Is Dead, Long Live Retailing

The debate about the future of physical retailing is divisive. “Brick-and-Mortar Is Dead. Let’s Open a Store,” ran a recent headline in the New York Times with logical consistency. On the one hand, it has long been observable that one store after another has closed in inner cities in a so-called extinction of physical retailing. A study by Credit Suisse states that there were almost 53,000 stores in Switzerland in 2013, but only around 50,000 at the end of 2018. On the other hand, more and more retailers are opening stores in prime locations, and that especially goes for online retailers. Digital pioneer Steve Jobs launched the first Apple Store in 2001 – today there are 510 of them.

White Paper: «Future of Brick-and-Mortar Commerce»

The Future of Brick-and-Mortar Commerce white paper from SIX presents the future of physical retailing for the years 2027 through 2030. In the more probable of two scenarios, SIX projects that stores will retain their reason for existing, albeit in an altered form. Almost all stores will need a digital storefront and will have to gear their offerings even more toward convenience, speed, and personalization. Moreover, emotional experiences in which consumers can immerse themselves with all five senses in person will immensely increase a store’s chances of survival. Consumers will expect a frictionless, hardly noticeable payment process with a wide choice of mediums of payment. Cash will continue to play a role in this context through the integration of retailers and a network composed of other consumers as decentralized cash dispensers.

Back to BRIDGE: Besides experiences, what other factors are needed to succeed against online retailing? “Retailing of the future requires more cooperation,” says David Böhler, who heads the BRIDGE project at Migros. “Our name expresses that. We’re building a bridge between shopping and dining, between Migros and external suppliers. We want to curate an entirely unique culinary world of adventure.”

The white paper from SIX contends that pop-up shops are a great way to provide customers with “the unexpected, novel, exclusive, Instagrammable in-person shopping experiences that they crave.” The first patrons of BRIDGE will even be able to savor a variety of delicacies from Peru thanks to two popups. Furthermore, pop-ups will help real estate owners to monetize unutilized space, Alexander Verbeck says, citing as an example a bookstore that turns into a yoga studio after sundown.

David Böhler heads the BRIDGE project, “the most exciting retailing spot in Switzerland.”

David Böhler heads the BRIDGE project, “the most exciting retailing spot in Switzerland.”

David Böhler exudes delight about the retailing world of tomorrow in every sentence he speaks: The vista of the railway tracks is a “top view,” meals are “shared,” projects have to be “agile,” further development means “forever prototyping,” and “storytelling” is central to selling cheese, and BRIDGE aims to be your “third place” – your favorite place next to your home and your office. Those may sound like a bunch of buzzwords, but BRIDGE’s concept has a thoroughly authentic feel. That also has to do with the issue of sustainability, an essential aspect addressed in the white paper from SIX, and one that is equally as important to Böhler: “We are going organic, locally sourced, and vegetarian as much as possible” on the product side, he says. And BRIDGE’s decor is made up of recycled materials from Offcut, a Swiss network that collects used and remnant materials and transforms them into new resources.

Retailing of the future requires more cooperation. We’re building a bridge between shopping and dining, between Migros and external suppliers.

David Böhler, BRIDGE, Migros

Sustainable and Premium

The sustainability aspiration runs all the way to the traditional grocery shelves that BRIDGE will also feature. BRIDGE will stock a premium selection of products, the Migros budget brand line won’t be carried, and 30% of the grocery range, primarily from small-scale producers, won’t be available in other Migros stores. But what’s surprising at first glance is the size and location of the grocery department: It’s on the third  floor and is barely bigger than a convenience store in a gas station. “That’s purely intentional,” Böhler explains. “Emotionless shopping solely for the purpose of quickly filling your refrigerator will increasingly be automated, at least in densely populated areas. We’re not needed for that kind of shopping.” One day, Böhler says, you will sit down to a cup of coffee and select grocery items on your smartphone and hit “pay” and then pick up your filled shopping bag on your way out of the store. “But that’s a long way off in the future.” Is it really, though?

In Düsseldorf in the west of Germany, you don’t need binoculars to see this vision of the future. The first TYPY store opened here in late 2020, though “store” is actually a misnomer because the 40-square-meter shop is nothing more than an upscale pick-up station with seating, coffee vending machines, and big display screens.

In Düsseldorf, a robot delivers groceries to a pick-up terminal.

In Düsseldorf, a robot delivers groceries to a pick-up terminal.

Payment Process as Catalyst

TYPY stocks a basic supply of food items, ready-to-eat meals, wine, and coffee. TYPY makes shopping about as efficient as it gets. Customers select the items they want and pay for them on their smartphones. A robot then fetches the organic milk, the quinoa wrap, and a bottle of Côtes du Rhône from the shelf rack and takes it to a pick-up terminal. The shopping transaction is completely contactless, transpires without human intervention, and takes less than two minutes – just enough time to order a premium cup of coffee, directly on the app of course.

The days of wheeling a shopping cart through canyons of shelves are definitively over.

Maximilian Grönemeyer, TYPY

The white paper from SIX calls this way of paying “frictionless.” The checkout proceeds as smoothly and easily as it does after an Uber ride. The main focus is on convenience. “The days of wheeling a shopping cart through canyons of shelves are definitively over,” TYPY co-founder Maximilian Grönemeyer says. “Shopping today has to be fast and convenient.” TYPY wants to cooperate with courier service companies in the future to also provide home delivery.

The startup from Düsseldorf thus fulfills four key attributes that the SIX white paper asserts to be crucial to staying successful in brick-and-mortar commerce: digitalization, convenience, speed, and personalization. At the same time, the payment process will become a catalyst for additional services such as personalized product suggestions based on digital purchase receipts, booking of restaurant table reservations, and mobile customer authentication.

TYPY has symbolic value – its grand opening was attended by the mayor of Düsseldorf and Germany’s minister of state for digitalization. This is just the beginning for the founders of TYPY. “It’s a fully functioning prototype on which we are performing open-heart testing,” Grönemeyer says. He and his business partner Carlo Caldi want to open 200 more sales outlets over the next three years, including miniature formats such as compact container stores on university and corporate campuses. Asked about role models, Grönemeyer replies self-confidently, that “our concept is unique in the world.”

The future of retailing has already arrived in Zurich and Düsseldorf. In that future, physical stores have earned their place beside online retailers and prevent our inner cities from turning into office wastelands.