Massive changes in retail
After leaving a buying job at Macy’s, I jumped the fence to the world of wholesale, aka selling schmata to retailers. The world was a very different place and to really become a big wholesale business, you had to sell to Sears or JCPenney. The first order I got from Sears was for our best selling jacket. They tested it out with 2400 units which was a nice size order to start. The goods hit the store and I did what we did back then, I called the buyer to get the data around the number of units sold the first week.
The buyer was quite pleased with the sell-through and told me that she was going to write another order to roll the jacket into more stores. I really did not know what to expect. A few hours later, the fax machine spits out an order from Sears. The total order was for $1m worth of jackets. The trajectory of our business changed over night and it was my first $1m order. It was a big moment.
Fast forward, it appears that Sears, one of the most innovative stores in the past 100 years will probably cease to exist. It defines a turning point around the old brick and mortar businesses that did not see change coming and did not have leadership in place to be as nimble as the new kids on the block. The biggest kid on the block is Amazon. The chart above defines it all.
The fear of the new kid on the block, who is now the biggest and strongest, is that they become a bully. Sure they are buying a lot of interesting companies that have built something of significance that Amazon did not build themselves but there is an underlying fear of investing in businesses that compete with Amazon because people believe they simply can’t compete.
No doubt the future will see others besides Sears close their doors, but how do new kids on the block become relevant when there is a bully looming out there?
This topic has been my life as well back when.I built the $b brick and mortal channel for Creaf in the mid 90s when there was no other and have been tracking its decline and participating in it as I build more online businesses ever since.What is most fascinating and the biggest change coming is I think in the perishable food business.This is a mess, unfriendly to artisanal brands and ripe to be turned on its head. Can’t wait actually.Thanks for keeping to opine on this subject.
Agree…the food is definitely in need of a massive shift.
That’s a great chart. Would like to see a comparison chart of 10 years ago (with dollars adjusted for inflation). Sears is so interesting because if you think about their roots, they started with catalogs.The differentiator with Amazon is that Bezos understood from the beginning that Amazon needed a long term strategy. Amazon consistently reinvests most of it’s profits in R&D which continually fuels growth and value. Comparatively, Walmart created growth by bullying it’s suppliers to take drastic cuts on price and by only hiring part-time workers to avoid having to pay for benefits. Two very different strategies. You can only cut so much before you lose value. Brands are built on Value. Penny pinching only goes so far. Walmart, I think, realized too late and now it’s playing catch-up. Not sure if it can.
I think that Bezos will move to own the supply chain.There is a huge business is helping brands build products off shore and the majority of the custom apparel brands do this. No reason why Amazon should’t own this.I think it is not unlikely that the way he will drop prices cross Whole Foods is to own the supply chain and mechanize organic agriculture and be his own supplier.This thing is just getting started.
An interesting aside — totally qualitative — is that I’ve stopped shopping at Target for the most part. Every time I’ve gone there over the last year or so, they don’t have the item I need in stock. Or they only have one of the item.For example, I used to regularly buy big pillar candles there. I have a pair of really beautiful handcrafted candle holders. But I’m not going to buy only one candle. I need two. I also have a different candle holder that holds eight short pillar candles. Same deal — There are usually only one or two of the short ones in stock. Well, I need eight. A few years back, they would have more stock. I would walk in, grab a cart and buy over $100 worth of candles. I would do this regularly. Once a month or more. I’d also end up doing impulse buys from there.I’m a busy person. I don’t have to time to drive to Target over and over and over again only to find out they are out of stock. So now Amazon has my business.
Amazon is genius and has changed our lives for sure.
It defines a turning point around the old brick and mortar businesses that did not see change coming and did not have leadership in place to be as nimble as the new kids on the block.This will continue to happen. A business that is able to rest on it’s laurels will get fat and lazy. And the workforce will fail to have the fire it’s it’s belly. Plus (and this is important) the workforce will age and their priorities will change as well. This is why new blood and younger people are important. They don’t know what can’t be done. When I started out in business I was one of those laughed at by older people so I know this firsthand. Second time around it was a bit harder because of a) What I knew stopped me from taking chances that I would have taken when I was younger b) I had something to loose. ‘B’ is super important.You know it’s no accident that the music created by rock groups is best when they are hungry and typically and in most cases when they are on the way up. Not once they are living in luxury. Billy Joel is touring as is Springsteen primarily on the strength of their songs in the early years. Those songs came through pain periods (if later that was what would spark creativity).Also as everyone knows it’s much easier when you have nothing to lose vs. something to loose because you are established.Business that pass on opportunities aren’t stupid they are just doing what has worked for them in the past. For every story you hear about some large company that rejected an idea that ended up being big (just last night re-read again how Ross Perot left IBM because they rejected EDS concept) there are 10,000 things they rejected that never came to be. (That number is arbitrary to prove a point).
I’ve been spending more time in the Chicago suburbs, and I’ve noticed an interesting retail development (as a consumer, not as a retail expert.) Spaces in larger strip malls, which that might have once Barnes and Noble or Old Navy, are now occupied Goodwill and other purveyors of secondhand goods; business appears to be booming.
If you cannot win as an elephant, win as a mosquito.