Back in 2006, you could jump in your new Pontiac and take a drive over to Circuit City for a DVD player. After that, you could stroll over to Linens N Things for new sheets. Then, push your cart past that giant new Bombay Company megastore. Hey, check out the new Hummer in the parking lot.
A lot can happen in a decade or so. Pontiac, Circuit City, Linens N Things, Bombay Company and Hummer, all gone. What erased these brands and their deceased contemporaries from the early 21st century landscape?
Let’s see… A big recession, technology and price-driven commoditization due to an over-reliance on price competition and a poorly targeted, price-sensitive customer base. But let’s not overlook another important fact, while those businesses failed, others, most significantly those that offered an appeal that could transcend price-competition, thrived.
Now it’s 2017 and a whole bunch of retailers are on their way down. Some may say that those brands are falling to a new enemy, online retail. Why, just look at this chart.
So, Amazon has stolen everyone’s lunch right? Not so fast. The US Department of Commerce has been tracking online retail sales for the past decade. The latest DoC numbers show that online sales in the USA between Q1 2007 and Q1 2017 have grown from 3.5% to 8.5%. That’s pretty significant but think about this… 8.5% of all US online retail sales during 1 quarter represents 105.7 billion USD. That means about 1.138 trillion USD in Q1 sales was left on the table for bricks and mortar retail.
Almost 1.4 Trillion USD per quarter. And that’s depressing old Q1, the one containing the annual post-Christmas malaise. So I’m going to stick my neck out here and say that when it comes to old fashioned storefronts, there’s still plenty of money to go around. Not saying we should ignore a fast approaching future. What I am saying, is that to place all the blame on online retail is to rely on a handy excuse for either sticking to an obsolete model or just being a crappy retailer.
Have another look at the top chart. Start with Best Buy. In 2006 you bought that cool new flatscreen at Best Buy and the days of radical innovation in everything from phones to Fitbits lay ahead. Today, if you are not already saturated with technology, you can buy a TV, a new phone, a surround sound or a Bluetooth speaker, and well almost anything at Costco, Walmart and yes, Amazon. And you can pick up dinner and a twelve pack of socks at the same time. Aside from the very real fact of technological saturation, fewer people feel the need to run out and change phones every time Apple or Samsung shift the position of the headphone jack. So Best Buy isn’t dying of online. Ironically, as a technology source in the age of tech, it is dying of its own obsolescence. Predeceased by Circuit City.
Next, let’s save time and put JC Penny and Sears together. Both are terrible, both attract a fast-dwindling customer who is either aging-out or going to Walmart. Does anyone ever get excited about going to either store? To blame Amazon for the demise of Sears or JC Penny makes as much sense as blaming the cat for not walking the dog. While we’re at it, let’s say the same about Kohl’s.
Target has lost its way as the owner of chic/cheap. Perhaps it is becoming living proof that you can’t have both at once. It got into a price war with WalMart and lost. Maybe Target isn’t failing, but it sure isn’t thriving in second place.
I’d like to venture that Macy’s and Nordstrom are suffering from a shift in customer behaviour. As maturing millennials and more moneyed and free-spending segments go out in search of experience and meaning in their shopping, the scale, location and plain old “mall-ness” of these stores become increasingly contradictory to the desires of their potential customers. Macy’s and Nordstrom could benefit from a better understanding of their customer’s journey. Neither retailer seems to grasp the idea that a potential customer is exploring ideas, inspiration and validation on their laptops and smartphones before going out on that bricks and mortar shopping trip.
Finally we arrive at Walmart, which might be losing ground but it’s not going anywhere.
It would be foolish to say that changes are not afoot in retail. But online or not, every retailer on that top list with a red number beside its name is in deep or at least shallow trouble for a whole bunch of reasons that do not come from the world outside their sliding doors but from the world within.
Oh and by the way, Amazon shares hit $1000 this week. Wish I’d picked a few up ten years ago, when they were $18 each.