Monster stores may be reaching the end of the line. With the likes of Amazon able to ship just about anything, anywhere, and in an instant, how in the world can bricks and mortar stores stand up to that kind of competition? They can’t. Bricks and mortar buildings are starting to show big cracks.
With bricks and mortar operating and financing costs screamingly high, the cost of goods rising, there is no doubt that all retailers with brick and mortar locations are stressed and under tremendous profit pressures.
But there’s more.
In the golden days of retail expansionism, it was easy to boost revenues and profits…and the value of shares…by following a simple formula of adding new store locations. But today, to cope with fewer consumers with money to spend on products beyond food, health and safety, the consumer marketplace is in a mess and getting worse.
The need to make big changes is an absolute must for the likes of big box retailers, especially those few which are the biggest. The days of wild expansionism are behind them. Even expanding in overseas markets will do little to protect them for the longer-term since the problem of falling consumerism is a global epidemic.
One very sad element to this bricks and mortar story is the danger posed to their suppliers. Due to the massive clout wielded by the largest of the bricks and mortar locations, suppliers had to invest in plant and facilities, large employee bases, training, and state-of-the-art equipment. If those bricks-and-mortar locations suddenly start closing locations and reducing the size of their purchase orders, those compliant suppliers will face disaster. [This reminds me of the mess following Nortel’s heyday. Nortel exerted tremendous pressure on suppliers to build state of the art plants and to produce excessive inventories only to learn that suddenly Nortel was in trouble…and so were the suppliers who had complied with Nortel demands like good soldiers.]
One large retailer, a bricks and mortar type, has a very significant amount of its products sourced and manufactured in China. So large is its buying power that it is often compared to the GDP of a respectably large country. Though jobs flowed from America to China, and that caused great pain at that time, now, it may be China’s turn to endure the pain of downsizing that comes from the upcoming adjustments these large bricks and mortar retailers must make.
It’s as if there is nowhere to “hide”.
I used to tell my colleagues that it was easier to have successful business ventures and marketing programs in the USA than in any other country, that to succeed in America, “All you have to do is wake up and fall out of bed in the morning…” Even if that were once a truism, it no longer is. Now, American companies are finding it tougher than ever to succeed.
[One of my favorite books, the Icarus Paradox, contained the lesson relevant to all business models. Yet, it amazes me how many times leaders of great businesses fail to follow the wisdom in that one book. I consider it a masterpiece, for time and again, I can point to it and say, “If only they studied that book…”]