Fridge doors, beer fridges and refridgerdating

Frayed nerves and weak growth – ‘Hold your nerve’, Theresa May requested of her colleagues in Parliament yesterday. However, with many looking at the 44 days left until we leave the EU, and the increasingly stark choice of May’s deal or no deal, those nerves are starting to fray. An extension of the Article 50 process might have a soothing effect, and in that regard hopes were raised this week when the UK chief negotiator was overheard having a drink in a Brussels bar suggesting that this might happen. Quite how long would be needed is a different question. In the meantime, it seems that business has been losing its nerve. The growth figures for Q4 2018 were anaemic at 0.2%, with the full year coming in at 1.4%, (you have to go back to 2009 to find weaker data). The service PMI report for December blamed reduced business spending on ‘Brexit-related concerns’. Digging into the ONS data, the final quarter growth has been dragged down by a negative growth manufacturing output, whereas the service sector has eased somewhat following a strong summer. Construction fell by 0.3%, whereas retail fell by 0.2% in Q4. Meanwhile, business and financial services picked up to 0.6%, with real estate being a key driver. As the Bank of England agent’s report notes: ‘Sectors such as commercial property, recruitment and business advisory services reported that demand had been more resilient than they expected.’ The question for our sector is how long this nerve will continue in the absence of a clear direction on Brexit.

 

Cooler screens – As the purpose of the shop shifts from being somewhere to stock purchasable inventory to being somewhere to create customers and collect data, so the function of the furniture also needs to change. Walgreens has recently rolled out fridge doors with a difference across six of its stores in the US. The doors digitally represent the product inside, but that’s not the smart bit. Whilst you’re browsing, sensors in the screens identify personal characteristics such as gender, age and mood to help guide you towards your purchase and to serve up targeted advertising. This is both cheaper and better at capturing data and providing information to customers than a shop assistant, and also generates a new revenue stream. Furthermore, in a pilot project, customers stated a preference for this digital addition and made them more likely to make a purchase. If the future of the store is advertising, then the shopkeepers of the future are probably digital ones.

 

Experience, hotels and beer – If the future of retail (or for that matter offices) is about ‘experience’, then where should we look for examples of great real estate led experiences? A good start would be places where people choose to go rather than have to go. We all have to go to work, and (although less so in the e-commerce era) we all have to go shopping for necessities. However, we choose to go to places like restaurants (you could just eat in), theme parks (the definition of experience) and hotels (central to leisure breaks). The best hotel chains have clear experience propositions, which aim to make their customers feel valued and excited in a way that is appreciably heightened compared with being at home. In a concept that blends hotel with theme park, Aberdeen-based BrewDog has opened what it believes to be the ‘world’s first crowdfunded craft beer hotel’ in Columbus, Ohio (safe assumption). Strong branding, fun, beer on arrival, beer taps in every room, shower fridges, beer pong, beer museum – clear what it stands for? This is perhaps not a great solution for serving a mass market. However, as a vehicle for responding to a clear market segment, whilst raising the profile of the parent brand, it’s pretty spot on. Is this so different to the emerging role of real estate for many retailers?

 

5 in 5 – IBM Research has created a paper on the five big innovations that it believes will change the world over the next five years. These five predictions are: (1) ‘digital twins’ (virtual models) for farms will increase data sharing, promote innovation among growers and hence increase crop yields; (2) new recycling processes will significantly reduce plastic waste; (3) the ability to map microbes will revolutionise food safety; (4) AI sensors will be able to detect foodborne pathogens; and (5) blockchain will prevent food waste by increasing supply chain visibility and efficiency. Most of these relate to food in some form or another – a particular issue in the developing world, but one of increasing importance in the West as pressures grow to increase domestic production. The last prediction typifies the impact of blockchain on systems – increased visibility. Currently 45% of fruit and vegetables are wasted. Part of the reason for this is the imperfection of information from one end of the supply chain to the other. As this information flows up the supply chain it becomes distorted and is often progressively interpreted with increased amplitude (‘the bullwhip effect’). So, when customer demand increases by 5%, manufacturing output can erroneously increase by as much as 40% in response. Blockchain will reduce this error, theoretically reducing the amount of inventory held in the system at any point in the form of safety stock, and a shift to just-in-time fulfilment. Hence, less stock in sheds and shops.

 

Liberstad – In a modern context, vesting city spaces and services in public ownership is generally considered to be politically desirable. However, there are those railing against this trend. In the small town of Liberstad in Norway, all property is in private ownership and all services are performed by private companies – by design. Although subject to Norwegian law, the city is founded on principles of natural rights, self-ownership and freedom to live life how you want without large investments and cost. In the spirit of these principles, the city has recently adopted ‘City Coin’ as its official (and only) currency, based on ‘City Chain’ – a smart city blockchain platform. This will therefore become the only medium for paying for civic construction projects and delivering public services. Wider precedents? At Winter Wonderland you pay to buy tokens that can then be spent on activities. At Disney you load up credits onto a wristband. At the Burning Man festival, no money is exchanged and only non-reciprocal gift giving is allowed. Department stores have been offering vouchers for ever. With sufficiently large mixed-use developments, is there anything to stop a similar deviation from using traditional currency? Allowing campus residents to: pay for their accommodation, purchase goods at campus shops, dine at restaurants, license flexible office space and consume services using credits paid for through a subscription plan, could prove an interesting alternative to monthly rent.

 

Refridgerdating – A common pivot for hardware businesses looking for new growth opportunities is to shift their model towards selling services. A recent example of this that may be interesting to those who don’t yet have a date for Valentine’s Day is Samsung’s new ‘Refridgerdating’ App. The app, which is a software addition to their Family Hub Refrigerator, allows users to select future partners based on the content of their fridges. It uses the interior camera to take a picture of the fridge’s chilled contents, which is then shared with other users who can then swipe left or right. ‘We hope people can meet under more honest or transparent circumstances with the help of the contents of the fridge, because that can tell you a lot about the personality’, says Samsung’s PR. And undoubtedly you can infer a lot about the personality of a person who chooses fridge dating over other networking options. In our modern connected world, there is a niche for everything; however, picking a date based on the freshness of one’s lettuce might seem a step too far. On the other hand, the Family Hub Fridge has a list price of $4,000, and that might be an equally informative dating criterion.