Were one to ask most brick-and-mortar retailers what their biggest problem is today, Amazon might not be their first pick, but it seems fairly certain that they’d be in the Top 3.
Is it fair to blame Amazon? The question is complicated.
On the one hand – as Karen Webster pointed out in her 12 Steps For Retail Redemption, blaming Amazon isn’t really helpful. Amazon didn’t do anything tricky to outflank much of the physical retail world – it just did a lot of things better.
“Amazon has built its business around the consumer – what she wants to buy and how she wants to buy it,” Webster noted. “Amazon offers a massive number of products at reasonable prices that are delivered fast, thanks to Amazon’s massive investment in logistics and optimizing its supply chain. Increasingly, Amazon is where consumers start their journey to buy the things that present little risk to them of buying online. They trust Amazon will get to them in two days or less.”
Amazon found pain point after pain point in the consumer experience and then found solutions for them – and turned those solutions into valuable commodities in retail that its competitors could either match, or be mowed over by.
Which is why the question is complicated – because the urge to blame Amazon – and the so-called “Amazon effect” is really understandable. When someone is eating your lunch – most of us want to blame that person instead of conceding the may deserve our sandwich more than we do. .
And make no mistake, lunch is being served – Amazon’s sales were up 28 percent in Q1. And consumers aren’t just buying more – they’re selecting from an array of goods that is ever increasing (and encroaching). Clothes, baby goods, household product and groceries – things customers have long bought from other retailers – are now happily shipping (sometimes within hours) from Amazon’s warehouses to customers hands.
And even when Amazon is new the game – as it is with clothing (is surprise launched its apparel line less than three months ago) – analysts estimate that Amazon’s share of apparel sales is approaching 7 percent already and will likely grow to 20 percent in less than four years.
It is unsurprising that among retailers – particularly among hard hit department stores whose apparel space Amazon is clearly treading – view Amazon as their problem Blame, jealousy and perhaps even the tiniest bit of resentment are perhaps to be expected, if not applauded.
“Most of it is crap anyway,” noted Postmates co-founder and CEO Bastian Lehmann during in a fireside chat at Shoptalk in Las Vegas of Amazon’s recent big push private label products while
“There’s so much crap and boring stuff … the last thing we need is more of the same.”
But then Postmates is running a “competitor” service to Prime – and so it would be somewhat strange if he had high praise for a business that analysts routinely predict will eventually push him out of business.
So, Lehmann’s – and other retail sector big players overt hostility to Amazon is probably to be expected.
Less expected?
The Gap wondering if perhaps they consider teaming up with Amazon – since beating them is just not working out at all well.
And yet that seems to be the retail curve ball of the week – with GAP CEO Arthur Peck managed to ring some genuine surprises out of firm’s annual shareholder meeting with the announcement that Gap was considering taking its show to the Amazon tent.
“To not be considering Amazon and others would be in my view delusional,” Mr. Peck said Tuesday in response to an investor’s question at the annual shareholder meeting. “We are always considering all of our opportunities beyond our traditional mix of channels and stores.”
Peck referenced the fact that currently Amazon isalready about one-third of all e-commerce sales in the U.S. by this year – and that by next year it will quite likely becoming the largest apparel retailer in the United States.
“To not acknowledge that and what it means to our strategy would be to have our head in the sand, and we do not have our head in the sand,” he said.
What is unclear at this point is if if the two companies are in discussions – or whether Peck was merely speculating or floating a test ballon. Representatives for Gap and Amazon declined to comment.
But were it to come to pass – is it more of a sizzle or a fizzle?
And for this week it seems to depend on which side of the equation you are.
For Amazon this seems to be a pretty clear sizzle. While some brands have notably migrated onto Amazon – a large iconic player like Gap with store chains and eCommerce channels under development of their own have tended to shy away from the Amazon market for fear of competing with themselves and giving away valuable data about their consumers to their competitors at Amazon.
If the Gap decides to refocus some of its digital commerce efforts around officially hanging out its shingle in Amazon’s marketplace – it may signal the beginning of a shift of those now struggling malls brands like Gap. This could be the official point where the benefits of being where the consumers are now “walking around” outweighs the risk of it being inside Amazon’s garden. That would be a very big win for Amazon.
For Gap it is less clear. As of now Gap is reporting four consecutive quraters of falling same store sales. Plus all three of its flagship brands are in trouble – in the past Old Navy’s persistent growth has fueled the firm – these days even Old Navy is bleeding customers. Share prices that have shed 30 percent of their value over the last year.
That something needs to be done to reverse the course at the Gap is clear – whether or not Amazon will be it, that remains to be seen. Customers might follow The Gap to Amazon – but it is not clear when they get there whether they will want the Gap’s wares anymore than they do right now – Amazon might just have better clothes on offer – or equally good clothes that are cheaper.
Can the Gap sizzle again? That remains to be seen. But Amazon is pretty clearly sizzling – and even better – perhaps convincing some retailers that it is better to join the Bar-B-Q with them that fizzle out alone at the mall.
There were some spectacular flameouts in the fizzle column this week – we could have said predictable fizzles, but we’ll let you be that judge.
Over on the sizzle front, some of what had been simmering has gotten hotter with, we predict, the potential to throw even more heat onto that fire in the not-too-distant future.
Sizzle
Software
The payments world got a pretty good look into the power of software to enable payments innovation this week. WePay started us off with news that its “we embed payments into software and not the other way around” strategy went mPOS. It took on Square by introducing a white label mPOS reader that makes omnichannel not only a reality for SMBs but a friction-free one at that — all of the sales made across any channel are all neatly integrated into the accounting software that they use to run their business. That’s because WePay embeds payments capabilities into software like FreshBooks that makes payments a seamless part of the solution for its SMB customers.
Just two days ago, we also saw how Google plans to use its software platforms to enable a variety of payments innovations across all of the channels consumers might like to use it, including the mobile browser. We heard PayPal CEO Dan Schulman discuss how PayPal’s consumer and merchant network – its “secret sauce” plans to “rewire commerce.” And peeked our heads into the progress of the PYMNTS 2016 Alexa Challenge Teams to see how they are using Alexa’s voice-enabled software and ecosystem to reimagine commerce and financial services.
Devices are only as good as the software platforms that make them magical. And it seems as though the cool kids are making software more magical than ever.
Amazon
You know when you hear the CEO of Gap say that he’d be “delusional” (his word) not to consider Amazon as a channel to peddle this stuff that retail has turned a big corner, at least some merchants are thinking of Amazon as more of a lifeline than a death knell.
With 7 percent of apparel sales already, Amazon – analysts say – is well on its way to a 20-percent share of the apparel market in less than four years. A trusted consumer brand, the one-click checkout, the nuanced “log in with Amazon” that one sees now on high-end sites like Moda Operandi (and not Pay With Amazon), and more and more of Amazon’s sales coming from the marketplace, merchants who want additional customer touchpoints are setting their issues aside in favor of booking sales in ways that were once regarded as unthinkable.
After all, desperate times (in traditional retail) call for new thinking – or as Karen Webster pointed out on Monday, a Twelve Step Program for Commerce Redemption.
Walmart
Walmart delivered retail’s only good news this week. In a sea of retail earnings gloom and doom, Walmart booked quarterly revenue of $115.9 billion, which was up over the $114.8 billion booked this time last year and the $113 billion that analysts expected.
Walmart’s CFO said that low gas prices and interest rates put more money in the consumer’s pocket, yet the uncertainty over the economy longer term keeps spending cautious. Analysts predict that better-than-expected performance will turn into better-than-expected price cuts for consumers as a way to keep them coming into the store – potentially putting pressure on competitors like Target who may not be as well-positioned to match discount per discount. The only soft spot was Walmart’s eCommerce business, which, with *only* 10 million SKUs, analyst say isn’t growing fast enough. But all in all, a good Walmart story – one that juiced Walmart’s stock price, which closed 9 percent higher yesterday.
Fizzles
Lending Club
We’re thinking that these guys might be on this list for a pretty long time – they have claimed a spot on this list ever since we started this series. This week, though, the fizzle-y part has moved beyond a demolished stock price and a potential gutting of the online lending space.
The combination of the DOJ subpoena for a Grand Jury investigation (yikes – that’s a criminal probe), the first (of potentially many) shareholder class action lawsuits, and a probe by the NY banking regulator about the relationships between loans and ties to financial institutions lays out a long spell of serious trouble for the organization and its board.
To top it all off, Bloomberg’s depiction yesterday of the incestuous connections between investors and the ousted CEO hints at perhaps a much bigger story to come – one that includes the blindspots that investors and the market develop when high-profile board members lend their street cred to “disruptive” platforms – and as a result investors fail to do their own due diligence to find out what’s really under the hood.
Theranos
Speaking of which, here’s an idea for the latest Netflix blockbuster: Orange is the New Black – The Silicon Valley edition. Between what’s unfolding at Lending Club and now the $9 billion company that was going to reinvent diagnostic testing that is now proven to be a total sham, it’s not such a stretch.
The fun began when regulators started a criminal probe into Theranos a month ago which would (will?) result in a two-year ban of its “female Steve Jobs” CEO Elizabeth Holmes. Then The Wall Street Journal reported on Thursday, May 19, that Theranos recalled each and every one of the tests it had ever done on the grounds that they were not accurate. As in tens of thousands of them – every single last one of them that its “revolutionary” Edison platform had ever done. This, some suggest, was done preemptively in an effort to blunt the prospects of Holmes’ banishment from this field for two years.
Wonder where they got that piece of advice?
This quote from the article is pretty classic and pretty much sums it all up: “There have been massive recalls of single tests in the past, but I’m not aware of one where a company recalled the entirety of the results from its testing platform,” said Geoffrey Baird, associate professor in the department of laboratory medicine at the University of Washington in Seattle. “I believe that’s unprecedented.”
But not really a surprise since, like a lot of things that get funded, once “groupthink” takes over and high-profile people start talking it up, and prominent VCs and hedge funds start throwing hundreds of millions of dollars at it and the board gets peppered with the likes of Henry Kissinger it has to be amazing – right?
Never mind that the board didn’t have a single scientist on it. And that Henry Kissinger may be a brilliant foreign policy expert but probably would be hard pressed to pass judgment on the scientific merits of new blood testing technology. Or that not a single piece of research was ever published in a peer reviewed scientific journal because the female Steve Jobs CEO said that their stuff was much too “top secret.”
And no one pushed back or questioned why — and kept giving them hundreds of millions of dollars that delivered a company with a $9 billion valuation.
Some might say who really cares since the people who will get hurt are the investors and employees who should have known and/or did but turned a blind eye. Oh, maybe those people whose test results were wrong and whose lives were potentially put at risk. Having “inaccurate” tests that can result in people dying maybe is a different kettle of fish than misleading investors.
Expect the lawsuits to begin.
MCX
Stick a fork in it. – it’s done. Despite lots of media reports to the contrary, MCX folded its CurrentC tent this week – and for good. The starring character in the MCX Fairy Tale in 2013, its value proposition of lower interchange to merchants just wasn’t good enough for consumers to adopt its mobile wallet.
Imagine that.
No one should be all that surprised. It took three CEOs and three years to get a product in market, and most of the big guys, including its anchor merchant, Walmart, were all going their own mobile payments ways. Brian Mooney’s announcement last week said that CurrentC had hit the pause button in favor of shifting its focus to bank partnerships. You might be able to fool some of the people some of the time …
The Amazon-Gap Pair-Up
Were one to ask most brick-and-mortar retailers what their biggest problem is today, Amazon might not be their first pick, but it seems fairly like that before they got out of their Top 5 the United States most prominent e-retailer would probably make the list.
Is it fair to blame Amazon? The question is complicated.
On the one hand, as Karen Webster pointed out in her 12 Steps For Retail Redemption, blaming Amazon isn’t really helpful. Amazon didn’t do any trick to outflank much of the physical retail world — it just did a lot of things better.
“Amazon has built its business around the consumer – what she wants to buy and how she wants to buy it,” Webster noted. “Amazon offers a massive number of products at reasonable prices that are delivered fast, thanks to Amazon’s massive investment in logistics and optimizing its supply chain. Increasingly, Amazon is where consumers start their journey to buy the things that present little risk to them of buying online. They trust Amazon will get to them in two days or less.”
Amazon found pain point after pain point in the consumer experience and then found solutions for them — and turned those solutions into valuable commodities in retail that its competitors could either match, or be mowed over by.
Which is why the question is complicated, because the urge to blame Amazon — and the so-called “Amazon effect” — is really understandable. When someone is eating your lunch, most of us want to blame that person instead of conceding they may deserve our sandwich more than we do.
And make no mistake, lunch is being served — Amazon’s sales were up 28 percent in Q1. And consumers aren’t just buying more — they’re selecting from an array of goods that is ever increasing (and encroaching). Clothes, baby goods, household product and groceries — things customers have long bought from other retailers — are now happily shipping (sometimes within hours) from Amazon’s warehouses to customers’ hands.
And even when Amazon is new the game — as it is with clothing (it surprise launched its apparel line less than three months ago) — analysts estimate that Amazon’s share of apparel sales is approaching 7 percent already and will likely grow to 20 percent in less than four years.
It is unsurprising that retailers — particularly hard hit department stores whose apparel space Amazon is clearly treading — view Amazon as their problem. Blame, jealousy and perhaps even the tiniest bit of resentment are perhaps to be expected, if not applauded.
“Most of it is crap anyway,” noted Postmates co-founder and CEO Bastian Lehmann during a fireside chat at Shoptalk in Las Vegas, of Amazon’s recent push private label products.
“There’s so much crap and boring stuff … the last thing we need is more of the same.”
But then Postmates is running a “competitor” service to Prime — and so it would be somewhat strange if he had high praise for a business that analysts routinely predict will eventually push him out of business.
Lehmann and other retail sector big players’ hostility toward Amazon is probably to be expected. Less expected?
The Gap wondering if perhaps they should consider joining up with Amazon, since beating them is just not working out at all well.
And yet that seems to be the retail curveball of the week, with GAP CEO Arthur Peck managing to ring some genuine surprises out of the firm’s annual shareholder meeting with the announcement that Gap was considering taking its show to the Amazon tent.
“To not be considering Amazon and others would be in my view delusional,” Peck said Tuesday in response to an investor’s question at the annual shareholder meeting. “We are always considering all of our opportunities beyond our traditional mix of channels and stores.”
Peck referenced the fact that currently Amazon is already about one-third of all eCommerce sales in the U.S. by this year — and that by next year it will quite likely become the largest apparel retailer in the United States.
“To not acknowledge that and what it means to our strategy would be to have our head in the sand, and we do not have our head in the sand,” he said.
What is unclear at this point is if the two companies are in discussions, or whether Peck was merely speculating or floating a test ballon. Representatives for Gap and Amazon declined to comment.
But were it to come to pass, is it more of a sizzle or a fizzle?
And for this week it seems to depend on which side of the equation you are on.
For Amazon this seems to be a pretty clear sizzle. While some brands have notably migrated onto Amazon, a large iconic player like Gap with store chains and eCommerce channels under development of their own have tended to shy away from the Amazon market for fear of competing with themselves and giving away valuable data about their consumers to their competitors at Amazon.
If the Gap decides to refocus some of its digital commerce efforts around officially hanging out its shingle in Amazon’s marketplace, it may signal the beginning of a shift of those now struggling mall brands like Gap. This could be the official point where the benefits of being where the consumers are now “walking around” outweighs the risk of it being inside Amazon’s garden. That would be a very big win for Amazon.
For Gap, it is less clear. As of now, Gap is reporting four consecutive quarters of falling same-store sales. Plus all three of its flagship brands are in trouble; in the past Old Navy’s persistent growth has fueled the firm. These days even Old Navy is bleeding customers. Share prices have shed 30 percent of their value over the last year.
That something needs to be done to reverse the course at the Gap is clear — whether or not Amazon will be it, that remains to be seen. Customers might follow The Gap to Amazon, but it is not clear when they get there whether they will want the Gap’s wares anymore than they do right now — Amazon might just have better clothes on offer, or equally good clothes that are cheaper.
Can the Gap sizzle again? That remains to be seen. But Amazon is pretty clearly sizzling and — even better — perhaps convincing some retailers that it is better to join the BBQ with them than fizzle out alone at the mall.
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