The retail industry is known for its ever changing and often unpredictable landscape. With another year of the infamous Black Friday and its online counterpart Cyber Monday in the can, it's clear we have a new crop of winners, losers, and a few whose place is yet to be decided.
Last month, a number of traditional retailers announced results that fell below expectations--Nordstrom, Macy's, and Men's Warehouse, to name a few. Yet, discounters like TJX (owners of TJ Maxx, Marshall's, and Home Goods) delivered a better than expected performance. Amazon also continues its extremely rapid growth (albeit at a low to no earnings pace). A number of online only retailers are now pushing ahead with uncertain outcomes as the landscape gets increasingly price competitive. A report I saw from MasterCard Advisors points to solid growth among small businesses this year, coming at the expense of larger national rivals. The question everyone asks is this: When the dust finally settles, who will be the victors?
What is clear is that consumer behavior is not changing--it has changed. The new reality for retailers is that shoppers have been trained to buy mainly when there is a deal. They have been trained to expect shipping for free. They have adapted to the convenience of purchasing online or shopping in a small business with a unique product, brand, or service level.
Clearly, the consumer is winning, as everybody becomes more discount focused and deal-driven. What a great time to be a shopper. You can go online at your convenience and get great deals delivered directly to you (and most of the time delivery is free) or you can walk into a store and get a crazy deal that you never would have found 20 years ago.
Further compounding the retail challenges is that Millennials, the new crop of shoppers, are much more interested in travel and leisure experiences than in shopping. This is great for the travel and leisure companies, but presents more challenges for national retailers already being attacked by e-comm players, juggernauts like Amazon and Walmart (who sell commodity products that compete mainly on price), and service-oriented small businesses/boutiques as they now must contend with spending also leaving the retail sector in general and going elsewhere.
That said, I definitely would not count out the major national retailers just yet. As they move more and more of their businesses online, developing better mobile offerings and service levels at competitive pricing, they will have the chance to steal share from those retailers not migrating fast enough. Their scale and scope can provide inherent leverage from a pricing and fulfillment economic perspective. As Macy's and others move to look more and more like their online only competitors, they will have a unique advantage in having both stores and online. This will make it more competitive for them in the end.
The victors will continue to be those that become nimble enough to build both a great mobile shopping experience along with traditional brick and mortar. This means that the online only retailers will continue to need expansion into a physical presence via their own stores or selling through larger physical retailers. The e-com players that thrive most will have a targeted market niche, be profitable and own their brand experience so they can truly differentiate themselves and control their destiny in the marketplace.