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The Future Of Retail In The Age Of Amazon

27 November 2017

From Fast Company:

The Mall of America’s terrazzo floors, glazed white like doughnut frosting, ribbon out in every direction, creating a vast mirror maze of consumerism with 520 glassy storefronts. Shoppers, who have escaped an endlessly gray Bloomington, Minnesota, sky on a Monday morning in October, drift through the largest mall in the United States like tourists at an Atlantic City buffet. A couple holding hands strolls into a Zales while buttery perfumes emanate from an Auntie Anne’s next door. Kids and some willing parents fling around on the SpongeBob SquarePants Rock Bottom Plunge roller coaster, one of 27 rides at the Nickelodeon-branded amusement park on-site. Distant echoes of saxophone Muzak clash with both elevator whirs and bubbly pop songs. Somewhere in this otherworldly commercial expanse are five Lids stores and four Sunglass Huts.

When the mall opened, in 1992, it represented the pinnacle of retail convenience and a mecca for young people to gather and spend. But the $650 million megamall was always “vaguely unreal . . . exuding the ambience of a monstrous hallucination,” as novelist David Guterson described it in a 1993 Harper’sarticle, calling it “monolithic and imposing.” Two years later, Jeff Bezos launched his online book marketplace, which quickly grew into a new type of Everything Store, one that fundamentally redefined the shopping experience and led some to argue that commercial centers like the Mall of America would become gaudy relics of an antiquated era.

Now, Wall Street analysts say, the retail apocalypse is upon us. Amazon dominates e-commerce and has gobbled up 5% of total U.S. retail sales. Some expect that the company will own half the online market within the next five years, a period during which, Credit Suisse predicts, a quarter of all malls will close. By the end of this year, more than 8,600 stores will have shuttered in 2017, the worst year on record.

But here’s the thing about the Mall of America: It’s fighting back. “I hear all this doom and gloom in the industry,” says the mall’s SVP of business development, Jill Renslow, with an upbeat, Midwestern delivery. “I’m like, ‘Folks! Keep your chin up! There’s so much opportunity!’ ” The mall completed a $325 million expansion in 2015, says Renslow, who started working there as an intern in the mid-1990s and has seen it endure recessions and upheaval before. A new 342-room JW Marriott has opened upstairs, and retailers like Zara and Anthropologie are being lured to the space.

. . . .

“Amazon alone isn’t holding the knife,” says NYU Stern professor of marketing Scott Galloway, who studies the retail industry. Cultural tastes have changed. Malls grew too quickly, at twice the rate of the population, from 1970 to 2015. Many retailers succumbed to quarterly earnings pressures, invested in share buybacks rather than their stores, became saddled with private-equity debt, or failed to keep pace with digital trends. What we’re seeing now, industry executives say, is a rational, albeit painful, course correction.

. . . .

“Retail is under huge pressure, but the death of stores is greatly exaggerated,” says Galloway, who believes that while Amazon will continue to disrupt the market, an increasing number of competitors will discover new ways to respond. “In the age of Amazon, retailers must leverage assets that [Bezos] doesn’t have: When Amazon zigs, retailers must zag.”

. . . .

Target’s digital efforts continue to lag. When Mulligan takes me to the back to show off the redesigned storeroom, I don’t see any floor-roaming robots or automated conveyer belts, despite the fact that Target has stated that it plans to use its more than 1,800 stores as fulfillment centers (80% of the U.S. population lives within 10 miles of a Target). Instead, I find just one store clerk manually taping cardboard boxes for in-store pickup. Later, when I arrive to retrieve a $14.99 Goodfellow Henley shirt I purchased via Target’s app, the cashier asks for my ID because the flagship store’s smartphone scanner is broken. When I test Target’s new curbside-pickup service to buy paper towels, it fails at three consecutive outlets within the Minneapolis area. Ultimately, I give up.

Link to the rest at Fast Company

Amazon, Disruptive Innovation

11 Comments to “The Future Of Retail In The Age Of Amazon”

  1. I have a large mall nearby called Potomac Mills. Its response to Amazon was to go upmarket.

    During a refit it replaced the wire gates used to close store entrances in most malls with doors and long stretches of glass. The developer also started angling the entrances to each store so that you could see the store sign and look into the store as you walked down the main drag.

  2. People shop Amazon because it saves them time.

    • Or it is the only accessible source at any price.
      The excessive focus on price blinds the media to the fact that local stores simply can’t carry as broad pf variety of merchandise as a large online retailer. Oftentimes online is simply the only option.

  3. MOA is kind of a destination and has a town square vibe, at least it did for me back in the late 90’s when I was in grad school. I’d hop a bus and hang out in one of the food courts overlooking the park to study. In midwinter I could see trees, a bit of non-frozen water and sit in natural sunlight coming through the glass ceiling. That was nice in Minnesota! And I could catch a movie before heading home.

  4. Richard Hershberger

    “Many retailers … became saddled with private-equity debt”

    Note the weasel language: they “became” saddled with this debt, as if through momentary inattention. In reality, this debt was inflicted on them by smash-and-grab corporate raiders.

  5. Why is Amazon more successful than these other retailers? Because Bezos has a vision. He is a long term planner. The others are out to get rich as soon as possible and long term consequences be darned.

    Bezos is invested in his “baby”. Other CEOs and “leaders” are only invested in their own bank account.

    • Amazon’s long term projects are all funded by very short term cash flow. Cut off that short term cash flow and the whole thing collapses.

      Like any other company, Amazon tries to get that cash flow as soon as possible. Bezos spends just as much time on the short term as any other CEO.

      And long term? Car manufacturers spend ten years bringing a new model to market. Drug firms spend 6-10 years developing and testing new drugs. Oil companies spend five years on exploration and development drilling, then two years of construction to bring in fields that will produce for ten to twenty years. Mining companies have thirty year development plans to exploit underground ore reserves. Boing started development of the 747 in the Sixties, flew the first one in 1969, and fifty years later the fleet is still flying all over the world.

      For many of these companies, we then have to add a few years of getting permits from a dozen government agencies and going through court challenges from people who want to stop long term plans.

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