After reading the fascinating and highly recommended Why Your World Is About to Get a Whole Lot Smaller by Jeff Rubins, it got me thinking about really big picture environmental and social changes and their impact on retail. One small outcome of the changes to come according to this very broad and intelligent book is that the increasing cost of oil will drive the cost of transportation so high that a whole lot more manufacturing will take place in North America. As oil costs rise, the lower wages for manufacturing in far flung places will be offset by increased transportation costs. It’s already happened to a certain degree as part of the recent recession. As chief economist at CIBC for 20 years, Jeff’s ideas have credence.
Another big picture idea that blew me away was in the latest issue of Wired that includes an article about a new generation of affordable technology allowing for incredibly cost effective product development and for crowdsourced projects. One example is the makerbot open source 3d printer, a kit that anyone can buy for $700 and assemble to “print” 3 dimensional items using ABS plastic from plans that can be made with free tools like Google Sketchup.
The impact of these two items to retail?
- There will be an increased demand for labour for manufacturing jobs in coming years if Jeff Rubin is correct. The result are fewer people to keep the service economy going. The people that work in the hospitality industry, the grocery stores, the boutiques, movie theatres, and more. This means more demand for technology solutions to deal with labour scarcity and reduce flexibility. This was a problem during the oil boom in Western Canada in the 2007-2008 timeframe. Expect it to happen again, and with deeper impact. With fewer options available, retailers will need to consider every option available to stretch labour dollars to build flexibility into their systems while minimizing costs. Self service will grow.
- With capacity for design resources made available affordably to those who did not have it before, expect to see ever more products available in much shorter runs. With more differentiated products available to serve the Long Tail, this could mean reduced sales for big box stores, as niche players find a place in the market. It will probably also drive a number of niche players to work via mail order via the web and skip the retailer altogether. At the very least, the big players will have to be more selective in their product mix for sale, and either way it makes life more complicated, with smaller segments served by individual products, or with many more SKU’s available and having to be tracked and turned in stores.
- In the even bigger picture, for very simple products, retailers can expect to see the problems that the music industry and the movie industry have experienced for a few years. Not only can these printers make a prototype, they can make a product. The makerbot makes the potential of downloading plans for a model car and building it myself quite real. With this technology in its infancy, it is not a stretch to build your own mobile phone with the right plans, some plastic, and some kits from my favourite electronics store in the near future. Retailers and manufacturers will have to consider the potential of tomorrow’s Napster not sharing music, but plans for the latest Nike shoes, or a Google Phone Knockoff.