Data Drivers: Weathering Retail’s Perfect Storm

Can retail survive the perfect storm, in the physical world at least? The headwinds of dwindling foot traffic, the headwinds of mounting costs, the headwinds of inefficient deployments of time and capital and people?

The timeline is long enough so that retail can in fact emerge from the torrents well-positioned to capture the fancy of consumers coming in for a look, a feel and ultimately a buy of merchandise that dwells on store shelves, as Sean Arietta, founder and CEO of DotDashPay, noted to PYMNTs’ Karen Webster in the latest Data Drivers give-and-take.

Data Point One: $2.37. This is the increase in the minimum wage over the last 10 years with adjustments for inflation. That’s a sizable increase, and, with legislation popping up around the country, there might be more increases on the way.

“There’s a bit of a perfect storm” in place for retailers who rely on physical sales rather than those done online. With this data point, said Arietta, the cost of human capital itself is on the rise. And it is going up at a rate that has not been seen since the early 1980s. The key is for retailers to spread out these costs, and their increases, effectively. It remains inefficient for companies to have staffers standing behind a cash register solely “to juggle plastic all day.” The $2.37 increase is possibly just a floor, noted the executive, and likely to increase, and will go up “even more in the near future.” Turnover may also boost costs, agreed the duo, and it does indeed cost to hire and train people, of course, regardless of business vertical.

And in terms of deciding where to spend money and allocate other corporate resources when it comes to staff, Arietta noted that humans are quite good at creating optimal experiences and interactions for other humans, while machines are good at replicating and performing menial and repetitive tasks such as those tied to payments.

In other words: Let humans be humans.

Data Point Two: 2037. This is the year, based on census calculations and other data, and as determined by Arietta’s firm, that the current rate of eCommerce growth and the decline of offline transactions will be equal.

Surprised? Perhaps you thought that such an event would happen much sooner than 2037. But the point here, maintained Arietta, is that eCommerce transactions are growing, and the pressure that is coming to bear on physical stores still has a long way to go – and this means, said Arietta, that the physical retailer “isn’t going anywhere for the foreseeable future.” But nonetheless, adopting to that type of online transaction is paramount, at least at some point. Physical retail in its current incarnation may die, eventually, but the absence of physical stores in their entirety is not likely to happen.

Data Point Three: 16.7 percent. This is the average growth rate, annually, of retail automation, as measured between 2014 and 2020. Webster said that this suggests that retailers know they need to be more efficient within their physical storefronts and are cognizant that the retail storefront has a place in the retail mix. The conversation with retailers, said Arietta, is one where many retailers “have an anecdotal” understanding of the need to embrace a more automated process.

“Retailers are quite good at understanding their customers … and designing experiences.” The challenge is marrying the creative experience that retailers design with their burgeoning need for automation.

He said there is a lot of technology that works to automate payments and some of the consumer experience via self-serve checkout kiosks, but that is not, in fact, attuned to an optimal consumer experience. Some experiences at the intersection of technology and physical goods are more intuitive and lend themselves to mobile apps and products that are well-known – such as Starbucks – where the goal of not waiting in line for long is satisfied.

Other items, such as clothing, do not lend themselves well to such an intuitive experience. “Even when I want to buy a pair of jeans, I need to go try them on,” Arietta said, noting that the ultimate decision making is tied to an in-store process. The eventuality of automating more processes is one where, though the retailers can identify what their consumers want, they do not have the tools to execute on that vision – yet.