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A Brief History of Shopping

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The effect of innovations on industry is historically significant and can be a guide to how to respond in future. If businesses and individuals are to adapt and flourish, they can either proactively be attuned to these forces and set a course for success or suffer the results of being washed along with the current.

Mobile devices are changing the retail industry. Retailers must respond, adapt and be ready to cannibalize business segments for the good of the whole enterprise. They can certainly learn a trick or two from the technology industry which, almost by definition, cannibalizes itself with every new product version or strategic product maneuver.

From Shaman to Shopping
Early commerce typically involved the exchange of valuable goods and services between individuals. The local shaman, who was believed to channel healing powers, might receive livestock, food or jewelry in exchange for an application of their mystic powers onto an ailing relative. The purchaser and the seller were directly swapping units of value. They had to have contact with each other in order for the transaction to occur, and they had to mutually have units of value the other wanted. The shaman had to want the livestock and the family had to want a healing.

An innovation to bartering was money, which is basically a container of value. With money, individuals can store and accumulate units of value in a convenient way in preparation of future transactions. Communities of people could now develop more diverse and specialized skills and commerce could be more free flowing. A blacksmith, baker, barber or butcher could sell their goods and services at prices set by local market forces. In some areas, bread may have a high price, in others it might be inexpensive. Although money was often standardized across these markets, the breadth and depth of markets themselves were dependent on the speed and ease of travel and the extent of information exchange between markets.

When impediments to travel and information flow lessened - for example from stagecoaches, the Pony Express, the telegraph or railroad - many barriers of communications between producers and consumers were reduced. Innovators realized that they could create a menu of goods and services from their local market and present it to distant people and markets. This cataloging of products vastly improved the reach of sellers and presented new information to the consumer. A blacksmith might have to reduce the price of a box of nails when consumers in their local market see a cheaper price in a catalog. The blacksmith is feeling competition from another entity hundreds or thousands of miles away and either adapts or goes out of business. The consumer, in contrast, has greatly benefited by the ability to have access to a much wider variety of products and at prices cheaper than the local market provides.

But, for many consumers, seeing a sketch or photo of a product and reading a description is insufficient information for them to make a purchase decision. They want to experience the product first-hand, something not possible through a catalog. Local shops that carry a wide variety of goods from multiple distribution sources bring the innovation of general retailers to Main Street. Local shops move some of the profits from the catalogers back into the local market. There is still local craft specialists, but their share of the local economy has morphed into being an artisan and nostalgic market niche.

Main Street shops had a strategy of either having a broad variety of products, or having deep specialization in a product category. Some shops specialized in men's clothing, while others in leather goods. Other shops carried a wide variety of different products but only one or two in each category. The innovation that dramatically changed the market for Main Street was the big box store, an approach to retail focused on greater breadth and improved depth of product categories. A walk down any town's Main Street will quickly demonstrate the effect of the big box retailer to the local market.

The big box store innovation both expanded the retail economy and capture shares of it from existing participants. As with all innovations, some participants simply left the market. Others redefined themselves so as to successfully compete. Successful competitors often moved into vary narrow product categories, which are often high-end products able to garner price premiums. These include wedding dress shops, florists and jewelry. A large part of their ability to compete against the big box is establishing mindshare in the local market and developing a desirable brand presence. These responses to market forces were rarely a consideration in the days of the shaman or even the blacksmith. As innovations emerge in any industry, the responses become more sophisticated.

Around the mid-1990s, the innovation to be faced by incumbents was the Internet. The big boxes, Main Street, artisans and others once again faced a threat to the fabric of shopping. Much of the response was hesitant, or worse, non-existent. As with other innovations, many businesses could no longer compete after the introduction of online shopping. New entrants to the market did not have huge capital investments in brick and mortar storefronts and were able to route investment into more sophisticated shopping experiences for the consumer. Today, online shopping continues to innovate and storefront retailers have responded by accepting ecommerce as an additional channel with which to reach consumers. Online storefronts are the contemporary analogs of paper catalogs.

Recently, another innovation has emerged that is again rapidly changing consumer shopping. Mobile devices like smartphones and tablets are forcing retailers to rethink their strategies. The industry has learned not to wait and see how things shake out either. At least 83% of retailers now have a mobile app, mostly these are mobile versions of their ecommerce site, are store locators, promotion platforms, and customer support tools. But, the innovations being brought about by mobile apps are coming from wholly new threats, and opportunities, for retail. Some pure-play online retailers, like Amazon, are providing consumers with apps that make every storefront a part of their ecosystem. Retailers with large capital investments into storefronts are being deeply threatened by this. Consumers, on the other hand, are benefiting.

A killer app has yet to emerge that benefits the big retail incumbents. There have been several interesting approaches over the last year or two. For example, many retailers have dabbled into augmented reality by giving the consumer a richer experience with products they are considering for purchase. Others have supplemented the in-store shopping experience with store-specific tools to help shoppers locate products and place orders if a specific style or color is not available in the store. Some apps are being geared toward loyalty programs to further incentivize consumers to stay with a retail brand. Larger outfits are offering consumer-focused value-add apps such as digital closets as a convenient and mobile inventory of personal wardrobes; including photos and color swatches to see, for example, if a particular belt or shoe would complement a dress.

This brief history of shopping has highlighted several trends in shopping. First, the retail industry has been characterized by several very important innovations that have benefited consumers and sellers alike. These innovations have always lead to winners and losers in the market, but overall they have transformed the industry repeated over history. The pace of innovation is accelerating. Whereas it was once centuries between major innovations, these innovations have occurred at an increasing rate. This pace puts significant stress on the retail industry as the cost of such rapid-fire adaptations incurs a large burden on industry players. Historically, both small and large retailers who have had the ability to embrace these changes have been the ones that have thrived.


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