As tech companies make job cuts, Main Street appears to be experiencing something of a renaissance. Could authentic automation be the key?
According to a report published in the Daily Mail in December 2000, the internet was possibly a dying fad. “Researchers found that millions were turning their back on the World Wide Web,” it stated.
Well, it seems to me that the internet didn’t go the way the Daily Mail suggested. It’s about as important to the economy as oxygen is to life. Yet, a new narrative is emerging: online commerce is struggling and old-fashioned shopping is back. Amid this debate, authentic automation might create something of a more hybrid nature.
The global economy is wilting; the U.S. may or may not see a recession; a recession may or may not bite elsewhere. Whatever happens, it will be a close call. In the U.S., the Q4 economy grew at an annual rate of 2.9%, much better than expected. But much of this growth was due to a rise in private inventory investment, and some economists fear that the headline data disguise a less positive underlying trend.
Whatever the quarterly data says, however, it feels like we are at that point when the economic cycle turns. There were similarities between that period in the year 2000 when dot-coms crashed, and in 2008, when the financial crisis created such havoc. Such times often see a reset.
But there are some other forces at play that many observers overlook. In particular, 2023 seems to mark a moment when AI is catapulted into another bracket and automation becomes ever more pervasive.
I find it curious. While some people prepared to write the Internet’s obituary in 2000, the foundations for a revolution were laid behind the scenes. First, broadband, then the rise of wireless internet access and then smartphones created a world in which nearly all the largest companies were either dotcoms or at least techs. The internet’s death was about as short as a winter’s day in the Arctic.
Yet, in 2023 I hear similar voices. Writing in the Telegraph, Matthew Lyn said, “Tech giants will pay a high price for their expensive bet on the ascendance of home shipping.” He suggested that the techs were arrogant, but now they will pay the cost. At a superficial level, the hard data backs up this claim. In the U.K., internet sales lost market share — declining from 30.5% in December 2021 to 25.6% in December 2022. In the U.S., the end of 2022 saw a distinct flattening in the curve tracking ecommerce sales.
The well-publicized job cuts at the large techs lend support to the narrative of techs peaking, and share price performance supports this. For example, Amazon shares are down roughly 40% from the peak, whereas Walmart shares rose sharply in the second half of last year and are not far from an all-time high. In the U.K., shares in high street favorite Marks and Spencer increased by around 50% since last October, while shares in U.K. online retailer ASOS had a torrid 2022.
But look again, and the story is not so clear-cut. Covid and resulting lockdowns distorted the data. For example, in December 2022 online sales in the U.K. were up 19% from December 2019. Likewise, ecommerce sales in the U.S. are substantially above pre-Covid levels. And if there is slight evidence of a fall in online sales once lockdowns eased, then such an occurrence is hardly a surprise.
Although many in the investment community talk about the return of bond and commodity investing and are less positive about the techs, products like ChatGPT seem to be changing the world. The internet didn’t end in 2000. While the share price performance of companies like Amazon and Apple reflected the negative sentiment of that period, shares soon recovered and then dwarfed pre-dotcom highs. I think the tech revolution is as dead as the internet was in 2000. As for online retail, we will see a hybrid model emerge.
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Euromonitor recently talked about authentic automation, or humans and machines working in synchronization, a trend it sees as a likely key feature of 2023. The idea will hardly surprise technologists. In the age of ChatGPT, the human and machine working together imperative becomes more obvious.
As the economy wilts, consumers will inevitably look more closely at costs. But don’t overstate the importance of this trend; there is ample evidence to suggest inflation is falling, especially in the U.S., where the month-on-month consumer price index fell in December.
What is clear is that as the AI and automation revolution continues. Consumers are looking for the best of both worlds — the efficiency and searchability of online, with the human-to-human contact and immediacy of physical retail.
Euromonitor says: “Emotional connections are not to be underestimated, and tech benefits should outweigh the need for personal interactions to create a seamless experience.”
It also says: “39% of consumers said more of their everyday activities will be in person over the next five years.”
The hybrid model is the obvious solution. People can search and browse online, collect and see in the flesh at physical locations.
The way forward is the local fulfillment center acting as a physical hub for a local shopping and leisure ecosystem. AI and automation support this way and complement old-fashioned, human-to-human interaction.
Most large techs remain in rude health, but tech is also changing, and the transition can flatter to deceive notions of a return to old-fashioned retail.