The fact that our predictive record isnt very good appears to matter not a whit. Alas, if we just paid more attention to history we might realize that there is no future in prophecy.
Business is particularly susceptible to crystal ball gazing because it allegedly abhors uncertainty. Even false prophecy is better than no information at all to many commercial savants. But the problem with this penchant for declaring the end of 'whatever' as we know it is that it blinds us to real change that may simply be incremental or too microscopic to be identified in its early stages.
Retail sales, which drive the GDPs of western economies have been an especially ripe target for the economic Madame DuFarge's of the futurist genre. Ever since the the internet became something more than a geek's fantasy, experts have been sonorously declaring retail's doom. Early prognosticators envisioned a cavalcade of delivery vans dispatched by the click of a keyboard. Anyone remember pets.com? Or the billions invested in home grocery shopping?
The reality is that the tangible and intangible are converging, merging through mobile interfaces so that online purchases can be tried on in stores or deals can be compared on the run. No one correctly predicted where this was heading (iPads, anyone?) nor where it will yet be taking us. Retail has changed radically since Strawbridge & Clothier complained that they couldn't tell which 50% of their ad budget was wasted. All we know is that the future will be different than we think - which we could have predicted had we paid more attention to the past. JL
Ken Favaro and Nick Hodson comment in Harvard Business Review:
Ever since people started shopping on the internet, commentators and forecasters have been predicting the death of retail as we know it, much as the self-service format (Retail 2.0) largely killed off the full-service model (Retail 1.0) in the last half of the 20th century.
The dot.com crash gave pause to that idea and a less radical consensus has formed around the view that the internet is "just another channel"; retail will become a stable world of integrated clicks and bricks. There's an almost eerie parallel to Francis Fukuyama's notion of two decades ago that history was dead.
It's perhaps worth pushing the parallel even further: Less than ten years after Fukuyama's book was published, history came back with a vengeance. And if you take a look at the data on retail you'll see that in category after category the internet format — Retail 3.0 — has accounted for essentially all of the growth over the last decade, if not more.
The writing is already on the wall for some categories. For example, scarcely a single new book store has opened since about 1998. In computers and electronics — the Apple Store notwithstanding — the internet has captured more than 40% of sales and incumbent stores are so vulnerable to smart-phone-based comparison shopping that they are rapidly becoming nothing more than showrooms for internet-only retailers.
In many categories, online retailing is advancing much faster than the last format innovation — self serve — did the last time around. That's partly because having to build out stores is not a constraint to growth in the virtual world.
But it's also because the internet growth is starting to affect the economies of scale on which traditional retailing relies. Every time an item is sold online, another unit of volume is lost by a self-serve store somewhere. And as they lose that volume, their economics become more marginal, the pressure to protect profitability by raising prices increases, and the risk of a doom loop deepens.
No doubt some will argue that consumers will always want the in-store experience and that may indeed be true in some categories. But ask yourself this: are you hearing a refrain of the mom and pop grocer's pain in the 1950s? Or the dedicated appliance store owner in the 1970s? Or the self-deluding rationalization of a 1970s gas station attendant? All of these "traditional" formats have all but vanished — there was no defense for those who failed to adopt the new self-serve formats.
Take apparel: who would have thought ten years ago that Zappos could build an online business which prides itself on delivering not just low prices but an excellent customer experience, including service? Zappos's online-only retail format is so efficient that it can offer very competitive prices, free shipping and free returns of as many shoes as you like, at a stroke removing the biggest problem with online apparel shopping: "Does it fit?"
In the future will our daughters meet at the mall to shop on a Saturday or instead at a friend's house or a fashionable café to compare what they got in the post that morning? Perhaps they already do...
1 comments:
It may be that the growth in retail has accounted for all of GDP growth in the past 10 years but remember that retail sales have been supported by increased levels of debt.
It is unfortunate that Economists count the GDP number without taking account of the continuous rise in debt. What we call the debt crisis is actually only a symptom of an underlying root cause of debt fuelled spending which has also resulted in hugh trade imbalances as countries suck in imports from low cost economies and at the same time destroy domestic competitiveness by increasing the domestic cost base through the costs associated with compliance with domestically imposed regulation and legislation.
Over 10% of GDP in the UK is created by the annual increase in UK Government debt and a similar story is true in the US and in much of Europe.
So what I would say is that though:
The rise in GDP is evident from the numbers AND
The retail sector has been the beneficiary
The root cause of this growth is debt fuelled spending AND that this level of spending is unsustainable...............
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