Why Retail is Dead.
To tell you the truth I think this is something that has long been established. But people specially those with the old school mindset are finding this extremely difficult to believe.
They argue stating that
Amazon’s revenue might be increasing but it’s profit has been diminishing.
Most of the current e-commerce companies are still in their honeymoon period with their venture capitalists and manage to find newer girlfriends when the old one runs out of money and some day that money will run out. Case in point, Flipkart.
People still want a touch and feel experience and wish to get out of their house and try things before they go out and buy them
Not everything is available online.
Let’s get this straight if you were born post the nineteen nineties then you aren’t going to believe any of the arguments given above primarily because they will not uphold if you were to go online.
Today, rentals have gone through the roof, the average cost per employee is probably going to shoot up to it’s highest levels specially since we are out of the recession and heading towards a boom, the cost of stocking has gone up which has in turn led to retailers cutting down on inventory, this in turn is going to have multiple effects.
For starters, choice which is something that the internet has made the modern day consumer take for granted is going to not be available to the consumer who is going to visit the marketplace.
Then, as the retailer chooses to cut down on the quantity that he/she purchases and stocks it is going to hamper the price at which he/she is going to be able to offer that particular good to the consumer. In all likelihood there is no way in hell that an average retailer can match the volume and pricing of an e-commerce player.
Of course, the critics are still out there gauging the feasibility of e-commerce as a medium and the concept of the online marketplace but if you really want to test this out all you have to do is go visit your local shopping centre or mall and you will see how a greater number of shops that were once in different businesses are slowly heading towards high profit low cost businesses which is the only manner in which they will be able to survive.
For starters, the restaurant business is being seen as many as something that can never be hampered by the e-commerce because it is something that the consumer needs to consume only when he/she has visited the restaurant. Online services such as food delivery and rating websites can only capitalize on the market not deteriorate it’s existence.
Booksellers are probably the most fucked people in the businesses today. They cannot compete with Amazon and with the advent of digital publishing and wide adoption by consumers of the Kindle and similar reading devices it is only a matter of time before the entire planet goes digital.
Of course clothing is still a 50-50 business with consumers choosing to shop offline and online equally. While luring consumers with heavy discounts is one aspect of the e-commerce strategy offline retailers have chosen to compete by providing annual sales often going up to four times a year. Others, have resorted to boycotting the online medium as a whole and establishing global chains with showrooms across locations and using the internet as a flip book which will display all their products online.
This brings me to the only logical solution that is possible which undoubtedly is also a complex one and will take time and effort on the basis of the kind and scale of retail business one is into.
The only logical survival mechanism that shall ensure longevity and sustained profitability for a retailer shall be a two fold approach:
You own the complete cycle. This includes everything from production to retail and can continuously innovate and create products that are of the highest quality and provide them at the lowest costs to consumers. While this may seem as a standard that is well being adopted across the world ever since Apple has shown how successful this model is it is also essential to note that a lot of smaller businesses such as mom and pop retail stores simply do not have the resources to create such an ecosystem let alone sustain it.
The second solution is to create exclusivity. Retailers should seek to create a mechanism which allows them to retail products exclusively in their stores. Something that cannot be sold online or in any competitors store. This in turn will create a feedback mechanism which will ensure that the consumer keeps going back to that particular store for that particular good. Flipkart and the recent success they have had with the online Motorola store is a valid argument. They managed to do it online, now retailers simply have to recreate it offline.
So here’s to all the retailers out there. To your survival, sustainability and profitability.