This content is transcribed from a podcast episode which you can listen to here.
There is an idea that is just accepted completely, often presented with very little to no arguments opposing it at all, the idea is “Amazon is killing the retail industry.” On the surface, this really seems like a no-brainer: Netflix killed Blockbuster, Amazon is killing brick-and-mortar retail companies, just a couple familiar arguments made for how something came along and disrupted an industry, a phenomenon that is all too common these days. However, these statements and assertions are often pretty shallow, and a bit lazy.
How did we get here?
The assumption that Amazon is single handedly taking down the retail industry competition is a result of what I like to call “surface looking.” You hear about Amazon growing, everyone uses it, the boxes are on everyone’s doorsteps, and Bezos is in every other headline. Alternatively, we’re inundated with headlines shared through social media what seems like every other day, of another big retail company filing for bankruptcy as they struggle to maintain market share in a new and shifting retail market landscape.
The formerly stated factors create a sort of “noise” that influences our opinion of the state of retail. Amazon is such a dominant force, no one will argue with the claim that the company is reaching monolithic status. On the other hand, the “noise” involved in describing competition in the retail space, echoes the sentiment that brick-and-mortar retail brands are being decimated.
Millennials: The scapegoats for a changing market
The result is an easily accepted back-of-the-napkin analysis that Amazon is single-handedly wreaking havoc on a previously booming industry. This is often parlayed into a dystopian vision of society and where it’s headed. The popular narrative is that people disconnect from reality, the new generation of self-obsessed, anti-social, me-first instant gratification driven millennials have led the charge in the rise of what is perceived as a rejection of in-person shopping experiences.
Like many back-of-the-napkin analyses, this take is wrong. And the assumption about the way that millennials interact with the world, and with brands in the market is wrong as well. It’s no revelation that the internet, and handheld digital devices have really changed the landscape of how human beings interact with each other and their environments. I don’t believe there is a lot to argue on this point, however, the dystopian picture that’s often-painted smacks as far more of a fear of what’s not understood or known than it does as a realistic and stark portrayal of the shallow downfall of human civilization as we know it.
The truth of the matter is that despite the incredibly rapid rate at which technology has advanced, traditional companies (and consumers) of the economy haven’t adapted to what technology has made possible. There is a generation of market participants that struggle less to keep up than others in the face of this changing market environment, and that generation (millennials) is easier to paint as a problem then it is to understand. The truth is, hand-held digital devices and an obsessive addiction to screen-time isn’t a millennial only phenomenon, and neither is appreciating the convenience of shopping from your sectional.
Is millennial behavior really that much different than any other generation of the past? Why are millennials spending so much time staring at screens? That’s where their friends are, social interactions are now handled online, and that’s something that goes for everyone. Is it some new and special behavior that we observe people of a certain age tend to want to spend time engaging with their social circles?
Before Facebook, Twitter, Instagram, and the like, this behavior still existed, albeit with more limited forms of communication available to facilitate it. It just looked like a teenager on their (hard-wired telephone line) phones or never home as opposed to someone with their face locked into a digital screen.
Millennials aren’t the problem, but they are helpful in understanding what the problem is.
The truth of the situation isn’t nearly as dystopian as it’s painted to be. Is anyone that surprised? Historically, people having trouble understanding things rarely ever leads an open-ness and patience. Change is most commonly met with apprehension, a fair amount of kicking and screaming, fear, and wild (primarily false) assertions manifested and presented from a place that says changes to the status quo are bad.
Millennials do play a major part in understanding what’s going on with market environments. Millennials represent the first generation that society has to learn from, to start to understand what life looks like for the future of humans considering recent rapid advancements with technology. Many millennials were born without knowing what life without an internet is like. It’s for this reason that the way they think about retail, shopping, socializing, marketing and advertising, etc. is much different than their predecessors. Whether anyone likes it or not, this is the new normal, it’s something to accept and adapt to unless you’d prefer to be left behind.
As is often the case, the “surface look” analysis of the situation leaves out a lot of nuance, and misses the forest for the trees. When it’s stated that “Amazon killed retail competitors,” the statement is just accepted, while most are just looking around in agreement saying things like “No one knows how it happened exactly, but Amazon just totally killed retail. Amazon didn’t kill retail, retail killed retail.
As the popularity of new platforms and mediums of communication have emerged, it’s become almost trendy to write this occurrence off as something not to take seriously. You see this kind of attitude all over the place. People will state proudly “Don’t worry about what anyone says online, Facebook isn’t real life” or, “People these days spend so much time tied up in the internet, they don’t stop to look around at the real world.” Comments of this nature really do provide us an example of exactly what is happening in the retail space, and in many other facets of life at the moment. Half of the country looks at the internet and sees some silly hobby that young people are overly obsessed with. The other half have accepted the legitimacy of the way technology has changed business and life in general, recognized it as the new normal, and are getting rich as a result.
Despite the “noise” – plenty of retail brands are thriving, regardless of Amazon’s growth.
Just looking at headlines, it’s easy to get carried away with the narrative that brick-and-mortar retail stores are headed down the toilet. The problem with that is, it’s not at all the actual reality of what’s going on with the industry. It’s also no surprise, that the companies that have survived, and realized success in this new dynamic, are the companies that have made efforts to remain flexible in the face of changing market needs.
Target made it a big point to have the technology side of the company worked out. From a fully functional app that tells you product availability in your nearest store, to online orders that you can easily pick up at a specified area inside, to the online order and curbside pickup, there has been an obvious and heavy emphasis to tie in the online experience with the in-store experience. As a result, we can observe the revenue trends as follows:
Walmart has taken a similar approach with their online and in-store presence. Implementing many of the same things Target has that were just discussed.
Some will be quick to say, well those companies were already very large anyway, that doesn’t really prove much of anything at all. This is a fair argument, so let’s look at companies that aren’t as large.
Nordstrom put a strong emphasis toward online presence, in how it ties in with their stores (curb-side pickups, inventory by local stores listed, etc) and their marketing and outreach.
Would you have guessed Bath and Body Works is experiencing YoY success consistently? Well, they are. A robust website and effective online/social media marketing are a primary reason for that.
Williams-Sonoma has taken a similar approach, and we can observe their revenue trends over time:
Blockbuster didn’t fail because Netflix came to exist. Things are rarely ever that black and white. Blockbuster failed for a couple reasons: 1. When the mind behind Netflix approached Blockbuster asking to partner up, the brass at Blockbuster decided to laugh them out of the office after having heard the proposal. And, 2. it had a business model that was reliant on penalizing its customers. By the time Netflix was rising in popularity and taking market share, Blockbuster’s attempts to respond were simply reactionary and too late to stop what had already begun. Blockbuster tried to keep pace with Netflix by removing late fees, but that just led to fewer new releases on the shelves. And by the time they tried to have a DVD-mailing service of its own, they were already looking up from the bottom of a hole.
Similar to the situation involving Netflix and Blockbuster, companies that are failing in retail, are not failing because Amazon exists. Amazon, and other companies that have remained successful despite the growth of successful competition, remain successful because they are giving customers services and products they want, the way they want them.
It’s similar to what will happen if you go to a more rural area and try to get a job that is most commonly valued more in urban areas. In San Francisco, a graphic designer is worth more than they are worth in Fresno. For whatever reason, people are slow to put value on things like high-end graphic design, a functional and robust web experience, effective online marketing, etc. For a long time, the mantra was, as long as you got online you were with the shifting curve. It takes more than that now. It’s more than just being online, now you have to be online and do it the right way.
When Sears first ventured into the online arena around 2011, they were among the strongest in the space. It didn’t take long for that to change, and now Sears is among the companies adding to the noise that adds to the doomsday retail narrative. Sears had every chance to capitalize off of the initial success they found online, and just like Blockbuster they failed to do so.
It’s not just about being online, it’s about being online and doing it right. It’s about optimized and effective execution, it’s about realizing the emerging trends in markets and the reality that the way people interact with brands is changing. It’s about taking something seriously that others struggle to believe is relevant, and placing value on something that others refuse to see value in.
Customer service is important, companies with better customer service, often get more business from their customers. And now we’re seeing, that even more than good customer service (online chats, fast access to people and less automated call systems) is being dwarfed by the effectiveness of responsive social media management: https://www.v12data.com/blog/90-percent-social-media-users-reach-out-retailers-why-social-media-your-secret-weapon/
Companies that realize where their customers are, and how they’re communicating, are seeing benefits as the results of acting on those observations.
And the biggest growers in the retail space? They are those with the strongest online presence: https://www.powerretail.com.au/multichannel/online-brands-millennial-popularity/
Perhaps it’s time to stop with the “Facebook isn’t real life” or “The internet isn’t reality” rhetoric and realize that these same platforms that are excused a fantastical nonsense, are also leading to people are getting married, losing their jobs, getting new jobs, and becoming millionaires. Seems pretty real to me.
Latest posts by Vinny Marshall (see all)
- The Libertarian Fundraising Problem: 13,380.5% Behind - February 8, 2020
- Why Aren’t There More Libertarian Architects? - December 29, 2019
- The Curious Task: The Automation Problem - April 5, 2019