Is e-commerce bringing about the retail apocalypse?

Everyone is talking about retail apocalypse. Is retail dead? Is brick and mortar dead? If we look at the recent bankruptcies, we might agree that brick and mortar retail is on the verge of collapse and that e-commerce is poised to take the reins of retail. Albeit this looks like the trend, I don’t believe brick and mortar is dead, nor e-commerce will dominate the retail landscape. Rather, what we are seeing today is a game of strategy and those who do not adapt will perish.2017.11.08 - Retail 6_02017.11.08 - Retail 3

Before deep diving into what is going on in the retail landscape, it is important to understand history and how retail strategies have changed throughout time. A lot of people think that e-commerce started around the dot-com era, but I differ. I believe that the predecessor of e-commerce, minus the internet started with the retail behemoth Sears. Today Sears is a history of distraught, tangled up in a strategy debacle. But this what not the case prior to the 1970s. In the late 19th century, Sears flourished, understanding consumer needs and preference. During that time, the United States was a far-flung, underpopulated nation. More so, ample people lived in rural areas, which meant that access to retail locations was scarce and prices were high due to the lack of competition. Sears understood this and developed a catalog business for those in rural America. As Mr. Schrager poised,

“The catalog was “really the Internet of the day — a place where anyone, at any time, in any place could take a look, say, ‘Oh my gosh, I need that’ — and get it.”

By the 1930s, again, the American consumer preferences changed, and Sears molded its strategy of opening stores in urban areas, becoming the most convenient retailer for those in urban areas as well as rural areas, with their catalog business. By the 1960s, Sears again adapted their strategy to ever changing consumer tastes, by opening sub-urban stores, fueling the post-war sub-urban growth in the United States.

To understand today’s retail environment, it is important to understand history and understand that today “retail apocalypse” is not a battle of brick and mortar versus e-commerce, but rather this a pure game of strategy. The retail landscape is changing, and those who do not adapt will not prevail.

In today’s retail landscape in the United States, Walmart is the undisputed leader in terms of revenue at USD$486B (2016), while Amazon is not even half, balking at a USD$136B (2016). Yet if we look at market capitalization, which is how the stock market the company is “worth” based on future earnings, Amazon leads the way. Does the stock market something that we don’t? I guess it all boils down to the same issues faced by Sears, this is still an issue of strategy not e-commerce versus brick and mortar.

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If this is the case, why is Amazon now entering the brick and mortar? Amazon is simply following an omnichannel strategy. As HubSpot defines omnichannel strategy as, “the ability to deliver a seamless and consistent experience across channels, while factoring in the different devices that consumers are using to interact with your business.” During the heyday of Sears omnichannel meant being both on mail in catalog as well as brick and mortar. Nowadays, omnichannel means having online and physical presence, and Amazon is following suit. But it not only means just having presence in the two channels, but rather levering upon data and providing the customer the products when they want them and how they want them.

That is why Amazon has entered brick and mortar (among other reasons) to provide customers to what they want, when they want it. But what do customers want? For one they don’t want to wait in line, as such, Amazon has created Amazon Go, which levers upon advanced cameras and machine learning, so you can just pick any item and leave the store without having to wait in line. Amazon acquisition of Whole Foods, I would argue serves for three purposes in the future, to lever upon data, specifically customer insights, to implement Amazon Go platform and convenience, and to use physical stores as a bridge for local e-commerce deliveries.

Amazon is following a rather unusual path, e-commerce towards physical presence. So how do the established brick and mortar players such as Walmart, Target, among others compete in this competitive world.

As EVP of Global People Division at Walmart, Jacqui Canney, talked in class last week, Walmart, is transforming itself as a digital company, first by transforming from within and empowering those at the organization with the tools necessary to become a digital business. I guess it makes total sense as to why they bought Jet.com recently or bonobos, shoebuy, and the list goes on. It’s clear that in this age, businesses must mature and become present in both the e-commerce and brick and mortar space, like Walmart has done.

Walmart has also entered the mobile payments space. Interestingly, Walmart pay is close to surpassing Apple Pay in terms of transaction. One of the main reasons for this is because of the seamless experience customers have at Walmart when using Walmart Pay. This payment method is also seamlessly tied to the Walmart Savings Catcher, if a customer finds a cheaper offer, the system automatically issues a coupon for the difference.

bloomberg-walmart-pay

Today’s retail environment is not a competition between e-commerce nor brick and mortar but rather a competition for the best omnichannel retail experience. As a Doug McMillon CEO of Walmart states,

“Our goal is to be able to serve our future customers. To do that, we need to build a strong and capable e-commerce business—but also to strengthen what we’re doing in stores. Customers want to save money and time and have the broadest assortment of items, and we think that by bringing e-commerce and digital capabilities together with the stores, we can do things that a pure e-commerce player can’t.”

Today’s world is about providing the best customer experience and convenience and that means playing both in the digital and physical landscape. Those who do not realize soon enough, will perish.

Sources:

http://www.chicagobusiness.com/article/20120421/ISSUE01/304219970/sears-where-america-shopped

https://www.theatlantic.com/business/archive/2017/10/amazon-sears-mistakes/541926/

http://www.chicagotribune.com/business/ct-sears-bloomberg-mcardle-20161209-story.html

https://www.bigcommerce.com/blog/omni-channel-retail/

https://savingscatcher.walmart.com/

https://www.altexsoft.com/blog/business/digital-transformation-stories-how-starbucks-walmart-and-sephora-revolutionize-retail-industry/

https://hbr.org/2017/03/we-need-people-to-lean-into-the-future

 

 

 

 

 

 

5 comments

  1. Your blog post brings really great attention to the idea that it’s not necessarily e-commerce v. brick and mortar, but the company offering the best, most seamless customer experience and it seems to be that it involves a bit of both. Your example of the Sears catalogue is very true. I remember as a child having catalogues at my house and it was completely normal to call the 1-(800) number to place your order; it truly was the first form of e-commerce or shopping on the internet. The phases and trends of retail, whether online or in person, can almost be seen as a cycle at this point, i.e. online mogul Amazon opening retail stores and shifting to the brick and mortar experience and Walmart providing technology and digital innovations to enhance their in person retail shopping experience; every company is looping it back to create a balanced experience offering the best customer experience.

  2. Great post! I’ll forward to Jacqui and Brian to see if they have any response.

  3. Great post. You bring up a great point about how the definition of an omnichannel strategy has changed over the years, from when Sears was a dominant market leader to now. I think the Amazon retail stores is the epitome of the strategies they are pursuing – as you mentioned, they are delivering a “seamless and consistent experience” through their online channel, as well as their physical store locations. I stopped by one of these retail stores in Columbus Circle in New York, and was really impressed by the experience. None of the books, electronic, or items had any price tags on them – instead, we were encouraged to use the scanners located around the store, which would give us a discriminatory price based on whether we were prime members or not. Rather than feel that this was inconvenient, I thought Amazon had done a great job of integrating the experience in the store and the application, as I walked around with my cellphone in hand. If anything, we can expect Amazon’s market cap to continue to rise.

  4. Love this post! I agree that I definitely don’t think e-commerce is going to kill brick and mortar. Depending on the item I am buying, there are certain things that I would never buy online without seeing or feeling first. I love how Amazon is transforming with Amazon Go. It really does provide a seamless experience which will certainly put them ahead of the game. It reminds me of the virtual shopping wall in the subway in South Korea. Soon, this will be where either Amazon or Walmart go to get ahead. How do you think this would go over in the U.S.?

    Virtual shopping:

  5. Love this post. It’s really interesting to think about Amazon’s strategy in consideration to the Whole Foods buy. Someone else did a blog post on Amazon and Walmart and discussed how Walmart sells essentials while Amazon is known for catering to non-essentials . By entering the food market, a market that has strong consumer taste for brick & mortar and which will never go away, Amazon is smartly entering the arguably most essential consumer market there is. In addition, Whole Foods was a perfect choice due to its middle/upper class consumer base and trust for quality products. Once Amazon integrates Amazon Go into Whole Foods an entirely radical change in food shopping will likely start to unfold. It seems that waiting on lines will be the biggest pain point retailers will try to remove going forward.

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