Walk down pretty much any one of Britain’s High Streets, and the boarded-up shops paint their own bleak picture of an industry in recession. Managers will tell you how there’s no money left in bricks-and-mortar anymore; this is one business model well and truly disrupted. But Silicon Valley hasn’t destroyed physical retail; it’s just changing it beyond all recognition.
The most immediate and tangible change is in payment systems. Back in the ‘60s, credit cards revolutionised payment systems. There’s nothing on the horizon that will do quite the same; rather, the upgrades being pushed are all about convenience and security.
When you use a credit card (or debit, if you’re poor and your bank hates you like me), all you’re doing is using a security ‘token’ to remotely access a system, which confirms you’ve got the cash, and debits the necessary amount from your account (or yeah, charges it to the credit card). That fundamental system – a centralised account and a remotely-accessed token – probably won’t change, since it works pretty damn well, wouldn't you say?
What will change, though, is the ‘token’ for authorisation. At the moment, that’s the little chip on your card. Alternatively – and excitingly – it might also be a Near Field Communication chip inside the card, which doesn’t require physical contact – rather, it just has to be touched on a reader.
To be honest, that’s not much of a change. Since the NFC chip is still in your card, all contactless payment (as the NFC system is rather obviously known) does is reduce the amount of time it takes to make a payment, from 30 seconds or so, down to around 10.
The potential for NFC comes about as a result of the fairly generic hardware. Given that most smartphones (with the notable exception of cool kids Apple and its iPhone) have a NFC chip and NFC reader in them, there’s no reason that smartphones couldn’t be used as the authorisation ‘token’ in the system.
Even more disruptive (ugh, that Silicon Valley term again), NFC-equipped smartphones could quite easily be used as the till system taking the payments. Considering conventional till systems cost thousands, break far too often (the last till computer I used crashed whenever the printer ran out of paper. It was amazing.) and are a pain to train staff on, ubiquitous, cheap and simple smartphones could make paying pretty easy.
It’s not an outlandish idea, either – the Apple retail stores equip every member of staff with chunky card-reading iPhones for taking payments, and customers in US stores can even process small transactions themselves, on their own smartphones.
Even beyond smartphones, wearable tech promises an even slicker retail experience in the future. When the mythical Google smartwatch (or even the iWatch) breaks cover, it may well feature NFC; being able to pay for your lunch without even reaching into your pocket is a future most of us can only dream of.
But where NFC falls down, unfortunately, is on security. Paying for stuff with a Chip-and-PIN card provides two factors of security – the card itself, and the PIN you enter. Contactless payments only require a PIN randomly, on every tenth payment or so.
That raises all sorts of problems for the paranoid. Various professionals worry about the potential for the details of contactless cards to be stolen without ever nicking the actual cards themselves. The ubiquity of NFC readers in smartphones makes this an ever-present threat – it takes nothing more than an app and a 2011 Android phone to read all the details off a contactless card, details that you’d normally need to swipe the magnetic strip to get. (The researcher who showed me that trick, Lookout’s Marc Rogers, actually lines his wallet with tinfoil hat -- possibly recycled from his hat -- for fear of his details getting lifted by a hi-tech Artful Dodger.)
Sacrificing that peace of mind for security isn’t a hit with consumers, however – Barclaycard currently reckons that two million customers in the UK are choosing to pay with contactless every month. In fact, apparently 41 per cent of Barclaycard purchases under £20 were made using contactless payment, which is 10 times higher than observed with high street retailers.
That might sound impressive; however, there’s over 33 million contactless cards out in the UK wilds at the moment; based on those numbers, a fairly paltry 15 per cent or so of people already equipped to use contactless are actually choosing to do so.
But still, the green shoots of progress are there for contactless – Barclayclard also told me, while demonstrating its contactless payment technology at the Barclaycard British Summertime Festival in London's Hyde Park, that contactless payment has seen a six-fold increase in the last year, showing that people are finally starting, slowly, to start using the contactless system. (It probably helps that TfL have added the option for contactless payments on buses, where regular chip-and-PIN transactions aren’t accepted.)
The future of payment systems is more than just contactless, though. Why have an imperfect physical token, when you can tie that centralised account to a unique individual characteristic, like your face? Companies like Finnish startup Uniqul are banking (pardon the terrible pun) on a payment system using nothing but facial recognition, which promises much faster transactions (we’re talking five seconds or so) and a higher level of security than some puny card could ever achieve.
The drawback, as ever, is cost; facial recognition relies on expensive rigs in each and every shop to scan faces. For a payment system to really take off, you have to be able to use it everywhere; otherwise, you’re just paying some by card, and some by face, and no one will want to be toting round their wallet in 2025.
Let’s take a moment and step back from payment systems, though. Contactless is all well and good, but what’s the point in having a physical card, if you’re buying everything online? If Amazon and eBay have their way, everything will move online, and there will be no brick-and-mortar stores for you to be processing your transactions at.
Of course, we’re never going to see stores die out together. Until the postal system can deliver us the goods within an hour of pressing click (hello, pizza drones!), we’re still going to need to nip 'round to Tesco to buy a pint of milk. (Side note: I reckon Maplin’s only still in business because of my inability to realise I’ll need a SATA cable until I’m five hours into a computer build.)
But beyond convenience shopping, retail outlets will only survive if they can offer something to the shopper: an experience. Let’s be honest, girls understand this better than guys [editor-Kat update: he has a point...]; they enjoy the physical act of shopping, wandering around stores with something vague in mind, and getting a kick from ‘discovering’ a skirt or somesuch they love. (This is according to my ever-reliable girlfriend, and the squeals of teenage delight you hear passing Forever 21 on Oxford Street.)
The online experience is growing to rival this, however. Technology is getting better, websites more ‘immersive’, and the online shopping experience (primarily clothing) is starting to use emerging technologies like augmented reality to create that same kind of immersed, endorphin-rush retail experience that the high-heeled gaggles on a pilgramidge to Westfield experience.
So obviously, the physical shops are going to do something about it. The first concern of displays in shops is to be eye-catching – to sell a product, you need a bit of a show. This, obviously, is something that technology can help with. Go into a Lego store in London, and you’ll see a great example of this in action – interactive displays. Hold a Lego box up to one of them, and it’ll pop-up the Lego set, turning it into an augmented-reality display of the toy train, on top of the toy train box itself.
Or wander into an Adidas store in Japan. There, touchscreens the height of walls draw shoppers into the Adidas world, detailing the different types of shoes on sale, and showing them the pros and cons in glorious hi-def.
Beyond the window-dressing, there’s more practical solutions on the horizon. Apart from being more of an experience, physical retail is also more convenient – you’d never buy a coffee off the internet; it’s simply not practical. So Costa has sought to expand its freshly-ground empire into more and more nooks and crannies, by building automated vending machines that offer (supposedly) barista-quality coffee, in the same size as a machine that would normally just spit out Cokes.
It’d be impossible to talk about the future of retail without even the faintest hat-tip to Silicon Valley’s current wunderchild of choice, the 3D printer. Even if it’s not quite the golden land of milk and custom-engraved handguns we’ve been promised, it still shows potential for making the shopping experience that little bit more personable again. 3D printers are, currently, a bit expensive and too specialised to find a home next to everyone’s inkjet, but stick it in a shop, with a trained operator, and it’d be fascinating to see what sort of stuff it cranks out.
Technology should also makes stores far easier and cheaper to run. As someone who has in the past spent entire shifts stocking shelves, I can back up some research by Intel which claims that a good 50 per cent of shop assistant’s time is spent stock-taking and restocking – the sort of tedious work ideally handled by a machine. Thankfully, such a robot is already on hand – mObi, a Bossa Nova-made and Intel-sponsored robot that, as well as having a unique mobility system that gives it reasonable height but a tiny footprint, packs Ultrabook internals and a Kinect sensor, that can sort of do stock-taking automatically.
Currently, mObi can scan shelves, identify holes where products should be, and produce and automated list for store managers that tells them where to send their little product-armed minions for hours of back-breaking restocking. But in the future, with more accurate sensors and better algorithms, mObi could analyse shopping lists, compute the fastest routes around stores (just like Amazon does for its warehouse pickers), and maybe even collect the items itself.
MObi’s just one of a dozen similar projects trying to simplify life behind-the-scenes for stores. With computing power still following Moore's Law and becoming exponentially cheaper by the year, Intel's Chief Futurist and Evangelist (there's one hell of a job title if ever I've seen one) envisages a future where computing power approaches zero cost, and "everything becomes a computer"; every shelf, floor tile and lightbulb will talk to each other, feeding information about stock levels, temperature, allowing stores to optimise their layouts and make shopping less where's-Wally and more an efficient blitz.
Although all this work is less glamorous than Lego’s glitzy AR displays, it serves an equally vital role for keeping bricks-and-mortar stores alive: by lowering the costs of staying in business, little R2D2 impersonators like mObi can actually keep the high-street stores alive.
There’s a more sinister side to the story, though – and as with many technological advances these days, it’s to do with privacy. Shopping online, as we’re now starting to realise, means leaving some of our privacy by the wayside – those cookie notifications at the bottom of websites, that you click away, aren’t just meaningless crap: Amazon, and every other e-retailer worth a damn, is tracking your every click, and taking note of every virtual penny spent.
Intel's vision for a connected store -- all these objects will be smart
Physical stores are doing the same. Just this week, the New York Times revealed that some stores are using the Wi-Fi signals from smartphones to track consumers around stores, looking at what products they buy, how often they enter the store, and probably what brand of cereal you prefer when it’s snowing outside. Even worse, the New York Times also spotted that US department store Target was using purchasing information from its loyalty programme to work out when customers became pregnant, and targeting them with specific products as a result.
That Costa coffee vending machine? It tracks (anonymously, to be fair), the gender and age of the people coming up to it.
And this is the result of shops having access to limited information on our habits. Imagine, then, what will happen with Steve Brown’s unlimited-computing-power and ‘smart shelves’. That’s a whole lotta information to give up.
Add all this together – the augmented reality displays, the stock-checking robots, the seamless payment systems and the store’s big-data approach to selling – and a picture starts to emerge, of a far more appealing store of the future. Stripping all the hassle out of shopping, and you get stores that are more convenient, with better-informed ‘staff’ (who will maybe just be a giant touchscreen), and a vastly superior stock selection.
Balanced against that, though, is a future where every store looks like the ‘recommended ads’ from Facebook, writ large. Stores will have vast, limitless quantities of data on our shopping habits – really the only things that matter to them – and, thanks to Intel, that unlimited computing power. Put all that together, and you’ve got a world where your every purchased is tracked, on and off the computer. Convenient, of course, but creepy beyond words.