Looking forward to the future of business
Rizal Philippines
December 2019
From Business Insider - Retail apocalypse continuing
This shuttered mall symbolizes the difficulty in this business
About 8,000 retail stores have closed shop this 2019 which include Gap Stores, K mart, Sears. Most hard hit are electronic and clothes store.
The trend is likely to continue for the next 7 years. The reason: on line shopping e commerce On line shopping which is at 16% now will be at 25% in 2026 says UBS. All ready Amazon has increased its sales by $38 billion which is the equivalent of 7,000 brick and mortar stores. American on line spending is roughly $5,000 per family
Why is ecommerce on the rise:
1. Less hassle of parking and walking around the store;
2. More warranties: free return of merchandise available
3. You can chat with the store on the products (not Chinese sites)
4. You spend less effort (walking) and time going through their products.
This is made possible by convenient payment options: credit card, Pay Pal, Pay Maya and convenient delivery system (hehe tell that to Lazada which has a number of misdelivery, wrong delivery, missing delivery) especially if products come from China.
Ayala which has formerly focussed on brick and mortart mallss realizes the changing trend and has bought an on line retailer: Zalora to its portfolio. Those who still are into brick and mortar store may see the need as their sales plateau and /or taper off (much worse decline)
This post is bearish on restaurants and retails:
Retail:
1. Strong competition
2. Paper thin profits
3. Thefts (shoplifting) and rotting inventories (BO) or out of trend stocks abound
4. High labor costs
That tops up threats from competition - e commerce
Restaurants:
1. It deals with wants which is very volatile. Customer wants change constantly
2. Tastes of consumers is trendy - Customers may want chicken now but tomorrow it
may be salad, or vice versa
3. Thus, Jollibee in US sees failure with its Smashburger in the US, or BK closing many of its stores
Those that flourish like KFC in the Philippines are innovative in their menus to fit the changing wants
4. Restaurants are in the food eaten out of the house category. There are still food eaten in the house category, and in difficult times, families will scrimp on eating outside the house. Go back to basics
Those with long term prospects business are still in:
1. Finance
2. Real estate
3. Transportation
4. Energy
5. Communications
This will force rethinking on business investments and innovation. Which this site professes. They are huge spending sprees to build brick and mortar stores. Time to reflect as we see the current landscape of retailing and food eaten outside the house
FMCGs and pharma are now shifting to ecommerce platforms to cover all their bases. Medicines, milk and other grocery items are available on line:
Benefits :
To the consumer:
1. Convenience
1. Shopping is done on line at the comfort of the home via android phone and even anywhere
2. No traffic and parking head ache
3. No waiting at check out counters and dizzying crowd
2. Lower price
3. Even deferred payment
4. Delivery service at your door step. No need to lug your purchase hail a cab which becomes rare on these occasion
To the retailer
1. No bricks and mortars investment (except for DC as by Lazada and Ali Express - to control delivery
and inventory
2. In general, there are no inventories; most transactions are flow through, and hence
3. Little or 0 working capital requirement
To the manufacturer;
1. Access to the existing customer of the e commerce platform
2. Minimal or little delivery to the store, less logistic requirement
3. Less or zero collection from retailers (Direct to the Customer business model)
