What will physical stores look like in the future? And what kind of customer services will shoppers expect? These are questions Signal360 posed to Pilot44’s founder Andrew Backs.

E-commerce drove 14.3% of all retail sales in the U.S for the first quarter of 2022, a number that has been growing for nearly a decade. Social-selling and  live shopping are helping to lure more shoppers online too, linking what have been traditional in-person elements into virtual spaces. However Backs doesn’t see this as the demise of the physical store. Instead he and his team believe traditional details such as white glove service to virtual experiences like holographic displays will start to seed that space, bolstering the customer experience no matter where they choose to shop.

Backs explains how his team’s four scenarios will help brands looking to stay ahead, and differentiate themselves, for their competition.

Watch the video and scroll down for the transcript:



Lauren Barack
Welcome, everyone to a special Signal Conversation. Today we’re going to be exploring the future of commerce with Andrew Backs. He is founder and chief innovation strategist at Pilot44. So welcome, Andrew.

Andrew Backs
Thanks for having me.

Well, it’s great. Thank you for agreeing to come in have conversation with us. I think we’ll like to start by just hearing a little bit about you. And maybe you could just sort of walk us through just briefly about kind of the work you guys are doing over at Pilot 44.

Sounds good. So as mentioned, I’m Andrew Backs, founder of Pilot44 I, before starting Pilot44, eight years ago, I actually spent a decade at Procter and Gamble. So I spent a number of years in P&G, and in variety of roles, most of them were innovation focused. Actually, probably most relevant to this conversation was the back half of my career with P&G, which was based in Silicon Valley, helping P&G tap into the emerging technology and startup ecosystem, leveraging open innovation practices. So I spent a number of years building that up, while carrying the P&G badge. Towards the end of that time, I felt the draw to start a company. Being in Silicon Valley, it’s hard to avoid. But I was living through essentially the problem that Pilot44 ultimately aims to solve, which was helping corporates, actually, activate innovation in market, get it in front of consumers, add value, and hopefully build the business. We’ve been building Pilot44, for just over eight years. And we’ve earned the reputation as a trusted corporate innovation and venture building studio. Our goal is really to help large corporations, as I mentioned, accelerate digital and growth innovation.

And so now, you’re sort of semi back in the fold with P&G and you’re doing some work with them on future commerce. So I think what we really want to talk about a little bit today is what you have uncovered around commerce. Maybe we could touch right now on some of the highlights of where you see commerce shaped into the future. How will consumers shop? Or will consumers expect to be able to shop in the future?

Yeah, it’s a great question. And I don’t want to pretend to have the crystal ball. A lot of the work we’re doing right now, and that we’ll talk about in this conversation is related to scenarios. And the beauty of scenarios is it starts to outline potential pathways. But before we get into the scenarios, underlying that work is some predictions that a lot of the experts we spoke to, our team, myself, start to coalesce around. A few of the big ones are sustainability is going to increasingly drive innovation and purchase decisions, whether it’s at shelf or online, demographics are going to shift and those demographic changes are going to impact shopping behaviors dramatically. The first generation of digital natives, ie the Gen Z, is already shaping the future of commerce today. We’ll talk through some examples, I’m sure throughout this conversation. But their focus on authenticity, and in the moment, commerce whether it’s shoppable content or things like live stream shopping, it’s being embraced already. So the future does feel now. A few other things that we’re watching as related to this work, is digital commerce is, going to continue to accelerate technologies like 5G, and high speed mobile internet, is going to unlock new experiences, everything from AR, VR to high power experiences, high value ad experiences. One thing that’s worth mentioning is that retail is not is not dead at all. The sort of pure play of just offline-only brick and mortar retail feels like a thing of the past. But the role of the store and omni channel shopping is alive and well. It’s just changing. I think it’s up to brands and retailers for that matter to start to adapt how commerce is transacted.

Can you kind of walk me through a little bit about the methodology, how you built these together, the scenarios?

The first stage of this work is really looking at macro driving forces. There’s this acronym called steep, it’s social technology, economic, environmental, political. These are forces that are going to be dominating the world over over the next few years, or maybe up to 10 years out. So looking at those macro forces, starting to get external point of view from experts, interviews of, of thought leaders and so forth, academia, even competitive activity. Then finally, internal perspective. There’s a general consensus on a number of things that will be certain over the coming years, and then there’s areas that are much more uncertain. So how do those map, how does this start to coalesce around plausible scenarios. Finally, we start to discuss implications, preparedness, and activation opportunities for P&G around these these scenarios. The final thing I mentioned around scenario work is that they’re meant to be plausible and provocative views of the future. They’re meant to magnify change that’s happening today and challenge our assumptions about tomorrow.

We’ve just come out of a pretty uncertain time, the last couple of years, and certainly COVID dramatically shifted the way that commerce was experienced by both brands and consumers. So I’m guessing those that played a huge role into this. From what I understand is, there were four scenarios that really came out of this work. What are the four major themes that you imagined,  that both brands and consumers would be expecting, if not in the next year, but going forward beyond that?

The four main areas that we we touched on, were named “Ruled by Algorithms,” “The 15-Min City,” “The Experiential Store,” and “Land of 1000 Retailers.” So just quickly touching on each of these. “Ruled by Algorithms.” This is a scenario that’s assuming that retailers are consolidating and that the world is becoming much more transactional. The role of the retail environment has changed. They’re still around, but probably with dramatically smaller footprint. They’re carrying only the essential top selling skews. And the most of the store is actually being used as a fulfillment center for click and collect and delivery and last mile delivery and those sorts of things. Under this “Ruled by Algorithms” scenario, shopping has become highly-automated. The AI and data driven analytics and personalization is really driving shopping. The computer, let’s call it, is doing a lot of the work for the consumer. So the role of the physical store is really implying that convenience is critical. Shopping will go on autopilot, there’s going to be a consolidation of retail, but this also means there’s going to be a consolidation of data. And the ideal brand loyalty is likely, or at least as we know it today, is likely going to be at risk or dramatically go away. So that’s the first one. 

The second area is around the experiential store. So this is still in a consolidated environment, where retailers are consolidating, but the store becomes much more experiential. So as you can see, this scenario is quite different from the previous and that’s by design. We’re not trying to predict the future, we’re trying to come up with plausible scenarios. This “Experiential Store” scenario is really in a world of one-click access, the distribution of products is all but ceased to be the issue. Anything can be shipped to anyone, anywhere, and the lines between digital and physical are ceasing to exist. The question of where the sale actually takes place is moot. Winning retailers in this environment will be essentially animating their physical presence and experience and trying to kind of move the hearts and minds of the consumer. The big impact of this is experience is critical. So if you’re going into a store, things like personalization, white glove service, virtual try-ons, really robust personal advice, sort of experiences and, and even online to offline, virtual shopping environments, will dominate this mega concept of the experience of store. So you can imagine some of the buzzy stuff like the metaverse reimagining retail. 

Quickly on the other two, there’s “The 15-Min City,” this is quite different from the other other scenarios, in that it’s assuming that retail retail continues to become more fragmented, versus consolidating. Under this fragmented environment, there is still a transactional component. So in this world, the retail landscape has become fragmented with dozens, if not hundreds of players. Some of the bigger players have historically in this scenario ignored the shifting preferences of their consumers, and have left room for competition to come in. So new types of marketplace creator-led brands, independent retailers are entering the scene. The implications of this are people will be shopping local, though the small independents will be really focusing on digital, and how they show up online. On-demand delivery, platforms will become more vertically integrated marketplaces, we’ve already seen signals for this around like companies like Gopuff, for example. And then convenience is going to be a really critical component of this. 

The final scenario, and I know, we’re spending a lot of time on this, but this is the meat of what we went through, is the “Land of 1000 Retailers.” This is a fragmented environment, just like the last scenario, but the focus is much more experiential whereas the last one was a bit more transactional. This is really leaning into a creator-led technology enable social-type commerce experience. It’s going to lead to the democratization of retail, once niche sellers have access to data and audiences, and they’re going to monetize those audiences with really amazing types of experiences. Data is gonna play a big role of this, but it’s going to democratize, and coming up with new brands is going to become much more flexible and fluid as content creators and influencers launch their own brands, for example. The impact of this is pretty profound on brand building, because it’s implying that there will be potentially 1000s of new brands that coincide with the 1000s of new retailers. The last thing I’ll mention is actually the definition of a retailer will change under this scenario. The content, the influencer themselves may become the retailer. I think we’re starting to see that certainly, I think it’s already at this point, in some ways. 

Was there anything that surprised you from what you uncovered? One thing  I actually thought was interesting, unless I misread this, were the two things about the store: the idea of a store being more immersive and experiential, as opposed to just a point to purchase something. And then that idea of the white glove approach, which to me sort of harkens back to the past, of that service one would have certainly expected maybe 50 years ago. You would go into a shop and we have all seen the photos of people with literally white gloves. But I love these coming back into a store environment. Are you already seeing brands adopting that to get consumers back into stores?

Absolutely. It’s definitely going to be one of the ways that brands and retailers for that matter, bringing consumers back to their stores. I mean, personalization is important to consumers and just as important in store as it is online. So a lot of the last five years or so in the tech world, we’ve been focused on online personalization. That transitioning to the in-store environment and creating kind of a seamless, personalized experience is going to be critical. Customer support customer service is inherent to that. Shopping is inherently a social activity, I think we’re gonna see more retailers incorporating more social aspects into the shopping experience. We’re already seeing this with Whole Foods doing wine bars to get consumers into the store and spend more time. There’s a number of grocers around the country that allow you to grab a beer and shop, that sort of thing. That sort of value add, making shopping even more and more enjoyable is another thing that’s going to be bring consumers back into the store.

How do you think P&G and others can actually use these scenarios and these insights to inform how they’re going to move forward in the future? Do they work as much for a giant corporation as they would for a very small independent store? Can both of them pull from these insights?

Great questions. The first one around implications to the brand builder, these scenarios, touch on a number of major areas. One is traditional channels, evolving sales channels, and the types of customers that they’re targeting, the behaviors of those customers are evolving very quickly. And so understanding those changes is really critical. The technologies that are powering sort of the future of commerce, it’s gonna be critical for brands, maybe not to become technologists per se, but they need to understand the power that these technologies can provide. They need to understand the sort of, let’s call it on ramps into these new technologies that brands can exploit, and start to learn about how emerging technology can be leveraged to build brands and new ways. It’s going to extend all the way to product innovation as well, how is the product pack tells the product actually shipped, and used in home. These scenarios implied product innovation, as well. 

And then final thing I’ll highlight there’s a number of areas, one is that I really focus on is what are some of the key partnerships that need to be formed to early, first off start to learn about the evolution of the future of commerce, but potentially, down the line who are the new set of scaling partners under under these types of scenarios? Obviously, existing retailers are going to be an important partner. But are there emerging startups globally, that the business can be partnering with, to learn and then potentially scale? Does this apply to equally to large auto brands versus the cornerstone? It absolutely could because one of the underlying driving forces that we alluded to in the scenarios was is the retail world going to consolidate or continue to become more fragmented? Under the scenario of fragmentation, the sort of small, hyper-local corner store becomes more powerful. Those types of scenarios raising big opportunity for that sort of hyperlocal, traditionally offline shopping experience to move online and touch consumers in an interesting new way. 

I think a number of these scenarios absolutely favor the small, the others where there is consolidation, will require adaptation to the small corner store. And getting access to data, getting access to the consumer outside of just that physical presence is going to be challenging under some of those scenarios. It kind of depends on which way it adds.

Thanks so much for joining us. Really appreciate it. I’m sure we’re gonna hear a lot more from you from Pilot44 for going forward. So thanks again.

Thanks for having me. Appreciate it.