Complexity in Practice

The global retail phenomenon called ‘Black Friday’ demonstrates true complexity. How what and where we buy shapes how we live.

The Friday after Thanksgiving in the United States is the day in which retailers were said to have cleared the red ink (debt) and moved into the black (profit) for the year’s sales, hence the name ‘Black Friday‘. While it is believed this term originated in the 1950’s, it didn’t catch on until recent decades when its popularity began to take off in other countries.

This ‘holiday’ as some might call it is a perfect case study for complexity in the real world.

Complexity in human systems represents an enormous challenge because of the layers of order and interaction within a dynamic set of interconnections that operate at different scales, time horizons, and magnitude. That’s a mouthful — and one of the reasons why complexity is so difficult to understand.

Within human systems we often see simple, complicated, complex — and even chaotic organizational patterns. (If you’re interested in this way of categorizing patterns of behaviour, check out the Cynefin Framework).

The Simple

One of the misconceptions in complex systems is that they are uniformly complex. In practice, there are often simple and complicated dynamics operating within them, which can add to the difficulty in assessing and acting on these systems.

Black Friday — and big sales days like it — operate largely under the simple economic premise of supply and demand and cost for value. When we introduce products for a lower price, we increase demand. An increase in demand leads to greater sales and, presumably, more income based on volume (not on price-per-unit).

A shopper is more likely to buy, buy more, and perhaps even buy more for more people (including themselves) if they find products that are substantially discounted. They may also buy products that they do not need right now, but anticipate needing in the future knowing that the discounted price is on for a limited time. Retailers almost literally bank on this.

These dynamics are simple, open to reasonably accurate prediction, and can be planned for and strategy developed to address.

The Complicated

When Black Friday started it was a local phenomenon confined to a few stores in Philadelphia, PA and all of the buying opportunities were local and ‘in-person’. Today, Black Friday sales take place in countries around the world and is mirrored by new phenomenon like Singles Day in China. Yet, what is most striking today is that these sales are also online.

The online component to Black Friday makes this more complicated. Stores might have ‘bricks and mortar’ physical retail outlets with an online presence or be simply online (with an ever-fewer number being solely physical). Inventory, availability, capacity (technological, product logistics, and customer service) and ease of shopping and delivery all factor in to a retailers choices.

These choices activate a number of other ‘systems’ including delivery services, parking, customer services for returns and exchanges, and merchandising (e.g., store decor, website attractiveness, usability and search-ability). They also influence the relationship with suppliers and inventory control systems.

It’s when these intersect with each other and the social world that we start to see the emergence of complex systems and patterns of behaviour.

The Complex (Part 1)

Each of these systems come with costs associated — the simple part of this problem. The costs are spread over a complicated collection of activities across the retail landscape online and in physical retail outlets. Complexity introduces a spectrum of activities and related effects tied to all of this that eventually influence the entire system.

The availability and convenience of products online and the lower barriers to entry for many retailers to move into online sales means that the competition increases for eyeballs (attention) and eventually buyers. This creates an environment where price cutting is higher (sometimes due to lower costs) supplemented by low or subsidized shipping costs.

As more people go online to shop there are fewer purchases made in physical retail stores. In 2019 online sales in the United States exceeded those of physical retail outlets for the first time. As retailers and marketers know, brand loyalty and convenience are two of the most powerful drivers of customer activity after price and availability. As more people get accustomed to the price, convenience, and availability of products online the likelihood that they stay online is higher.

Add to this the international nature of online retailers. Unlike when you went to a foreign country to find exotic goods, now through even domestic retailers like Amazon (through its global affiliate program) or eBay we can buy products from around the world. Aside from shipping and duties, there is no barrier to buying from a UK-based retailer as it is one in Spain, South Africa, or Thailand. National borders don’t matter.

Now, retailers are deploying resources in a cat-and-mouse game to attract buyers online, in their neighbourhood, and with competitors at home and abroad. Add to this the phenomenon of having people shop in-person for products and then buying them online — a phenomenon called ‘showrooming‘ .

The Complex (Part 2)

Complexity describes layers of systemic patterns that intersect and its in these additional layers that we find some of the most wicked problems.

Many bricks-and-mortar retailers will fail because of online selling. The more than fail in a particular neighbourhood, the less desirable it becomes as a destination for shoppers, which leads to lower traffic, which leads to fewer customers, and results in more closures, which creates a circular and spiral pattern called a reinforcing loop in system dynamics. (Which isn’t necessarily about complexity, but it points to the interconnections of different systems)

Some of these failures are due to rather simple or complicated economic factors. For example, Amazon controls between 38 and 47 percent of the online ecommerce market (depending on reports and interpretations) in the United States. Imagine if between one third and almost one half of ALL retail purchases were made at one shop in your city? How would that change where you live or how you interact with your neighbourhood or community?

The buying habit fostered by tools that make purchasing as simple as a single click (combined with the addictive potential of these technologies to capture our attention) starts to entrench new shopping patterns even when it is still possible to save money and get better products in local shops. Complexity comes when the simple rules stated above get upended as Tim Wu points out in his profile of the soon-to-close Chelsea Convenience in New York :

The “convenience” in the store’s name is no misnomer, for the place is extraordinarily efficient. It is cheaper and faster than ordering from Amazon and offers expert advice that reduces the risk of buying the wrong thing. It is all too easy on Amazon, for example, to buy halogen bulbs that don’t fit your lamp base; Mr. Feygin has spared me many such headaches. And the store’s small size is a virtue: Unlike at Home Depot, you can be in and out in 10 minutes.

These changes to retail dynamics and the entrepreneurship and employment opportunities that retail has provided many are influencing the social dynamic of immigrant experiences and the communities where people settle. When people seek to move into a community walkability and availability of local services and shops are what are commonly cited as attractive qualities in a neighbourhood.

This is the stuff that creates ‘character’ and vibrancy. Retailers create places for people to go and while they are out they might just stop at a cafe, pub, or restaurant, visit a gallery, or use the local salon or dry cleaners.

What has happened is that the complex interactions created by online retailing has upended some of the basic premises that made it attractive in the first place. This is complexity in action.

The Complex (Part 3)

The effects go further. What happens when we have our products and services delivery TO us rather than have us go to get them? A feature report in The Guardian illustrates how home delivery has reshaped our social, economic, and geographic lives.

The convenience of delivery saves people time and potential inconvenience. If you’re frail, have limited mobility, or are time-poor (e.g. working parents) you might find home delivery a wonderful thing. It saves time, fuel (for cars), reduces risk of injury and more

Yet, no matter the positive benefits, there is a cost — and there is always a cost in a complex system. As Samanth Subramanian outlines in his Guardian investigation the impact on the environment through packaging alone is enormous:

The packaging of home-delivered products now accounts for 30% of the solid rubbish the US generates annually, and the cardboard alone costs 1bn trees. And there are numbers for frenzied growth: the $3.8tn (£2.95tn) in global online sales in 2017 will near $6tn by 2024.

Home delivery of everything from consumer goods to ready-to-order food now has shifted the relationship we have with our neighbourhoods and communities. It’s changed the job market – losing retail jobs in favour of delivery, warehousing, and robotics-related employment.

Complexity involves consideration of the effects and ripples of impact that our choices — often starting as simple — have on our world.

What does this convenience mean for our physical or social health? Of course, we could go for a walk, but what if there are fewer places to walk to or past? What does introducing more bike couriers and delivery trucks to our already busy streets along with the required increase in size or frequency of waste collection vehicles?

Effects and their Consequences

This portrayal of complexity introduces effects into our world. For some, these effects are positive while others are not. These effects are also not distributed equally or equitably.

It’s tempting to lay blame or praise at the feet of capitalism, Jeff Bezos and Jack Ma, the Internet, or even those retailers who brought Black Friday to life back in Philadelphia to greet the throngs of fans from the annual Army-Navy football game back in the 1950’s. It’s more than that. We — humans — have desires, needs, independence (autonomy) and are also constrained, influenced, and shaped by systems around us.

We are a part of the system. Understanding how we make these systems more beneficial for more people (and the planet) in more ways that minimize the harmful effects of our actions is the challenge of complexity. That also means learning how to unpack issues and strip out the simple, the complicated, and the complex in a topic and finding those places where we can make a positive difference.

This Black Friday (and holiday shopping season) it’s worth considering the systems we’re a part of and what we want from them.

Happy Holidays.

Note: Systems thinking is about looking at the systems around us and mapping the interactions within them and evaluating or understanding their effects. This is an example that most of us are familiar with. If you’re interested in learning more and want to know how this way of approaching problems can assist you, contact me at Cense.

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