For those of us in the Northeast, the month of March is offering winter wonderland challenges. When power is out, and there is no heat, or when the roads are blocked with fallen trees and branches, the perspective of life immediately shifts to survival. Often any money issue cranks up fear and survival (how can I afford… increased costs for heating, tree removal, snow removal, etc.) – but that is another article. When in a challenged situation and fearful state of mind, the future of retail or technology is uninteresting – our minds focus on more fundamental needs that we believe are necessary for immediate survival.
But when life offers more peace, warmth and an opening to receive information about other aspects of life…thoughts about the future are an enjoyable invitation that can lead to interesting investment opportunities; please enjoy these words about the changes in our world.
Chances are you have experienced the sea of change going on in the retail industry. But you may not realize how far and how fast the online tide is rising. Singularity University founder Peter Diamandis invites you to recall the powerful retail networks created by Sears, J.C. Penney and Macy’s. Since 2006, the stock value of Sears has fallen from $14.3 billion to $300 million – a 98% drop.
Over the same time period, JC Penney’s stock value fell from $18.1 billion to $1.2 billion (-94%) and Macy’s, worth $24.2 billion in 2006, is now worth $9.3 billion (a 62% drop). Less dramatic but still significant price declines can be found at Kohl’s (-54%), Nordstrom (-28%), Best Buy (-25%) and Target (-20%). Diamandis notes that in 2017, over 6,700 physical stores closed their doors.
Meanwhile, the premier online retailer, Amazon, has seen its total market share value rise from $17.5 billion in 2006 to $726.3 billion in 2018, a rise of more than 4,000 percent. The reason for such a shift has been the decline in profit margins for brick and mortar stores as online sales have increased. Amazon’s profits have been rising (after more than a decade of losses) while profits on sales at brick and mortar retailers are dropping. It’s anybody’s guess whether Amazon will continue increasing sales and market value while bricks-and-mortar retailers continue to see a drop in sales and a greater squeeze on profits. However, Diamandis points out that this remarkable shift has been accomplished despite e-commerce only accounting for 10% of total retail sales in 2017. For those of us who love statistics retail sales in the US for 2017 were $5.7 trillion. Many are not aware that Amazon is not the “typical” retail store; it is a tech wonder at play in the retail industry – the two cannot really be separated. In this regard, many forget that Amazon began as an online bookstore to sell new and used books.
Because Amazon is a tech wonder, it seems like a sure bet that their growth will continue, although the actual trajectory is uncertain. Diamandis does, however, see some hope for physical retailers on the horizon for the following reasons: currently brick-and-mortar retailers provide products they have to select and warehouse and stock on shelves for people to travel to the stores’ locations. Due to the requirement to have something on their shelves, traditional retailers pay rent to landlords, hire more sales people and sometimes the retailers have to write-off significant inventory when something they stock does not sell fast enough. At this time, those issues have placed traditional retailers at a disadvantage to Amazon as Amazon has sped up the time from purchase to delivery.
A possible game changer and a solution to the traditional retailer’s problem is custom 3D printing. The promise of custom 3D printing is the attraction of a customer walking into a store, logging onto a terminal and custom-order clothing or other items that are physically created on-site in a few minutes. Another possible advantage, at least in the short term, is the so-called “experience economy” that will extend to retail purchases, as people don virtual reality glasses and create their own custom kitchen redesign or map out their upcoming vacation trip to Prague. The hope is that the combination of virtual reality and custom 3D printing will excite people and motivate hordes of people to experience shopping at traditional retail stores again. The excitement model is one that occurred around the turn of the 20th century and are considered “the good old days of Department stores”. The experience at that time was described as a combination of awe, excitement, entertainment and fun. Traditional retailers are hoping to capture that customer experience again!
Speaking of 3D printing and technology transforming an experience… every year, MIT Technology Review provides its answers to the question: what are the most important technological advances from the past year?, keeping a focus on the innovations that will have the greatest impact on consumers.
This year’s list includes 3D metal printing; that is, printing metal parts quickly and cheaply, and cutting-edge urban design using digital technology. Also: digital earbuds with a built-in language processor that will translate foreign languages into Standard English. The magazine cites a power plan that captures the carbon released by burning natural gas, avoiding greenhouse gas emissions, and a tool developed via the new block chain technology behind bitcoin that makes it possible to carry out digital transactions more cheaply and efficiently than can be done with today’s credit cards.
One other item on the list is all the new genetic testing services, which are making it possible to predict peoples’ chances of contracting certain diseases and even to determine the natural IQ of the testee. At the same time, the magazine warns, these services will also increase the risks of “genetic discrimination” – employers deciding to hire based on your genes, or healthcare providers charging higher premiums to people who might have more susceptibility to congenital illnesses or heart disease.