Are you, like me, beginning to feel sorry for the traditional retail industry? Lately, the litany of bad-news stories has become relentless. (Yes, I just wrote about this from a different angle; today I have a different theme.)
The latest synchrony of doom and gloom articles were Is American Retail at a Historic Tipping Point? from yesterday’s NYT and Neiman Marcus Finds Even Wealthy Shoppers Want Better Deals, from today’s WSJ. Just a few quick data points; you get the gist:
- Here in New York, rents along Fifth Avenue and in SoHo—grounds zero for high-end retailers—are softening, vacant storefronts are increasing, and of course, elsewhere, “zombie malls” seem on the verge of becoming the norm.
- In the last six months, general merchandise stores have laid off nearly 90,000 workers, more than total employment in the US coal industry—and more than 10% of Americans work in retail.
- Consumer confidence is high and unemployment is low, yet stores are being closed at a greater rate than during the great meltdown of 2008; this is clearly structural, not cyclical.
Now it begins to get pointed for us: According to a 2015 Bain study, the entire luxury retail-goods industry benefited from “relentless price increases over the past five to ten years,” noting that “one of the tricks to luxury is price discipline,” but that party has abruptly come to an end. Neiman Marcus is a case in point, where annual price hikes of 7—9% were the norm. Until 2015. Suddenly startups such as Matchesfashion, Bluefly, Farfetch, and others are undercutting them, and the impact has been vivid:
Why “pointed” for us? According to the 2017 Citi/Hildebrandt Private Law Firm Annual report (emphasis mine),
“Despite very modest law firm demand growth, revenue was up 3.7% at the nine-month point, driven largely by lawyer rate increases of 3.2%. Rate growth as the primary driver of revenue growth has been the norm now for several years.”
Hold that thought, but first let’s go back to retailing.
Why this is all happening to traditional retailers now is self-evident: The explosive growth of online in general and Amazon in particular.
But that’s not actually an explanation of why and how they’re growing, it’s merely a descriptive recap of what we can all see.
For a bit of insight into how Amazon, at least, is doing it, I commend to you The Jeff Bezos playbook for preventing Amazon’s demise, just published on <recode>, which comments upon and reprints his April 12, 2017 letter to shareholders.
The whole thing is worth reading, but highlights follow.
Bruce – thanks again for sharing.
J. Bezos also has a few more things that should hit the radar screen for Big Law:
“Your margin is my opportunity.”
– Don’t fall in love with measurements that mean nothing on how you run your business.
“The balance of power is shifting toward consumers and away from companies… The right way to respond to this if you are a company is to put the vast majority of your energy, attention and dollars into building a great product or service and put a smaller amount into shouting about it, marketing it.”
– Sounds like GC’s and other legal clients these days.
“If you double the number of experiments you do per year you’re going to double your inventiveness.”
-Even the failures, e.g. Amazon Fire Phone, lead to insight were the stepping stone to future success, e.g. Alexa.
“If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunity on the table.”
– Compliments your statement of 70% information vs. 90% information decision making.
“The great thing about fact-based decisions is that they overrule the hierarchy.”
– Many firms still defer to the senior leadership’s hierarchy. Sometimes they do so without knowing the facts until it is too late. (e.g. Dewey)
https://www.inc.com/jessica-stillman/7-jeff-bezos-quotes-that-will-make-you-rethink-success.html
I once told the CEO that I did not believe in consensus and thought it was destructive and at best led to mediocrity by definition. He replied “I know you are only joking.” (I wasn’t.)