The Reality of Retail and E-commerce Today

Do you need to reengineer your business to keep up with e-commerce today?

e-commerce today

Read any retail trade publication or mainstream news media article about our industry, and chances are that you will walk away feeling bearish on the future of this business. Go to a retail trade show, and you are likely to hear speaker after speaker emphasizing change, business disruption, moving to e-commerce, and the need to completely reengineer your business to court the new, tech-savvy generation of shoppers.

In fact, the more retail e-newsletters and alerts you receive, the worse you may feel with the constant drumbeat of store closings, retailers filing bankruptcy, and elimination of jobs in our sector. Is this reality, or is it Chicken Little syndrome?

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You will also read and hear about how the future is bright for those companies that embrace omni-channel retail—groceries delivered into your refrigerator, a ready-to-cook gourmet meal pack on your doorstep, free shipping and free returns, and price guarantees to make sure you never pay more than the cheapest price you can find on the Internet.

With the twin poles of hype and hysteria in mind, this post reflects on the reality of what is actually happening and tries to find some sense of balance in a world that magnifies the extremes. We will look at the current state of the retail industry and compare it to the narrative that traditional retail is dying with three principles in mind:

  • Keep a historical perspective.
  • Frame the debate correctly.
  • Pay attention to actual data.

Keep a Historical Perspective

Is the retail scene changing? Of course. Have there been a number of established retail companies that have gone out of business or are struggling? Without a doubt. So what’s new?

Retail has always been a hypercompetitive business with thin margins and obsessive pursuit of market share and customer loyalty. We don’t have to go back too far to see the same answers to the above questions.

For instance, let’s look at what we’ve seen in retail over the past 35 years or so. During that time, we’ve seen the rise and fall of almost the entire consumer electronics retail segment. I bought my first VCR at Montgomery Wards’ “Electric Avenue” shop a couple of years into my retail career. But I also shopped some great stores including The Wiz, Circuit City, and Lechmere. When it came to computers, I spent a lot of time in CompUSA and Computer City. What do they all have in common? They are all gone, of course, and not a single one of them went out of business because of Amazon.

When I was in the northeast part of the country in the late 1980s and early 1990s, Ame’s, Bradlee’s, and Caldors dominated the mass-merchant segment. None of them survive today, and Kmart is famously on the ropes.

Should we talk about the home improvement category? Rickel? Builders Square? Channel Home Centers? HQ?

What about toy stores? KB Toys? Circus World? Thornberry’s? FAO Schwartz?

We have not even gotten to the fickle fashion sector. Do you remember when specialty retail was dominated by conglomerates like Melville (Wilsons, Chess King, Foxmoor, and Thom McAn) and Petrie Stores (Stuarts, Jean Nicole, Mariannes’, G&G, and Petrie stores)?

Even those fashion retailers that have survived would hardly be recognizable to a time traveler. How many of you remember when American Eagle Outfitters was all about flannel and the lumberjack look? Do you remember when Banana Republic had a Jeep in its storefront and the tagline “Travel and Safari Clothing Co.”?

This review is not intended to be a trip down memory lane or wistful nostalgia. It is simply a reminder that pretty extreme disruption happens in our business all the time. It doesn’t feel good for the “losers,” and it certainly creates disruption to retail workers. But we are all subject to the tendency to believe the moment we are currently in is vastly different than what anyone else has ever experienced in the history of mankind. Psychologists call this “declinism” and define it as the belief that a society or institution is tending toward decline. Today, it seems to be a widespread phenomenon across society that is hard to shake even when the facts are clearly in opposition.

Frame the Debate Correctly

One of the real problems in the perception of what is happening in retail is how the issue is framed. Is retail in decline, or is it brick-and-mortar retail that is in decline? We’ll look at more data on that in a minute, but we need to start with accurate baseline definitions.

If one were to go back just ten years ago, most industry insiders would not even consider Amazon as a “retailer.” They were the enemy. They were not welcome at retail industry trade shows. Retail groups were lobbying against Amazon on the issue of sales tax.

In a similar fashion, it is easy to remember when eBay was a pariah to the retail loss prevention community. They weren’t a “retailer.” They were an online flea market that existed solely to sell counterfeits, out-of-date product, and worst of all, the illicit gains of organized retail crime gangs. This was the perception despite the fact that eBay is used by many large retailers as a way to job out clearance merchandise.

Fast-forward to today, and one is forced to view the issue a bit differently. How does one separate an online retailer from a “regular” retailer when Amazon is buying brick-and-mortar retail, and brick-and-mortar retailers are focusing so much time and attention on growing their online businesses? How does one exclude Amazon from being a retailer when such global brands as Nike are opening dedicated Amazon shops?

It is not just Amazon we are talking about here. Warby Parker, Bonobos, and Casper Mattress have all made the move from pure-play e-commerce to a blended model with a brick-and-mortar presence. Untuckit recently announced plans for up to 100 brick-and-mortar stores over the next five years with fifty opening by the end of 2018.

Going back to the issue of eBay, they alone generate about $9 billion in retail sales in the online brokerage space. In fact, one could make an argument that eBay is the new manifestation of the mom-and-pop retail segment in today’s society. Who doesn’t celebrate the success of the independent, family business?

It is probably not necessary to spend much time discussing how traditional retailers are expanding into online e-commerce. All one must do is read retail company press releases, and it is easy to discern the scramble to capture a percentage of the online market share.

Let it suffice to say that the way we think about retail has changed, and e-commerce will inevitably be part of the picture for the vast majority of retail organizations. Therefore, growth in retail has to be evaluated in holistic terms.

Read the full article, “Searching for Reality in Retail,” to discover the third principle—the biggest reason why we need to take a breath and reconsider what is going on in the retail industry—and that is paying attention to the actual data. The original article was published in 2017; this excerpt was updated July 30, 2018.

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