The retail apocalypse is so overblown by the media and analysts my head wants to explode. Lazy articles from CNBC and other news outlets clump together store closings from long dying retailers like Sears and Kmart with those announced by Macy’s. I have many concerns about Macy’s but there is no connection between these companies from a performance perspective. One recent article says that Amazon is eating their lunch. Ah, no, if Amazon were not in the mix at all, Sears/Kmart would be in the same situation. Watching this slow death spiral that really started for Kmart when I still worked there in 1994 is painful. Macy’s has been impacted much more by off price stores like TJX and Ross, as well as the cultural shifts toward more casual dressing. The inevitable comparisons of Amazon and Walmart are equally as silly. Yes Walmart was slow to fully embrace ecommerce but actions they have taken in the last 18-24 months have righted the ship. Amazon’s threat to Walmart has been overblown, certainly compared to its physical threats in the US market from Aldi, Dollar General and soon Lidl.
I admire Amazon for its innovation and customer focus, but it is not destroying all retail. I call this Amazon Derangement Syndrome (ADS), and it’s reaching a fevered pitch. Do you suffer from it? The symptoms of chronic ADS include:
- Believing that Amazon’s market cap ($587B as of 1/5/18) should be nearly twice that of Walmart ($297B as of 1/5/18)
- Ability to ignore key metrics on SEC filings, focusing only on top line growth
- Overestimating Amazon’s market share (roughly 4%)
- Believing that because you are part of the high income demographic, and order from Amazon all of the time, everyone in the country will do the same
By all accounts Amazon had an amazing year in 2017, and record sales over the holiday period. I am waiting eagerly to see just how painfully expensive all of this was…I suspect the bottom line will be negative. Fulfillment costs have been growing at a much faster pace than sales for several years and likely continued this trend through 2017.
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