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Prediction: It’s the beginning of the end for the big box retail dinosaurs (and that means Wal-Mart too)June 29, 2009
Truth be told, big box retailers are clumsy artifacts of another age. Just like network television and daily newspapers, they are confronting the existential threat that keeps coming from technology that no amount of recalibrating departments or product mixes can change.
The analysis I am seeing in the media is focusing on the impact of the recession and not on the steady erosion of the Internet on bricks and mortar sales. Consider the front page New York Times article entitled “Big Retailers Shift Strategy in a Recession.” The article, which talks about a major shift in retailing, puts it this way: “Hammered by the recession, some of the nation’s biggest retailers are seizing the moment to reinvent their business strategies. And the impact will mean both sweeping changes in the merchandise on their shelves and subtler alterations, like how many pantyhose to keep in stock…”
As I thought about the article, it occurred to me that what was missing from the discussion was the explicit impact of the Internet on these companies. If you read between the lines, however, you can see it peeking out.
Take this sentence from the article: “One of the biggest changes consumers are likely to see is greater personalization and regionalization of merchandise.” In other words, big box chains are going to have to slice and dice their inventories to meet local standards. Well, let me ask you this, who can do a better job of not just regionalizing but truly personalizing, than the Internet? A shopper can easily find exactly what they are looking for with a good search engine. A big box retailer, with its finite capacity to carry inventory can never provide the almost infinite range of products that an ecommerce provider can serve up.
Another point the article makes is that, due to cutbacks in inventory at big box retailers, “you’re more likely to see retailers ordering fewer of each individual size and taking that risk that they’ll sell out and not capture every sale, rather than the risk of having too much inventory left over to mark down.” On line retailers can provide an infinite range of sizes so how are consumers, used to that kind of service, going to respond when they go to buy a dress or a pair of pants and the store is out of their size? Anger and frustration are not great shopping experiences. They are excellent, however, at driving consumers where you don’t want them to go if you are a big box retailer; to the Internet.
And finally, there is this paragraph: “Yet another change will be the obliteration of any remaining divide between online and in-store shopping… Four J. C. Penney stores in Dallas are testing ‘FindMore’ machines the size of arcade games, letting customers see every item J. C. Penney sells and find out if the item they want is in the store or online.”
In other words, JC Penney is essentially setting up an in store training center to teach the remaining coterie of bricks and mortar shoppers how to shop on line. Now there is a winning strategy for how to sustain a 200,000 square foot store.
Am I right? We’ll see.
Posted by Richard Gottlieb on June 29, 2009 | Comments (6)
July 1, 2009
In response to: Prediction: It’s the beginning of the end for the big box retail dinosaurs (and that means Wal-Mart too) imdave commented: The last several times I visited WalMart they either didn't have what I was looking for, their choices were very slim, or they only had one choice available. You may be on to something.
July 1, 2009
In response to: Prediction: It’s the beginning of the end for the big box retail dinosaurs (and that means Wal-Mart too) Rod Hoffmann commented: I finally agree with Richard. It's long been known, consumers go to brick and mortar stores, examine the item, then go home and buy it on line cheaper. This applies to everything from clothes to cars. As the internet consumer come of age, going to the brick and mortar first isn't even necessary. With the increased cost prohibitive buying procedures of many of these big stores (now even some second tier retailers), at what point will manufacturers simply sell direct to the consumer, leaving the brick and mortar retailers to fend for the impulse buy? Actually, in many sectors this has already begun.
July 1, 2009
In response to: Prediction: It’s the beginning of the end for the big box retail dinosaurs (and that means Wal-Mart too) Rob commented: Good post, Richard. An article in today's WSJ talks about concerns that back-to-school sales will suffer due to inventory cutbacks at major retailers. It's been my experience that selection and availability are the primary drivers of online sales. Price is a non issue when the store doesn't carry what you want to buy.
July 1, 2009
In response to: Prediction: It’s the beginning of the end for the big box retail dinosaurs (and that means Wal-Mart too) Renee commented: I've been seeing both bookstores and big boxes like Wal-mart offering shoppers free shipping if shoppers purchase items through their Web site and then pick the merchandise up at a local brick-and-mortar store. Saves the store the trouble of keeping everything in stock, and keeps people from being frustrated at not finding what they need in the store. Not sure in the long run if this will stop people from buying direct elsewhere on the Internet, though, even with the free shipping.
July 4, 2009
In response to: Prediction: It’s the beginning of the end for the big box retail dinosaurs (and that means Wal-Mart too) NateS commented: The appearance of some brands like Sony and Garmin establishing their own storefronts has long been evidence of a decline of major retailers. Moving forward, these become a product showroom to reassure potential customers of the value of their purchase. There will always be a place for brick and mortar, the relationship just changes. The greater issue is how governments react to the loss of tax revenue with a majority of business being conducted across state lines.
July 5, 2009
In response to: Prediction: It’s the beginning of the end for the big box retail dinosaurs (and that means Wal-Mart too) Manny commented: A good read Richard. My only insight is that although online shopping may be more efficient and more likely to have the desired item in stock than stores, I don't think it might be the end of the 'big box retail dinos' because people still like the 'shopping experience' as perhaps a passtime (just to get out of the house) that and the online orders do take 'time' to get the product you want. In this fast paced world where people can't wait to get home to make a phone call and instead would rather risk their lives to make the cell phone call while driving, the big box retail stores do offer some products now, while online deliveries may take a few days. Time can be as valuable as money to some people and add in the shipping cost of online deliveries and you have more to be considered in this prediction. But on the flip side, there is also more hassles getting to the big boxes such as traffic, cost of gas, and who knows, throw in road rage just because the tempertures are going up outside.
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I am not a prophet but I am going to step out and make a prediction: We are seeing the beginning of the end for the traditional big box retailer with its huge suburban footprint. All of this talk about the recession is hiding the fact that the Internet is inexorably eating away at customer counts. All that has to happen is for a retailer to lose just enough customers for it to be no longer feasible to sustain the cost of supporting a store’s physical infrastructure.