WATCH YOUR STEP AS YOU BOARD THE WAYBACK MACHINE.
We’re going to travel about 20 years into the past. Destination: 1999, the
height of the e-commerce boom. Just before the bubble burst.
Remember Pets.com? How about e Toys or Webvan? Those companies
were going to revolutionize the way we shopped. Why bother going to a
store when you can make purchases from the convenience of your couch?
Brick-and-mortar retail stores were bound to close within months, and
Main Street and shopping malls would become relics of a bygone age.
The assumption was that cutting out the retailer middleman would
more than offset the cost of shipping to millions of customers’ homes.
Billions of investment dollars were thrown at that
proposition. Companies with no track record or even
a comprehensive business plan announced record-set-ting IPOs. Sophisticated warehouses rose overnight.
Then the bottom fell out.
As we now know, the problem for these newcomers
was not a lack of capital. What doomed them was their
failure to grasp the complexities of distribution—
specifically, direct-to-consumer distribution. While
staggering amounts were invested in new warehouses,
many of those facilities were not designed to pick and
pack individual orders efficiently and cost effectively.
Let’s journey back to the present. Today, I believe we
are seeing the fulfillment of those prophecies of two
decades ago. Many traditional retailers are reeling, and
shopping malls are struggling. Sears has shuttered more than 236 stores
since January, while Payless, Gander Mountain, The Limited, and Rue21
have recently closed for good or are barely afloat in bankruptcy.
What has changed? Dot-com companies (and other retailers that
succeed at e-commerce) have figured out how to make distribution and
shipping work and, in some cases, to parlay it into a source of competitive advantage.
Amazon, one of the few survivors among the early dot-com contenders, is leading the way. Amazon Prime, which features free two-day
shipping, is the benchmark, and retailers who want to survive must tailor
their supply chains to match that high level of customer service. A few,
such as Walmart, have been doing their best to keep pace. But consumer
expectations are also evolving, putting even more pressure on retailers
for ever-faster response, low-cost or free shipping, and easy returns.
Just like 20 years ago, retailers that can develop efficient pick-and-pack
operations and also figure out how to leverage the brick-and-mortar
stores they have left stand the best chance of surviving and possibly even
thriving. Then and now, it all comes down to mastering their supply
chains.
bigpicture
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