Scott Galloway on Retail Like It’s 1999

 

Another installment of Winners and Losers in the Retail Space by Scott Galloway. Go checkout and follow their YouTube channel at: https://www.youtube.com/user/l2thinktank/featured

 

A winner: Jeff Bezos, who is now the wealthiest person in the world. He’s been criticized for not being more philanthropic, which in my view is total BS. Just recently Mr. Bezos spent almost 14 billion dollars trying to solve the shortage of almond milk in Tribeca.

Who’s losing? Retailers. More stores closed in 2017 than during the financial crisis of 2008. One retailer shuttering stores? Sears. Dozens of stores after sales plunged 17% in the third quarter. In 1999, Sears had a market cap of 16 billion.

News segment:

Meanwhile, in July of 1995, from this modest ranch house outside Seattle, Bezos sold his first book. Today, he has five huge warehouses in the United States and Europe. Last year Amazon sold more than 600 million dollars worth of merchandise over the Internet. And Wall Street isn’t concerned that Amazon has never made a profit. Not a dime. In fact, it lost a hundred and twenty-five million dollars last year. The company says it’s investing for the future. Skeptics say it would have to sell every book being sold in the world today to justify its stock price”.

I think my generation grew up with Sears and Amazon is worth 20% more than Sears is worth in market capitalization”.

How do you view that phenomenon that Amazon today is worth more than Sears?”

Investors are focused on the future. Amazon has growth potential that Sears doesn’t”.

Could Amazon and its tributaries be flowing towards the shopping mall and eventually drown it out?”

Today, the market capitalization of Sears is four hundred and thirty million and Amazon is approaching six hundred billion or approximately fourteen hundred times what Sears is worth. And Amazon operates 75 fulfillment centers, or put another way, there’s an Amazon warehouse within 20 miles of half the US population. And some of those warehouses are shipping more than a million items a day. Meanwhile, retailers are scrambling to offer the same level of fulfillment, but only Amazon can afford the seven and a half billion-dollar loss getting you your kombucha tea within 47 minutes. This year there will be a hundred and seventy thousand fewer retail jobs in the United States. But don’t worry, Amazon added fifty-five thousand robots to its workforce. to win as a brand, you have to have an Amazon strategy and sometimes it means distributing on the platform. Calvin Klein sells certain items exclusively on the e-tailer and focuses on selective high-volume, low-cost products and core replenishment categories. For example, underwear; helping parent company PVH achieve 20% digital revenue growth in the third quarter of 2016. Levi’s – a brand that missed the boat in the early part of the millennium, has rebounded with an Amazon strategy focused on selling its core product, jeans, on the platform.

How do you win as a retailer? Dollar General, one of the most profitable retailers in the US this year, is winning by focusing on where Amazon is not; the low-end market. Its 14,000 stores more than doubled Macy’s profit last year on less revenue, and its market value exceeds that of Kroger, the largest pure-play grocer in the country. As other retailers close the company plans to build thousands more outlets in rural areas. everybody is looking for is silver bullets or some sort of magic pixie dust to compete with Amazon. The first thing I tell boards when asked how we compete with Amazon, is unfortunately you’ll lower your profit expectations. How do you compete with a company that doesn’t want to be profitable? Bottom line, you reinvest more in the consumer experience.

We leave you with a picture of Mr. Bezos in 1999 and one in 2017. We are exactly the same age except one of us is worth a hundred billion dollars. But more importantly, is aging in Reverse? What is going on here? I want on the program you’re my trainer boss. I’m here. New York Sports Club. We’re talking isometrics. We’re talking yoga. I have one of those machines you wrap around and jiggles you up. Call me…we’ll see you next week.

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