Retail is Dead, Long Live Retail

There’s a pretty good read in the Economist this week on ‘making it click‘ that convincingly makes the point that the Internet presents little opportunity for retailers.  This is an over-simplification of the point of the article.  The author also discusses opportunities to for traditional retailers to use the Internet and mobile in innovative ways to support their business, but overall it seems like the web is not a home for traditional retailers to make huge profits.

Terry Lundgren, the CEO of Macy’s, claims this isn’t true and that ‘omnichannel’ retailing will remain the future. He contends that catalogs, then tv selling, were both supposed to kill off retailers but never did.

Mr. Lundgren makes some good points, but dis-intermediating traditional retailers from the manufacturing chain is exactly what the Internet is made to do. People go to retailers because they can scoop up a bunch of brands and products from a single location.  This value proposition falls apart when moving from one store to the next is a click away.  I believe Amazon and Google Shopping are slowly proving this out.

I also think there are two contrary ideas when thinking about the web and retailing:

  • There’s no point in having retailers if manufacturers can reach customers directly through the web because there are no opportunity costs associated with moving from one environment to the next, however
  • There is still significant value in curating selections for customers and presenting products in an environment that helps them make good decisions. This was previously the roll of the publisher, but the current online advertising ecosystem doesn’t sustain great content.

There are billion dollar ideas buried somewhere in this sea change.  I think Pinterest is the closest to making a real play in curated commerce an I’m excited to see where it goes.

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2 thoughts on “Retail is Dead, Long Live Retail

  1. There are many factors at work when it comes to retail. For instance, in the case of luxury goods or clothing, people will always want to try clothes on or feel and test products that command a price premium-a bricks and mortar store is the best place to do that. Of course, patrons have the option to then shop online after testing in store, but retailers are creatively convincing them do make the purchase in store. The fashion industry also has pricing strategies and practices to control margin that will prevent sites like Amazon from selling items at deep discounts.

    • Thanks for the thoughts, Doug. It seems that legacy brands that have built their businesses with retail partners need to be sensitive to this, but (potentially) new brands may not have the same considerations.

      Levi’s, for example, doesn’t discount on the internet, but allows retailers to deeply discount their products. I imagine this translates to low Internet sales volume and high retail sales volume at lower margins for the company. A new jeans brand that was web-only wouldn’t need to worry about upsetting retailers. They could offer low prices online and command higher margins.

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