Seeking Alpha
Professor, tech, energy
Profile| Send Message|
( followers)  

This week, there were two data points on the irreversible transformation of distribution (and employment) wrought by Jeff Bezos.

The first came in Friday's WSJ, reporting on Q4 results by Seattle's fifth largest company:

Starbucks Corp. reported slightly lower-than-expected revenue and same-store sales growth in its fiscal first quarter due, in part, to consumers' shift to online shopping during the holidays.

Howard Schultz, Starbucks's chief executive and chairman, told investors on Thursday that "2013 was the first holiday that many traditional retailers saw in-store foot traffic give way to online shopping in a very big way. Customers watched, waited, compared prices and then bought the brands and products they wanted online-frequently using a mobile device to do so" and that Starbucks is well-positioned to benefit from the shift thanks to its investment in mobile-payment options and electronic gift cards.

What does it mean to society if Starbucks (NASDAQ:SBUX) - Starbucks! - is losing sales because people are shopping in their PJs rather than the malls? Presumably Schultz will still get the commuters and business travelers, even if their seasonal bump is never again what it used to be.

The second data point came from entrepreneur Howard Lindzon, who makes his money collating stock insights on Twitter. In a (dead tree only) column in our local birdcage liner, he wrote this morning how "bricks and mortar" has become "bricks and mortuary," as America's largest e-tailer continues to put storefronts out of business:

Over time, more and more of us have become comfortable doing an increasing portion of our buying online. Amazon has won. With tortoise-like patience, it has conditioned us to expect low prices, vast selection, quick delivery and one-click transaction. it is hard to compete against it today. Ask Best Buy.

Best Buy (NYSE:BBY) was once the quintessential "big box" retailer. Of course, Blockbuster used to be the category killer for video rental, and look how that worked out.

Lindzon expressed skepticism about Best Buy's plan to improve online sales efforts in hopes of catching Amazon (NASDAQ:AMZN):

Good luck competing with Amazon on price and selection or on customer awareness. They have already won this battle. Your only chance is customer service, but it has never been in Best Buy's blood. It is hard to teach an old dog new tricks.

If I were still teaching undergraduate strategy, I'd point my seniors to the three essential truths here:

  1. The transformation of retailing is ongoing and unstoppable.
  2. Traditional retailers will be unable to out-Amazon Amazon, and only a handful will come close to competitive parity.
  3. The only hope firms have to compete with the volume leader is to offer superior service.

Some firms already value service, and may be able to find a way to monetize those competencies. For those that can't or won't, it's hard to imagine a viable path forward (other than exit via M&A).

Disclosure: No positions

Source: Nobody Beats Amazon