One of the primary thesis that I have on Retail is the ‘Unbundling’ phenomenon. With mobile and mobile apps, the consumer shopping journey is distinctly split into two parts – Shopping and Fulfillment.

 Shopping can happen anywhere anytime and will primarily be a click/touch tap away for the consumer. This means a retailer’s advantage of having stores remains a fulfillment factor and not necessarily a shopping advantage. And to the extent that retailers can fulfill immediately (aka stores) or quickly to home (prime, one day, same day), such fulfillment will be table stakes expectations for the customer.

 Then do retailers that have stores stand to have an advantage over those who don’t? (not if the pure play ecommerce players encroach on building ‘stores’ and fulfillment capabilities (aka pop up stores, same day, 1hr delivery etc.)

 Now that brings me to the question – Who has an advantage on shopping in this new mobile centric world?

In the pre mobile world retailers who built stores in close proximity to the customer won footsteps, shopping mindshare and thus the market.

Similarly, in a mobile centric world the ‘retailer’ who has the advantage, is the retailer whose app is on the customer mobile ‘home’ screen (or on key pages) That’s the digital equivalent of your store, just a tap away from the consumer.

This evens the playing field for retailers (the cost of getting a great shopping experience is the same for a large retailer as it is for a smaller one) (might be even easier and quicker for the smaller retailer).

 As a retailer, you can drive differentiation in 2 key ways – one being the shopping experience and second is your product assortment/pricing.

 Two dominant business models develop in this new market reality

 The marketplace driven retailer – This is the large retailer who wants to offer the breadth and depth of assortment at super competitive prices and will primarily compete on the ‘biggest box’ concept. Here shopping experience will be defined by availability of the product, price leadership, service and trust.  Fulfillment will be best in class on options and will thrive in ability to build a data driven, algorithmically optimized massive scale business.

 The niche retailer – The smaller retailer will start building into niche categories and carve out market share from the larger players, build a brand, and they will innovate on experience (flash sales, subscription, exclusive etc.)  and assortment (limited and curated).

(We have seen many players emerge – Trunk Club, Birchbox, Zappos, Zulily etc.)

Retailers who cannot adopt to this ‘unbundling’, and this new reality of business will start to get impacted.  Count Macy’s, Sears, JCP, Kohls, Dillards and many more into this. Some of these businesses just don’t have a massive moat of profitability and cash flow through their operations to sustain the attack of ‘unbundling’ and the giant Amazon march into their territories

http://www.seattletimes.com/business/retail/nordstrom-plans-to-lay-off-up-to-400-workers/

http://www.chicagotribune.com/business/ct-sears-layoffs-0226-biz-20160225-story.html

http://money.cnn.com/2016/01/06/investing/macys-cuts-3000-jobs-holiday-sales/

http://fortune.com/2015/10/23/jc-penney-layoffs/

http://www.bloomberg.com/gadfly/articles/2016-01-11/kohl-s-private-equity-sale-unlikely