Thursday Mar 12, 2015

Pure-play Retail is Doomed

I highly recommend watching NYU professor Scott Galloway discuss the Four Horsemen, but its the first 7 minutes that really interest me.  In that time Scott lays out a case for why pure-play retailers are doomed.  He states that retailers that focus only on e-commerce will either have to open stores or face going out of business.  (And I suppose there's a similar fate for traditional retailers that fail to adopt digital.)  He notes that retailers like Fab, Guilt, and Net-a-Porter are failures while retailers like Warby Parker, Rent-the-Runway, and Bonobos are thriving by opening stores.  "Stores are the new black in the world of e-commerce."

I was with Scott until he turned his attention to the big-kahuna of e-commerce, Amazon.  With $6.6B in transportation costs but only $3.1B in shipping fees collected, Scott claims Amazon's model is not sustainable (see his chart below).  Once the cheap capital dries up, Amazon will be forced to open stores in order to stay competitive.

I disagree.  Not because the logic is flawed, but rather because Amazon is not a typical retailer.  I believe they could be profitable if they wanted to but instead choose to continue investing in widening their competitive moat.  Not only is their retail business state-of-the-art, but their investments in AWS, tablets, payments, IoT, etc. are complementary and help to diversify the business (yes, they can do both).  Amazon is not your typical pure-play.

Scott rightly points out that the future of retail is represented by Macy's omni-channel model.  Using stores as showrooms, distribution centers, and customer service portals where the digital and physical are intertwined is the way forward.  Consumers will continue to shop at stores, but stores will also serve as pick-up points and shipping centers.  The graph below from Scott's presentation helps to show the momentum of click & collect, an important.aspect of this new model.

Traditional retailers that leverage their stores alongside digital can absolutely compete with the likes of Amazon.  Stores are not going away -- they are just transforming to serve customers in new ways.

Monday Oct 21, 2013

A Comparison of Store Layouts

Belus Capital Advisors is an independent stock market research firm that sometimes rolls up its sleeves and walks retail stores.  This month Brian Sozzi walked both Macy's and Sears and snapped pictures along the way.  The results are a good lesson in what to do and what not to do in retail.  The dichotomy between the two brands is stark, and Brian's pictures tell the stories of artistry and neglect.  For example, look at these two pictures:

Where do you want to shop for sneakers?  The left picture shows the Finish Line store within Macy's and the right shows empty shelves at Sears.  The pictures really show the importance of assortments, in-stock inventory, and presentation.  Take a look at the two stories, and pay particular attention to the pictures of Sears.

19 Photos that Show the New Magic of Macy’s

Sears is Vanishing from our Minds, the Shocking 18 Photos That Show Why

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David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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