Ask a bona fide retail visionary what the online/offline shopping experience will evolve into over the next three years, and you might not get the answer you’re expecting.
Louis Borders, founder of the pioneering Borders Books & Music chain, as well as the prescient Webvan grocery delivery service that came and went with the dot-com bubble burst of 1999, now helms HDS Global — an acronym for his “home delivery service” that uses robotics and a brand-centric mass mentality to rewire retail.
While he said the advent of inventory management systems enabled merchants like Walmart, Target and Amazon to grow beyond what would have otherwise been possible, he said the next wave of transformation — starting with grocery — will begin to threaten today’s retail titans as soon as 2025.
“There’s a war of the worlds going on, and this is beyond technology,” Borders told Karen Webster in an interview. “This is like a hundred-year war going on between the brands and the mass merchants. The brands don’t like the mass merchants, and I’m putting that very politely.”
Noting the habit of large retailers to embrace knockoffs — and the brand reaction of limiting variety to retaliate — he said he sees something new: personable, purpose-built platforms that sell only name brands, without venturing into more lucrative (but less desirable) off-brand options.
Citing the famous business tome “Crossing the Chasm,” whose thesis is that a 15% market penetration is the threshold at which companies and sectors can cross from niche to mass status, Borders harkened back to his Webvan days to make the point.
“Here we are 20 years later, and [grocery is now] at 15%,” he said. “It’s ready to go to the next stage, but the technology’s not there. There’s no purpose-built solution that can give customers price, convenience and selection in an online way.”
While the Amazons, Instacarts and Walmarts of the world would likely disagree, Borders said he believes these eCommerce giants can be edged out by leaner competitors built from scratch to fulfill the desires of consumers frustrated with aspects of eCommerce, starting with grocery.
PYMNTS data concurs. Per the How We Eat Playbook, a Carat from Fiserv collaboration, “The uptick in online food and grocery purchases presents a massive opportunity for grocers and restaurants to win over new customers, but that largely depends on whether they can deliver the pickup and delivery experiences that meet online shoppers’ rapidly shifting expectations.”
Get the study: The How We Eat Playbook
Setting Sights on Price, Convenience and Selection
Saying that physical retail “can’t just do a little bit better than what they are doing; they have to reinvent,” Borders envisions a 2025 where physical stores are far smaller and act more as “demonstration centers” for experiencing goods people will likely end up buying online.
As to his ideas about reinventing eCommerce, grocery is the first step in the HDS Global plan, but Borders said he believes it takes more than food to “cross the chasm” and scale to enterprise size.
“Combination stores are what people want,” he said. “It’s more convenient. When Walmart became a combination store, it was the same size as Target. Then it added grocery and general merchandise, and it’s now seven times the time size of Target. So, the combination store wins, but no one’s built it, still not today [online]. It’s amazing.”
Filling gaps that Amazon, Walmart and others have left open, Borders described the trifecta for a new eCommerce model.
“The way to think of it would be the dimensions of price, convenience and selection,” he said. “If you have a purpose-built solution, it should be able to deliver at store prices with no fees. You can even do better prices because stores are expensive to run. We’re now at the 15% for grocery. If we can come in for price, then 85% of the market is ready. But you’ve got to give them price.”
On concepts like convenience, Borders said home delivery will still be a core proposition in 2025, but it will also mean bringing items into your kitchen or offering reusable containers in a brief encounter with a delivery person that resembles visits from the milkman a generation ago.
Calling this an evolution to “a very personal retail service,” he added that “It’s more of an ‘everything store’ than Amazon in some ways because there’s more brand product.”
Read the report: The Bring-It-To-Me Economy
Connected Simplicity Will Win
While he feels that robotics, zero physical store overhead and a strict focus on established consumer brands will help grocery cross the chasm, followed by mixed merchandise, much depends on the support of brands themselves to beat the best in the business.
“If you go into a Target, you wouldn’t see one Nike shoe,” he said. “That’s fascinating to me. If you go on Amazon, you won’t see any L’Oréal products except counterfeits and affiliates. You can’t get the goods that you want from the mass merchants because as much as they can, [brands] limit what they sell to the mass merchants. They need them, but they don’t like them.”
As a result, Borders said he intends to be the first mass merchant that won’t offer its own private label inventory but will be in “the brand camp” instead.
Borders may be leery of mass merchants, but he’s bullish on the future of so-called super apps and the growing role and opportunity they have.
“If you think of all the people you buy from as vendors, you probably have hundreds,” he said. “You’re dealing with this incredibly complex life of managing all these vendors. So, whoever can offer a more complete solution is going to be a winner. Life is complex, and people want fewer suppliers.”
While Borders said he believes the changes in big retail stores and grocery chains will not happen quickly and that they’ll still be around in 2025, so will some other problems that are currently plaguing the system.
“COVID has shined a light on supply chain, [but] customers don’t care about supply chain; they care about when [goods] are at their door,” he said. “Now we have out of stocks, horrible service levels, substitutions and high prices [on major eCommerce sites], and I think you’re going to see more and more of that. It’s not going to get fixed in three years.”