APPLE’S EXAMPLE PROVES THAT PHYSICAL STORES AREN’T DEAD
Besides the statistics—which each side spins in the way that suits it best—the other big argument put forth by optimists is that physical stores won’t disappear, though they will surely be reduced in number. Instead, they’ll evolve into showrooms for products that can be ordered online, and they will attract customers with experiences not necessarily related to the store, such as concerts or artificial snow skiing slopes.
“Look at the way the Apple store has surprised everybody,” Swanson told me, citing the example of tech firms that have opened physical stores to showcase their products and educate the public about them. “When they started, nobody thought they would work, because most people would order online. Today, they employ 40,000 in retail locations. The experience has been widely successful.” And this approach is likely to be copied by other kinds of companies, he predicted. “As some retail jobs go away, other retail jobs go up. Maybe people won’t be checking out your product at the register, but they will be more helpful in letting you know how to use what it is that you’re buying.”
And Apple isn’t the only tech firm opening physical stores. Amazon and other e-commerce companies are doing the same. Not only has Amazon opened its automated supermarket in Seattle, but it is opening some brick-and-mortar bookstores for people who enjoy that sort of experience. In much the same way, Bonobos, an online men’s clothing store, has opened more than thirty physical locations so its clients can try on suits before buying them. These stores don’t actually sell the product: if customers like what they see, they buy it online and have it shipped to their house.
The Bonobos store on Fifth Avenue in New York doesn’t have suits of all shapes and sizes; instead it has just a few samples. People get fitted and order the final product online. That way, the physical store doesn’t have to spend a fortune to stock a ton of merchandise in one of the most expensive locations in the city. Instead, you can just keep a floor model of each product on hand while keeping the rest of the inventory in a warehouse outside the city, where the rent is much cheaper. Paul Evans shoes, Warby Parker eyewear, and Zalora clothes in Singapore, Malaysia, Hong Kong, and other Asian locations are doing the same.
SHOPPING CENTERS WILL OFFER “MEMORABLE EXPERIENCES”
The shopping malls that will survive through 2025 will be the ones that offer “memorable experiences” to their customers. For some time now, massive malls in Minnesota, Dubai, Bangkok, and other cities have offered indoor ski slopes and scuba diving tanks as extra incentives to draw in shoppers. These added attractions will be expanding to include all sorts of activities, including soccer fields, tennis courts, concert halls, conference centers, yoga classes, and cooking classes.
They won’t be able to rely simply on retail stores to bring in the shoppers, because customers will have the more convenient option of buying whatever they want online or with virtual reality devices. Malls will have to go the extra mile to make people say, “Wow!” and want to visit them. They’ll have to have public spaces with dynamic, ever-changing content and host events that will constantly surprise their visitors. Shopping centers will sell experiences, and they will charge stores for the privilege of having showrooms.
Not surprisingly, when Canada’s Triple Five Group announced in 2018 that it would build a $4 billion mall in Miami, Florida, that would be the largest in the United States, the company’s president, Don Ghermezian, said, “We’re not building a mega-mall. We’re not in the mall business.” While most of the planned American Dream Miami mall’s space would be used for shops, developers referred to the project as a “theme park.” It will have an indoor ski slope, a lake with submarine rides, a roller coaster, an aquarium, and a permanent Cirque du Soleil show, they said. Malls will not simply be distribution channels, but places to lure potential clients, promote goods, and provide information to customers. Rather than just selling goods, they will be aimed at engaging people and allowing them to make informed decisions so that they can buy their products either physically or online.
SALESPEOPLE WILL BECOME CONSULTANTS
What will happen to the millions of salespeople at brick-and-mortar stores around the world? Swanson, like many other optimists, believes they’ll evolve into sales consultants: specialists who are much more knowledgeable than their customers about the products they sell, and who will serve mainly as a source of expert advice. This is exactly what employees at Apple’s physical stores do, and why—according to official company policy—they are referred to not as salespeople but “geniuses.”
As anyone who’s entered one of the more than five hundred brick-and-mortar Apple stores around the world has probably noticed, as soon as you step inside there’s a young person dressed in black who says, “Wait just a minute, one of our geniuses will be with you shortly.” What was initially a cute term is now an official title for these salespeople, who are first and foremost technical consultants and advisers. Interestingly enough, Apple’s founder, Steve Jobs, was initially opposed to the idea of having “geniuses” in his company’s stores. Ron Johnson, Apple’s former retail head, says he will never forget the day when he suggested hiring them to serve their customers. “He said, ‘Ron, you might have the right idea, but here’s the big gap: I’ve never met someone who knows technology who knows how to connect with people. They’re all geeks! You can call it the Geek Bar,’ ” he recalls. But Johnson managed to convince Jobs that all the “geniuses” would be young folks in their twenties, and they would be a tremendous help to people having issues with their smartphones. The idea, of course, turned out to be a home run.
CONSULTANTS SHOULD KNOW MORE THAN SALESPEOPLE
The notion of turning salespeople into expert advisers isn’t anything new. Richard Branson, the billionaire founder of Virgin Records whom I had interviewed and quoted in Innovate or Die!, built his business empire thanks in part to this very idea. As a young man, Branson had created a company called Virgin Mail Order. The Virgin name was based on the fact that neither he nor his company’s cofounders knew anything about the recording business. When it came to that, they were total virgins. All they knew was that they liked music, and that the record shops in London didn’t know anything about the artists young people were listening to. Traditional record stores were selling music, but they might as well have been selling shoes.
So Branson and his partners decided to rent a space and use hippies who loved rock music as their salespeople. Decked out in jeans and sandals, they welcomed customers as if they were old friends. People would go inside—their eyes often bloodshot from smoking a joint or two—relax on a couch, and listen to whatever the Virgin staffers recommended. It was a totally new experience for the shoppers, and it turned out to be a huge success. Within a matter of months, Branson had opened a total of fourteen record shops all over England.
What Virgin and later Apple did—serving the public with experts rather than nonspecialized salespeople—is one of the things that brick-and-mortar stores will have to do to survive. Another thing they will have to do is offer free technical advice to potential customers, wherever they are. Companies like Best Buy have already started pulling employees off the sales floor and sending them directly into people’s homes. In 2018, the company had three hundred former in-store sales associates working as in-home consultants to meet with customers and offer suggestions about which entertainment equipment to buy and how to best install it. It’s a free service for the customer, in the sense that there’s no obligation to buy anything, and—according to the company—it’s neutral. The consultants aren’t instructed to recommend products by any particular company over another, and instead tailor their advice to the individual needs of each customer. The secret is to connect the public with experts and specialists who can help make informed decisions. And for that to take place, the consultants have to be knowledgeable, educated enough to interact with an increasingly sophisticated public,
and able to provide answers to questions that people can’t find online. Sales advisers will have to gain people’s trust in order to make their sales.
STORES WILL NEED SOCIAL MEDIA ANALYSTS
In addition to sales consultants, physical stores that want to survive in the era of e-commerce will need to hire data analysts to find out what their customers want, so as to make personalized offers to them. These analysts will mine people’s data from their accounts on Facebook, Twitter, and other social media and use them to anticipate their preferences. Armed with this information—and with new biometric recognition technology and GPS systems that allow stores to identify customers as soon as they enter their premises—sales consultants will be able to approach customers already knowing their favorite tastes, brands, and colors. They will use this information, for instance, to lead the customers to the section of the store that would interest them the most. As soon as you step in the door, a consultant—knowing that you are a frequent buyer of ties—may say to you, “Hi there, did you know we have a special deal going on in the men’s department today? There’s a 30 percent discount on blue ties.” And you will open your eyes in astonishment, as if you had blindly stumbled upon a hidden treasure, and go directly to the men’s department.
Stores can even do this via email or text message, notifying us through our smartphones as soon as we enter a store that there’s a special sale on blue ties. If I’ve just bought a watch, the store may send me a quick text message to say, “Thanks for buying your watch, Andrés,” followed by another saying, “Be sure to take advantage of this limited-time special on watch batteries! They’re in aisle D, thirty feet ahead of you, on your left-hand side.” If it’s raining outside, another message may tell me, “Andrés, the National Weather Service expects this storm to last for two hours. If you need an umbrella, we have them on sale in aisle G.”
Since 2013, an increasing number of stores have been using technologies such as iBeacon to identify the exact location of each and every customer in a store. Apple has been using such apps for years. In exchange for downloading these apps, customers get special discounts, a digital map of the store indicating where they can find the products they’re looking for, and reviews other customers have written about those same products. Many other stores, from pharmacies to supermarkets, are now using these hyperlocation technologies to maximize their sales.
Why are so many people willing to download apps that constantly track where they are located? Because the allure of getting a discount is much more powerful than the fear of giving up a little bit of privacy or being bombarded with ads. And all of this will lead stores to hire more data engineers and programmers who might not be out there on the sales floor but—according to the techno-optimists—will do jobs that didn’t exist before.
But will there be enough openings for social media analysts and data engineers to offset the huge number of sales jobs that will be lost to automation? We’ll analyze that in greater detail later in this book, but for now, let me tell you that—as you might already suspect—I think that in the short run it will be extremely difficult to replace the millions of salespeople, waiters, and other customer service employees who will be forced out of their jobs by robots and e-commerce. Countries will have to begin looking as soon as possible for new ways to reinsert some of these people into the workforce and to find new means of giving economic support and a sense of dignity to those who aren’t able to reinvent themselves. Otherwise, we’ll end up living in a world with growing unemployment and rising anger and resentment.
*1 In fact, in October 2017, Eatsa announced that it was closing five of its seven locations across the country, leaving only the original two in San Francisco. The company acknowledged that it had been a bit too hasty in its decision to expand into other markets.
*2 While many people use the terms virtual reality and augmented reality interchangeably, experts use virtual reality to refer to virtual images that imitate the real world, whereas augmented reality is a mixture of both real and virtual content achieved by adding digitized text, sounds, and images to actual physical spaces.
4
THEY’RE COMING FOR BANKERS!
THE FUTURE OF BANKING
TOKYO, NEW YORK
When I walked into the branch of Mizuho Bank, one of the largest in Japan, located on elegant Chuo-ku Street in the center of Ginza, Tokyo, I was greeted with a broad smile and open arms by the same sort of humanoid robot I had seen serving folks at a number of restaurants around the city. This machine, about four feet tall with a tablet on its chest for providing information and interacting with customers, fixed its electronic eyes on me as soon as I entered—a sensor on its forehead allowed him to detect the motion of someone entering the bank branch—and said with an intentionally robotic yet rather warm voice, “Welcome, I’m Pepper.”
The robot then asked me to take a number, and—according to my Japanese interpreter, because this Pepper in particular wasn’t multilingual—said, “Please choose what you want from the following menu.” Pepper offered me a number of options via the tablet, including a quiz game to guess my personality type and other puzzles apparently aimed at helping me kill time while I was waiting to see a human teller. But another option Pepper offered caught my attention: Was I interested in car insurance, home insurance, life insurance, or any of the bank’s other insurance policies? When I tapped “life insurance,” the robot asked me a number of more specific questions and then offered me its opinion, always looking me in the eye and accompanying his words with hand gestures. “Hmm, I understand,” Pepper said. “Now I’ll tell you what kind of life insurance is best suited to you.” After raising its eyes, as if it was thinking hard, Pepper announced its decision: “The insurance policy that best suits you is Kaigo Hoken. Please go to the last desk at the end of the room and tell the agent that you’re interested in learning more about Kaigo Hoken.”
Pepper had just done part of the work of both a receptionist and an insurance salesperson, leaving the bank’s staff to close the deal. And, as I later learned, that particular Pepper was one of the more limited versions of the bank’s robots. At other branches, the humanoid robots could speak multiple languages—the customers start the conversation by choosing the language in which they’d like to communicate—and act as fully automated receptionists, able to answer any questions, direct clients to the appropriate bank department, or clear up any questions about the various types of personal and commercial loans, mortgages, savings accounts, and investments.
According to a press release from SoftBank, the Japanese electronics giant that created Pepper, this was the first robot in the world that could detect human emotions and respond accordingly while simultaneously providing information in a fun and useful manner. “He is kind, endearing and surprising,” the company website says. In other words, the perfect bank clerk.
BANK BRANCHES AND EMPLOYEES WILL BE CUT BY 50 PERCENT
But the greatest threat to banking jobs aren’t robotic receptionists like Pepper. It’s the closing of entire branches because of the increasing use of online banking, the gradual disappearance of cash, and the replacement of many traditional banks with virtual financial institutions that operate exclusively in cyberspace.
In the developed world, growing numbers of people are using their cell phones, tablets, personal computers, and ATMs for all their banking needs. As such, the need to interact with an actual human teller is in decline. According to a 2015 survey conducted by the consulting company Accenture, an average client in the United States interacts with his or her bank about seventeen times per month, while “nonhuman contact,” such as Internet and mobile banking, ATMs, and social media accounts for all but two of those interactions. Today, some clients still go to physical branches if they need to open a new account—that’s one of the main reasons these branches still exist—or because they prefer to deal with a human being when it comes to making important, comp
licated decisions. But for your average day-to-day transactions, like making payments or transferring money from one account to another, visiting a branch is simply a waste of time.
Antony Jenkins, the former CEO of Barclays who predicted that up to half of all bank branches and employees in the industrialized world would disappear in the next ten years, may have been right all along. According to The Economist magazine, in the United States alone, over 10,000 branches—more than 10 percent of the total in existence—closed between the 2008 financial crisis and 2017. And in 2015 alone, the largest banks in both the United States and Europe laid off nearly 100,000 employees. A study by Citi Global Perspectives & Solutions (GPS) predicts that American and European banks will be laying off around 1.8 million employees over the next ten years.
There are now entire towns, like Windsor, population 6,200, in upstate New York, where there are no brick-and-mortar banks anymore: the last one, First Niagara Bank, shut its doors in 2017. There are around 1,100 towns across America that have done away with banks, and “that figure could easily double if small community banks continue to close,” says The Economist. In the Netherlands, the number of bank branches per 100,000 people has already fallen by 56 percent from 2004 to 2014, and the decline is showing no signs of bottoming out. In Denmark, the decline over that same period was 44 percent, and in the United Kingdom, it was 13 percent. The trend is clear.
The Robots Are Coming! Page 14