Retail, shopping & leisure

One-stop shopping is anti-social

Britain’s big four supermarkets – Tesco, Asda, Sainsbury’s and Morrisons – may have 75% market share, but their profits are on the way down. It could be argued that low-cost competitors like Aldi and Lidl, with 8.4% share, are simply hurting their monopoly.
As Sainsbury’s chief executive commented, the market has changed more in the last 3-6 months than in the last 30 years. Another view is it goes beyond economics: people no longer shop in the way they used to because their lives have changed.

One-stop shopping, which used to be so popular, has given way to more frequent shopping with smaller baskets or trolleys of goods. Part of the reason is the decline in full-time work, and the increase in part-time or self-employed work. It means, rather than being cooped up in an office every day all day, people can shop when they choose and make shopping one of their daily excursions or even an enjoyable part of their leisure. One heartening sign of small shopping is the fact domestic food waste has dropped 21% in the past 5 years – less waste, but also 13 billion pounds of lost revenue to the grocery sector.

Rather than charging round a supermarket once a week, shoppers are choosing smaller shops, farmers markets, and internet shopping, most of which offer a more personal experience. It makes a difference to speak to the farmer who kept the bees that made the honey. Co-op, for example, concentrates on smaller, central outlets selling Fairtrade, and, like Waitrose, attracts a following of loyal shoppers who prefer to shop small. It’s possible that small Tesco and Sainsbury’s outlets on the high street have helped to shore up the larger, impersonal stores by keeping contact with local people.

Many shoppers are obsessed with food now and they care about where it comes from, who sells it, and how healthy a retailer's ethics are as well as their food, so it’s no surprise people support shops that help them do that. The type of competition that supermarkets once offered – huge choice, cheaper food, mass parking – has changed to competition for food-as-leisure activity and, at a deeper level, even people’s identities.

Life in 3D

If you haven’t yet heard of 3D printing, you soon will. McKinsey forecasts that 3D technology will transform society in the next 10 years. Certainly, 3D printers are being manufactured and shipped – 108,151 in 2014, according to Gartner – and double that in 2015 to 217,350, doubling every year until 2018 to more than 2.3 million printers worldwide.

Whether or not you choose to own one, experts say it’s more likely you will go down the street to your local shop and use theirs. Already in America, the UPS pilot project for six stores to offer 3D printing is being expanded to 100 American UPS stores. Staples is testing these printers in New York and Los Angeles, London has a few shops offering 3D printing, and some innovative public libraries are already putting them in. Interested people can already sign up for community college courses that teach them how to turn their ideas into useful 3D objects.

The problem today is the machines are still clunky and difficult to use and, without a standard template, need advanced design skills from their users too. They are particularly useful for one-off customised designs, rather than anything mass produced. So the people who are able to get the best out of them – to make unusual shapes or mix materials on demand – could create brand new jobs for themselves.

One Australian entrepreneur claims children will drive the growth of 3D printing in Australia and claims simplified versions will be the “gift of choice” next Christmas 2015.

It is much like the early days of computers and ordinary printers. It will take time for consumers to accept and buy them, learn to master them, and trust themselves to get the results they want. Innovative types who can fully harness the 3D printer to make elegant and simple products customised to the client are sure to print a profit.

Crowdsource that tricky choice

There are some people who can’t make a choice unless they know what other people think first. Amazon built on this in the early days with customer reviews of books but it’s now standard practice online to use fancy algorithms to work out what you might want to buy next. What if it were possible for a personal shopper to help you make choices without knowing that much about you?

The idea of a personal shopper is being explored in an experiment at University of Illinois, in which crowdsourcing workers are hired to rate things for a particular target person. In this case, it’s salt and pepper shakers (eh?) and meals from popular restaurants in Boston and San Francisco. The workers had to give a suitability rating out of five for a particular person knowing only a little about their taste in shakers and food. Surprisingly, the average ratings from the top three recommenders were the same as the target person’s ratings, within half a star.

Once again, we are back to the so-called wisdom of crowds. Algorithms work effectively when there are large amounts of data, but not so well for anything too niche, intimate or rapidly changing. Crowdsourcing even works if you can’t decide which of your 200 holiday photos to put on Facebook.

Would you pay a small fee for the crowd to make up your mind for you? If you’re the type who hates making decisions, it’s likely that some smart entrepreneur will be ready to take your money soon.

Why Amazon is relentless

When Jeff Bezos registered the URL, relentless.com, he revealed a vision for the kind of company he wanted to run. Amazon is nothing if not relentless in its pursuit of new investments, from internet search and robotics to film and TV development and in June this year, the Fire Phone.

Fire Phones have a Mayday button, which you tap for webcam face time with an Amazon customer services rep. The Fire Phone also has a little Firefly button, which when pressed, allows the phone to give information about anything the phone sees or hears in that moment. It could be a song, a child’s toy, or a pot of tea – the phone will know about it and show you where to buy on Amazon. It’s like bringing the world around you into a shop window: now that’s relentless.

Amazon is unlike other companies in that it doesn’t engage in the mindless pursuit of quarterly profits. On the contrary, given a choice between making a new investment or making a profit, it makes the investment. This means that shareholders have received nothing like the return on the investment they could have expected, given the massive market share and share price of this behemoth. One commentator drily called it a “charitable organisation” run by a few in the investment community. Unfortunately, the organisation is not quite charitable enough to pay much sales tax on its total revenues of $US74.5 billion last year.

Amazon is one of those companies with plenty of jaw-dropping statistics. For example, it carries 230 million items for sale, 30 times more than Walmart, the world’s biggest retailer. Last year, Amazon was the world’s ninth biggest retailer by sales and could be number two by 2018. The company is growing more quickly than the pace set by e-commerce of 17%. Its global network of 96 fulfilment centres employs “pickers” who are guided on the shortest path and pack orders in boxes that are sized using algorithms; one centre is large enough to hold 20 American football fields. In North America, Amazon can achieve same day delivery to 23% of the population.

The question is what comes next? The true value of Amazon is in its massive infrastructure network. If Walmart, with poorer clients, can sell three times as much to them as Amazon does to its clients, there is obviously room for Amazon to grow. It could sell more non-perishables, things such as food and toiletries, which are worth $US150 billion in America alone.

Amazon claims not to watch its competitors, but the Chinese giant, Alibaba, is a competitor it cannot ignore and Alibaba, recently cashed up, is planning a marketplace in America called 11 Main.

Amazon’s long-term view has trained shareholders not to expect a profit and to operate at zero or negative margins to get market share. But if the company ends up putting its rivals out of business – and puts its prices up – the regulators could step in and shareholders may never get their cake and eat it. The Economist calls bullying competitors the “savage magic of capitalism”.