Came across this wonderful
article on HBR which talks about how every 50 years or so, retailing undergoes a kind of disruption.
A
century and a half ago, the growth of big cities and the rise of
railroad networks made possible the modern department store. Mass-produced automobiles came along 50 years later, and soon shopping
malls lined with specialty retailers were dotting the newly forming
suburbs and challenging the city-based department stores.
The 1960s and
1970s saw the spread of discount chains—Walmart, Kmart, and the
like—and, soon after, big-box “category killers” such as Circuit City
and Home Depot, all of them undermining or transforming the old-style
mall.
Like most disruptions, digital retail
technology got off to a shaky start. A bevy of internet-based retailers
in the 1990s—Amazon.com, Pets.com, and pretty much
everythingelse.com—embraced what they called online shopping or
electronic commerce. These fledgling companies ran wild until a
combination of ill-conceived strategies, speculative gambles, and a
slowing economy burst the dot-com bubble. The ensuing collapse wiped out
half of all e commerce retailers and provoked an abrupt shift from
irrational exuberance to economic reality.
Today, however, that
economic reality is well established. The research firm Forrester
estimates that e-commerce is now approaching $200 billion in revenue in
the United States alone and accounts for 9% of total retail sales, up
from 5% five years ago. The corresponding figure is about 10% in the
United Kingdom, 3% in Asia-Pacific, and 2% in Latin America. Globally,
digital retailing is probably headed toward 15% to 20% of total sales,
though the proportion will vary significantly by sector. Moreover, much
digital retailing is now highly profitable. Amazon’s five-year average
return on investment, for example, is 17%, whereas traditional discount
and department stores average 6.5%.
What we are seeing today is
only the beginning. Soon it will be hard even to define e-commerce, let
alone measure it. Is it an e-commerce sale if the customer goes to a
store, finds that the product is out of stock, and uses an in-store
terminal to have another location ship it to her home? What if the
customer is shopping in one store, uses his smartphone to find a lower
price at another, and then orders it electronically for in-store pickup?
How about gifts that are ordered from a website but exchanged at a
local store? Experts estimate that digital information already
influences about 50% of store sales, and that number is growing rapidly.
