From veteran publishing consultant Mike Shatzkin:
There are two parallel conversations about the future of retail that are quite active. One is within the book business and it centers around what the future will be — and will there be one? — for Barnes & Noble. The other one is about the future of retail competitors to Amazon in the broader sense, particularly the big retailers that anchor the malls and shopping centers and are depended upon to draw the traffic to all the other stores that share the same parking lots.
Whenever B&N announces financial results, the whole book business pays attention. When a chain with the ubiquity and brand of Toys R Us goes under, as it did last week, everybody pays attention.
Barnes & Noble has been feverishly changing executive management and delivering pretty vague and unconvincing strategic pronouncements in a context of declining revenues and a sliding stock price. Since B&N is both the single stop capable of putting a new title in front of the most bookstore customers and the single biggest retail customer for publishers’ backlists, it occupies a position of singular importance to almost every publisher.
Amazon may already be a bigger account for most publishers but that doesn’t change B&N’s unique importance. So it is not surprising that publishers obsess about the chain’s financial and operational health. And although I am still skeptical that their demise — or even a rapid shrinkage — is imminent, the consequences whenever it were to come to pass would be industry-changing.
. . . .
Of broader interest is the impact Amazon is having on all retailers. So many of them — Sears, JC Penney, Macy’s — are very obviously struggling. This year alone, we’ve seen stories about the death of department stores and other retailers from the Atlantic, Business Insider (citing Warren Buffet as their expert), and Time, among many others. Borders is gone. Radio Shack is gone. And then last week came the word that Toys R Us is filing for bankruptcy. So Barnes & Noble’s struggles are within a context that goes way beyond them and way beyond the book business.
. . . .
The current story attributes Best Buy’s success to the obvious tactic of matching Amazon’s prices and to soft factors like being quiet about cutting costs (so as not to panic the employees) and “staying humble”. But the one single operational change Best Buy made to enhance their competitive position actually demonstrates why Amazon has the advantage over them and everybody else. And why that is not likely to change.
The operational change Best Buy made was to use their distributed store inventory to ship online orders received centrally. The Times piece highlights the reduction in delivery time to customers that can be achieved by shipping from one of the 1000 stores that is closer to the purchaser than a warehouse with the same product. In fact, that’s only one of at least three advantages. The most significant is that they are undoubtedly able to fill orders with stock on store shelves that they would have lost completely by not having stock of the same item in a warehouse. The other is a much more efficient, and therefore profitable, use of their inventory. They effectively need less stock to fill more orders.
Link to the rest at The Shatzkin Files
PG says the history of retail stores in the US is one of more efficient and better-managed upstarts putting established retailers out of business. Why? Because customers liked the newer retail idea better than the old one.
Montgomery Ward, Sears (barely not dead), A&P, Marshall Field, Wanamaker’s, Gimbels, Eaton’s in Canada, Jacobson’s, Bamberger’s, Bullocks, I. Magnin, Joseph Magnin, and Carson Pirie Scott immediately come to PG’s mind. They disappeared because their customers went somewhere else.
Since Walmart was founded in 1962, it has put thousands of retailers out of business, including many small retailers in small towns. And don’t forget how many bookstores that Barnes & Noble and Borders forced to close.
In each of these cases, customers voted with their dollars. Today, millions of people say, “I like Amazon better than Walmart” and “I like Amazon better than Barnes & Noble.” And spend accordingly.
Economic freedom in action.