Can a Pandemic Inflect Local Commerce Tech?
Covid-19’s economic fallout has a polarizing effect on business. Anything that’s high-touch is clearly suffering, including brick-and-mortar commerce. Quarantine-friendly fare like virtual office tech, e-commerce, and casual gaming meanwhile see usage spikes.
Somewhere between those endpoints are technologies that enable local merchants to operate under social distancing protocols. We’re talking curbside pickup and other various ordering and logistical engines for retailers, restaurants, and other local merchants.
Retail-enablement technologies are given the chance to shine. These are not new technologies, but they’re now graced with new demand signals. The question is if current circumstances accelerate their adoption in ways that are positive and permanent.
Could forced adoption of alternative shopping methods like curbside pickup lead to user acclimation? Will millions of shoppers get exposed to the merits of these streamlined options and like what they see? Will new habits be born that sustain throughout normal times?
If so, these technologies — along with virtual-office enablement — could benefit from this period as a blessing in disguise for exposing their value propositions. But who stands to benefit most? We’ve identified five local commerce tech areas to which this could apply.
After much hype in the early 2010s, mobile payments fell flat because paying with cash or credit card wasn’t really broken. Moreover, mobile payments’ value proposition was underwhelming and incremental (tap versus swipe).
But mobile payments did gain traction where they addressed real consumer pain points, like saving them time. This is why Starbucks’ skip-the-line functionality has been so successful. Uber is in the same boat, given transactions that eliminate post-ride cash transactions and tipping. Just walk away.
These mobile payment success stories now take on new meaning because they support social distancing. Order-ahead has seen forced adoption via mandate. But through that process, as referenced above, many consumers could realize its time-saving advantages and develop a new habit.
This includes everything from curbside pickup at Target to order-ahead fast food (QSR). Altogether, curbside pickup is up 208%, and Sam’s Club just rolled it out nationally. Meanwhile, companies like Rakuten Ready provide advanced logistics for retailers to make it all happen smoothly.
2. Cloud kitchens and mobile order-only stores
Stemming from the above, one prospect about which we’ve been speculating for years is mobile-order-only stores. This is a coffee shop or restaurant that has no dining area. It’s built just to pump out pick-up orders. In the same family is cloud kitchens, which exist only to serve delivery operations like Uber Eats.
There are theoretical unit-economic advantages such as lower overhead and high-yield output. But in the current environment, adoption is also driven by the model’s alignment with social distancing. Starbucks recently announced it’s replacing 400 stores with pick-up-only locations.
Cloud kitchens meanwhile see some turbulence, mostly related to the brand trust that a “white-labeled” product inherently lacks. And trust is important with food. But the rise in demand — not to mention urgency for better margins in food delivery — could make this cloud kitchens’ time to shine.
3. In-aisle transactions and cashier-less retail
We’ve had a longstanding prediction about in-aisle transactions, though it’s been slow to materialize. The thought is that physical retail logistics could be more streamlined if shoppers can use their smartphones to scan and transact throughout the store, avoiding checkout aisle bottlenecks.
Some version of that has come to fruition through Amazon’s Go stores and its subsequent move into “retail as a service” (which we also predicted). The economic benefits and retail streamlining aren’t new concepts, but could social distancing accelerate the death of the checkout aisle?
The irony is that it could take a pandemic to save retail. Retailpocalypse has hit the tech laggards hardest. Could forced tech adoption from a pandemic inadvertently and finally vault retailers into tech-savvy practices that give them a fighting chance against Amazon?
4. Mobile ordering and payments at restaurants
One of my least favorite parts about dining out (besides irrational spending on food markups) is being chained to a restaurant table. This pain is mostly felt in the song and dance of getting the server’s attention, then several steps to generate, check, approve and transact.
Why can’t we experience the same “walk-away” benefits mentioned earlier in light of Uber? Paying through your phone and eschewing the physical check process is one of those mobile payments use-cases that actually solves a real pain point. Time is money and all that.
Taking that a step further, the entire ordering process could be done from your device. There are various flavors of in-table ordering hardware at some chain restaurants, but that’s a touchscreen biohazard. Mobile options could rise to the occasion as restaurants reopen.
5. AR Product visualization and try-ons
AR has been slow to gain traction for lots of reasons. That’s mostly because it was initially hyped as the next large-scale shift in computing that will apply to all aspects of our lives and work. It turns out that this isn’t true (and the underlying tech isn’t ready for prime time). But it is fitting for some things.
Like the above principle for new technologies that must solve real pain points, AR killer apps will germinate from things like visual search and product visualization. Google Lens is a wild card for being able to contextualize things visually, including local storefronts.
Product visualization is one area where traction is building already. This lets consumers digitally place a 3D object in their space — popular with furniture, cars, and flat-screen TVs (it also reduces product returns). But in a pandemic, these advantages are amplified in high-touch product areas.
The most notable of these is cosmetics. Since trying on lipstick shades at the mall isn’t an option, consumers have scrambled for alternatives. Fortunately, AR tools like L’Oreal’s Modiface let consumers do this with spatial and graphical precision, plus the ability to transact on the spot.
Driven by Modiface, L’Oreal’s e-commerce revenue is now 20% of total revenue. Like all of the above, this will expose the technology and give it a chance to shine (literally, in this case). The question, as with all of the above, is if that adoption sustains in the return to normalcy.