What do you do when you’re “marked” for execution? You can either adapt – and possibly live for another day – or find ways to significantly change the game. Unfortunately, in the retail business, most of the disruption is taking place by the disrupter itself, and not those marked for extinction.
Several years ago the Bespoke Investment Group, created a listed of companies which it believed were marked for “Death By Amazon” (AMZN) and created an index of these stocks. It includes such swell known companies as Best Buy (BBY), Barnes & Noble (BKS), Wal-Mart Stores (WMT), and Macy’s (M). As we noted in my classes this week (I teach business strategy for CUNY), several additional companies recently announced closings of physical stores – including the entire chain (e.g., Bebe, Payless, Radio Shack). As I understand it, the projection is for over 8000 retail stores being closed this year about four times last year’s number.
So the challenge is how to change the retail model. Many companies are looking to integrate e-commerce into its operation – as the proposed $300M purchase of men’s clothier Bonobos would do for Walmart. Target and other bigger stores are working on shrinking their stores to increase productivity and profit per square foot. Many are adapting customer-friendly practices to optimize the number of customers still using their stores; omnibus marketing strategies, collaborating with manufacturers to improve margins and cut costs, embracing social issues that customers care about, and increasing end-customer personalization. Whether these will result in long-term success remains to be seen.
The final challenge is who can do it better and faster. Will these individual and/or cumulative changes enable the retail stores to reverse their sales and profits slide, or will Amazon, with its potentially transformative approaches to retail (e.g., Amazon Go) give it a competitive advantage. For people with creative new ideas on how to transform purchasing and selling practices that integrate online and physical shopping, these can be exciting times. What are your ideas?