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The Ghosts of Holiday Shopping: Past, Present and Future


Microsoft Research Director Daniel Reed

In many parts of the western world, the frenzy of holiday shopping has reached its crescendo. In the U.S., it began with Black Friday, the day immediately after U.S. Thanksgiving. Not only is holiday shopping a major component of retail profits, financial analysts also use such consumer spending as a barometer of possible economic recovery.  With apologies to Charles Dickens, it is instructive to consider the ghosts of shopping past, present and future, albeit with a bit of U.S.-centric perspective.

Past

Those of a certain age (read, older than 40) remember when catalog sales and retail stores defined the spectrum of shopping options, and the traditional media (newspapers, magazines, radio and television) carried the advertisements of sales and loss leaders. Other than a few national chains (e.g., Sears), retail stores were largely independently owned and operated, supported by a wholesale distribution network.

As a boy in a small town, I distinctly remember awaiting the annual delivery of the Sears Christmas mail order Wish Book, via which one’s parents could purchase holiday gifts via mail order. Long before the ubiquitous UPS and FedEx and UPS trucks traveled the highways, multiple weeks could ensue from purchase to delivery.

From an information theoretic and network perspective, the system was much more loosely coupled. Consumers and retailers operated primarily with local availability and pricing data, coupled to the larger national and international economy via logistics and supply chain costs. The price of a toy could vary substantially across town and certainly across states and regions. Soon, all of that would change.

The dot.com bubble brought grand visions of reinventing retail commerce. Pure plays and a “get big fast” mentality prized growth over profits, with massive advertising campaigns for online orders. (Who can forget the pet food sock puppet and the Super Bowl advertisements?) Before the bubble collapsed, the frenzy stimulated a massive build out of dark fiber, which ultimately helped enable greater broadband penetration. From the rubble of the dot.com collapse, a set of viable business models did emerge, ones that leveraged the long tail and delivery of small, relatively high value items.

Present

Today, big box stores are common, supported by supply change management and point-of-sale data mining. Consumers commonly compare product characteristics and prices online and (increasingly) negotiate prices onsite, based on near real-time data from social networks and smartphones. In the electronic equivalent, we now have Cyber Black Friday and Cyber Monday, with many electronic retailers offering online promotions. Advertising is increasingly dominated by ad sales associated with web search engines, and ad placement can be the differentiator between profit and loss.

Although I felt some trepidation when I first entered a credit card number on a web site, particularly one I had found via a web search,  I am now as likely to shop electronically as I am to frequent a physical store. Indeed, for many items, electronic shopping is my preferred method, as it saves my time. This is a profound sociological change, enabled by inexpensive computing, broadband networks, rapid transport, globalization and information flow. However, security and privacy remain important concerns, with both social and technological components.

Future

As Yogi Berra once remarked, “It’s tough to make predictions, especially about the future.” I suspect, however, that the distinction between the physical and virtual worlds will continue to blur as the cost of information transfer continues to decline. Business competition between electronic retailers and big box stores is increasing, with each competing on the other’s territory. Augmented reality and intelligent devices will allow most customers to comparison shop and purchase simply by photographing objects. Finally, for information and entertainment, direct electronic delivery is likely to become increasingly predominant, with concomitant implications for physical manifestations of that information.

All of these are, of course, simply guesses. As they say in sports, even with rankings, the teams play the games to see what really happens. So it is with the future. We can predict, but reality is the ultimate validator.


 

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