Turmoil in the retail-scape
“Stores only existed because the internet hadn’t been invented”. This provocative statement by Oliver Samwer, CEO of Rocket Internet, boils down the dilemma many traditional retailers are facing today. The sector is evolving from a structurally rather rigid and somewhat un-emotional mainstay in the economy to a most dynamic field where old business models cease to exist, and new business models and players are bustling.
Take the venerable department store concept which has been thriving for decades and decades. It has lost a lot of its traditional appeal and it is coming heavily under pressure these days. Its role in the lives of many US shoppers declines along with the closures that sweep through the shopping mall landscape. Sometimes it seems hard to separate the difficulties of the anchor store from the struggles of the mall itself. In Germany, the two surviving (what a telling description!) stores, Karstadt and Kaufhof, eventually merge in order to rationalize cost even further. With respect to the value created for consumers, the outcome is still wide open.
Contrast these struggles with the triumphal march that Amazon has displayed. From its early beginnings in books and music it has become a technology powerhouse, active in virtually all Western mature markets across all consumer goods categories. In 2018, the share of Amazon alone of the entire E-commerce sales in the US and in Germany approaches nearly fifty percent. What a feat! This company seems to be offering something that consumers certainly appreciate. But it’s not only Amazon.
Retailers have only begun to run the marathon of change
Existing retailers have certainly started to digitalize their entire offering and provide a multi- or omni-channel approach. Beyond that, however, manufacturers are increasingly reaching out to the end consumer, wanting to build a direct interface. Likewise, the platform concept with the likes of Alibaba, Wish, Etsy, or Zalando, is finding extraordinary appeal from a consumer perspective. These are a few but still massive changes that the retailing industry encounters. As more and more customers prefer the convenience of internet-based shopping and direct-to-home delivery, many traditional retailers are forced to adapt.