Retail apocalypse likely to continue for the next 7 years, shuttering 17,000 stores? Grim landscape for retailers

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)

New business models being created....by new marketing platforms

Ateneo Professor on Entrepreneurship



July 12, 2019.

I buy from a website peddling all kinds of stuff:  bike jersey, bike parts, and lately to buy today, smartwatch.  But looking at the products they sell, it is a supermarket at the net:  they sell toys, clothing, infant formula, vitamins and even FMCG sells through them... 

They are outselling the old sites like OLX because of gimmicks, events, discounts, games and superior graphics.... And they cater to smart phones.  More and more people are buying and selling through these two popular sites with their deep discounts and promos (although they have chinks in the armor too)

And the malls too.   With their cheap prices and fast delivery, you are not in if you do not buy from them.  Their business have come of age because of internet, because of smartphones, apps, and courier services...

We were contemplating if our products and services can be sold through their platform...

If we will not keep abreast of the latest, then we can be dead...

Observations/analysis of a strama defense on a FMCG multinational business unit

Ateneo Professor on Entrepreneurship

 

I was surprised that I was invited again to sit at a panel of strama defense.  For unknown reasons,  I was never invited for almost a year.  Well, some of male professors have been notorious for being critical and strict with many defenders.  And for right reasons:  we want to ensure:    the quality of the GSB, and we want the student to proudly carry the title "Master"  The school has been branded as diploma mill for GSB.

Today I am back to my element.  While I gave passing grade to the student these are my observations:

1.  He discussed a business unit,  a multinational engaged in FMCG distribution and marketing, which in reality does not have degrees of freedom to implement the strategies. I thought the paper was on a SBU? He did not even mention the legal entity of the local business unit? or the business model.    He mentioned such limitations as:

     1.  Carrot and stick system of reducing AP because of flat, declining sales

     2.  The marching orders are from the regional head/office;

     3.  He blames the corporate stock outs for this problem, and I told that for a year or two that could have been corrected;  something external is amiss?

I thought that only strategic business units are subject of strama.?

2.  The student had audicious goal of achieving x number of billions of sales as his vision/goal for the next several years, yet:

     1. He could not clearly explain why the sales was flat.  He blames corporate woes including lack of correct execution;  but that would not sufficiently explain the flat sales

    2, He portrays the competition to be medium from several quarters and yet the sales does not keep up with growth of the economy and other external factors.  He failed to mention such developments as:    cheap substitutes, other product substitutes for feminine hygiene, and other developments in health care.   His mindset has been strictly pharma:  there are many alternative medicine that it may be eating into the market share. (I informed him that I write on this topic  Cheapcures)  He and his company may not be seeing reality and these changes.

3.  Consistency in the paper:

    1.  Growth opportunities/large markets were presented as beauty care, OTC, and yet were not present in the EFE, and thus in the strategy.   Thus his plan revolves on the products that they have sold before etc., same old story, me too strategy.

    2. For the IFE he prides the company on high engagement of the people, good culture, and yet states that the internal strategic issue has been that of correct execution  which are rather inconsistent.

I hope the professor in charge has the paper corrected and rewritten.

What has that strama paper achieved for the business and economy?  Not much I guess:

1.  Since this is not an sbu, what the regional office has dictated will be followed;

2.  Since the opportunities were not properly addressed, the x billion additional sales will find difficulty in the achievement.  The competitive pressures are not like wise addressed as well as increasing cost of sales channel.

3.  For the internal strategic issues, ie  that there is a need to address cooperation and coordination  (and the student prides in saying that they have strong adherence to corporate culture) and which is not addressed strongly, the problem will persist, execution will be a problem.

4.  Nothing new was presented except incremental improvements (I was hoping I will be surprised amazed).

At the end of the day, we passed a student who knows how to use strategic tool, but who did not create something new, nor made a dent in the universe. 

He did not rock the boat

Am I a panelist or terrorist?