on March 14, 2017 Insider

What Will the Future Have in Store for Retail?

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It's absolutely amazing what can happen in a decade. Blockbuster was founded in 1985. Netflix was founded in 1997, a decade later. Another decade passed and by 2010, Blockbuster was in bankruptcy protection.

Uber was founded in 2009. It's early 2017 as I write this and the company has made over 1 billion connections and operates in over 550 cities across the world. It is about to launch UberRUSH for bringing a retailer's merchandise right to the customer's door.  UberEATS is also being rolled out into select major cities. They will deliver food from your favorite restaurant to where ever you happen to be.

Amazon was founded in 1994 and is currently valued at USD 400 billion. The Amazon Prime service offers 30 million items and delivers on Sunday. Amazon Prime Now launched in 2014 and currently offers with 25,000+ items available for delivery within two hours in 28 U.S. cities. Did I mention that 2-hour delivery is free? The company is developing a logistics network called Amazon Flex which contractors pick up packages and bring them to Amazon Prime customers. This is similar to UberRUSH.

Recently the Wall Street Journal reported that certain financial market participants had taken a dim view on the future of malls. The article notes that in 2016, Macy's, Sears, and J.C. Penny announced that each of them would close at least 100 stores. Now, it doesn't mention that Macy's is opening new stores at the same time, so the net decrease is less. On the other hand, J.C. Penny's number one priority is to literally "save its business". This is an indicator that retail is under pressure but that doesn't mean that retail is dead.

Postmates is another delivery service, bringing its customers their groceries, pizza or even a new t-shirt. In 2014 the company's co-Founder, Bastian Lehmann, was quoted as saying "the city is our warehouse". Wow...That is a pretty phenomenal idea. Picture your local Wal-Mart Supercenter. You go there because there are a variety of goods there that you need. It's efficient for you drive once and shop for lots of products. In the typical city, retail space is built a short drive away from the local population it's meant to serve. If you take away the need for consumers to drive to the location to shop, it changes the economics of the supply chain. Retailers might ultimately re-think the format of stores, the location and the type of jobs needed. If consumers are buying the products on-line and having them delivered, it changes a lot of assumptions. 

It strikes me that retail is will experience rapid change during the next decade. Low-cost, locally available and convenient delivery options change the dynamics of the supply chain. I am not predicting one particular retailer to fail, but there is obviously pressure building and pushing retailers to adapt. 

We can always find examples where industries resist change. I was recently in Cancun, Mexico and saw a number of signs on cabs that let everyone know that Uber is currently illeagal there. Luckily for these entrepreneurs, the Government has taken steps to protect them from competition. Do we find them pushing ahead while protected? Is there an app that I can easily book my cab? Are the old cabs being traded in for new ones? No. When Uber makes it there, these entrepreneurs will have squandered the extra time they had to make progress.

A very famous example of not adapting was Blockbuster. It reportedly had a chance to purchase Netflix for USD 50 million. Today, Blockbuster is a distant memory and Netflix is worth over USD 60 billion. 

It goes without saying that knowing when to pivot is easier said than done. Strategic alternatives are blurry, outcomes appear uncertain and you may not know if you made the right move until years after. But the takeaway for entrepreneurs is that innovation is propelling certain industries into rapid change. When you sense it coming, don't ignore it: embrace it and think about how your business will need to respond. I also recommend having an annual business planning process. Part of that will involve scanning for market and technological changes that influence your industry's competitive environment. Being proactive helps you stay in control. 

Here's to your success!

Chris Yaren,

Founder, Accountifi

P.S. As I was inserting the last link for this post, an ad for a new entrant to our local grocery store market popped up. They were offering local delivery service: shop for everything from the comfort of your home. Anyone want to start a logistics business?


Chris Yaren

Chris established Accountifi because he saw that small businesses needed help that they weren't getting from typical accountants. Accountifi's vision is that small businesses don't make preventable mistakes and have the best possible processes in place.



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