Disruption in Retail: Who knew Amazon wanted to be a grocer?

by Roger Strukhoff

Consumer goods and services companies fill 362 seats within the Global 2000 amphitheatre, and are the most likely to kill one another during any given performance.

If you like brutality, then this is your business.

“Does Macy’s tell Gimbels?” went the popular saying in the 1930s. Nothing has fundamentally changed among consumer companies, with only the pace of change, the variety of choice, and the volatility of this business having been amped up considerably.

Online commerce as pioneered by Amazon is the latest big disruptor, coming a few decades after Walmart screwed up the small towns of America with its relentless focus on economies of scale and price.

The conversations 10 to 15 years ago about the death of brick-and-mortar stores have been replaced today with talk of hybrid approaches and neo-urban shopping, changing tastes for younger generations, and the death of the big suburban mall.

Personalized shopping for fashion products now available online in your size, color and fit to your dimensions. Photo by rawpixel on Unsplash

What Does it All Mean?

What does all this mean for Digital Transformation, and what does DX mean for executives and investors in this wacky sector of the global economy?

It seems to me the three biggest issues facing companies in the consumer goods and services business are:

  • Focus on the UX. There is high volatility in fashion and taste with consumer businesses. Even evergreen companies such as LL Bean and Sperry (coincidentally two of my old-guy favorite companies) must offer new styles on a regular basis. This was not true for my dad’s generation and not true for most of my lifetime. But it’s as real as rain now.

This means companies must focus first on the user experience (UX). The website and mobile experiences must be similar, but equally exciting. Furthermore, companies must be willing to “tweak” (ie, change) this experience quickly and decisively, without upsetting customers who will resist change.

This is an almost impossible task. We’re in an app-driven economy now, whether ordering our Starbucks remotely, choosing shoes while on the way to the store, or making airline reservations on the fly.

  • Focus on performance. Amazon said back in 2012 that a one-second delay in page performance was a billion-dollar-plus mistake. We can surmise that this situation is even more extreme today. Yes, human nature can be an awful thing. This is the reality of being in a consumer business.

    The technology industry has responded to this demand by conjuring up varietals of cloud computing. You can virtualize your resources online, to get more performance out of your existing hardware. You can buy numerous types of computing instances from Amazon, and so-called serverless instances that react to on-demand computing. You can work within vast computing infrastructures developed by Microsoft and Google as well, look to IBM and Oracle, and still find other, focused cloud providers that may work best for you.

  • Be paranoid always. Who knew Amazon wanted to be a grocer? Who knew a Paypal founder wanted to build cars and rockets? Who knew Apple the computer company wanted to be like Apple the music company (once their pesky 29 years of litigation ended)?

    Only the paranoid survive, as Intel co-founder Andy Grove famously wrote. He was in a business that’s driven by relentless engineering improvement. Consumer companies are in a business driven by access to this improving technology by relentless competition from all corners.

Analyze This!

Consumer goods and services also comprise an array of businesses that defy simple analysis: product margins, for example, range from 1% (for most groceries) to 50% and more (for mobile phones and upscale clothing and accessory brands).

Distribution is in constant flux, even as companies must make big bets in real estate and IT infrastructure alike. And new competition can appear in a flash, looking more like a quantum fluctuation than the existential threat it will become.

Consumer-company executives, like no others, need key people who are cognizant, conversant, and competent with all of the major technology trends.

Source: Photo by Hello I’m Nik on Unsplash

Who knew Amazon wanted to be a grocer?

Or perhaps not. There are several companies in this group who still seem to exist in the pre-Internet era.

I have a particular fixation on Sherwin-Williams, for example, a company that I think could be a major home improvement and even real-estate player if it can ever move past the idea that it just sells paint. But it’s tough to argue with people who manage $15 billion in annual revenue, and to date, no one from the company’s Cleveland headquarters has been in touch.

Given the disruption the company will no doubt someday face, perhaps they should contact someone, if not me.

So take a look at the companies in this space, especially if you work for one of them. Ponder a bit, then decide if any particular company will be around for another generation, or will be a future Woolworth, Radio Shack, Blockbuster, or Gimbels.

Skip the Queue: Shop Online. Photo by Joshua Rawson-Harris on Unsplash

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