Thursday, February 19, 2009

Tech Ticker: More Retail Carnage.

Here is an interesting video clip about the carnage affecting major retailers in 2009



I'm seeing a very interesting trend here. The mainstream press continues to beat the "depression" drum; Brick and Mortar retail is in real turmoil; The Consumer's discretionary spending is not happening to the degree it needs to help these large businesses stay afloat and yet Amazon and Buy and other ecommerce pure-play sites are still growing. 

There will be winner's and losers during this recession and online merchants will be among the winners. In fact I'm hearing from many 3rd party sellers that they are continuing to show stronger sales then they anticipated. 

Spending is down and those companies that over-built or have huge overhead are not able to manage the sales downturn, many of them are too heavily in-debt to survive this turmoil. Small merchants on the other hand are not leveraged to the hilt, they have access to customers on their own websites and at marketplaces like eBay, Amazon, Buy.com  and the smaller sites. 

People are still spending but the big guys are the ones taking the hits. Smaller players are getting access to product that is being liquidated and are able to actually grow during this downturn. 

2009 will be a tough year for the Brick and Mortar and Click and Mortar retailers but 3rd party merchants may be the lone bright spot in this terrible retail environment.


Just my 15%

12 comments:

ms.pat said...

Its true! online sellers are doing well. I know that my own buying habits have turned almost totally to the internet. I enjoy browsing thru things sitting in my comfortable chair. I don't really care for going out finding parking and walking around trying to find what I want. In that respect, online sales will give B&M a beating. Top that with Amazon - very professional and all the online retailers. I just bought a small iPod Shuffle...directly from Apple because of free shipping and they engraved my name on the thing free. Before that my 500 gig external hard drive - from Amazon and all my books DVD's from Amazon and all my mp3 downloads also from Amazon. Convenience and price and good customer service is the ticket. If an online site adheres to that then they have it made!

Anonymous said...

But if this guy's theory is correct it would include places like Amazon and Buy since electronics, DVD's, books and etc aren't essential. He is making a case that all non-essential spending is down. He is not saying people are buying online. All the stores mentioned have an online presence.

Randy Smythe said...

Anonymous, he did seem like Chicken Little. The sky is falling and everybody is under water, when he really meant the luxury aspect of discretionary spending, sub $100 items still are selling but the stuff above $100 is having trouble.

Siva said...

Hi Randy

Your thesis that the recession is widening the gap between online retailers and physical stores is confirmed by the ComScore January e-commerce numbers - 2% growth! http://www.internetretailer.com/dailyNews.asp?id=29477

-Siva

ms.pat said...

He never once mentioned Walmart or Target - therein lies a lesson ;-)

Randy Smythe said...

Pat,

Yep, that is exactly the point. Sure spending is down but it is moving to the web (Amazon, Buy) from B&M and from Department stores and Luxury outlets to WalMart, Costco and Target.

You have to figure out how to live with lower margins.

I liken the problem with the luxury brands to the problems faced by eBay. If eBay wanted to stoke the marketplace they should cut fees in half.

Henrietta said...

"If eBay wanted to stoke the marketplace they should cut fees in half."

That would be a first step but there are other issues.

Someone who works for WalMart told me that when items are popular the price goes up, a little. This makes good retail sense but the key word is 'a little'.

For sales to continue in a spending slump there has to be a perception of value and it can't all come out of the seller's pocket or the seller will not gain any value from the deal.

eBay should be selling piles of quality used clothing. The additional 50% and up on FVF in the second tranche is not encouraging. Media gets a 57% break on the front end and 25% 'adjustment' in the patootie and what makes computers so special?

Clothing, Shoes and accessories: 12.00% of the initial $50.00, plus 9.00% of the remaining closing value balance ($50.01-$1,000.00)

Computers & Networking: 6.00% of the initial $50.00, plus 3.75% of the remaining closing value balance ($50.01-$1,000.00)

All other categories: 12.00% of the initial $50.00, plus 6.00% of the remaining closing value balance ($50.01-$1,000.00)

I have no axe to grind here, I don't sell clothing or anything else on eBay but I used to buy.

ms.pat said...

Randy - to make it even worse for B&M's stores like Walmart are selling online. I even order my prescriptions from Walmart online now. They'll mail them or I can drop in and pick them up. No waiting! Ebay needs to sharpen up because as the economy worsens it will be even more "dog eat dog". We are going to see some stunning sales prices everywhere. Ebay can't keep saddling sellers with heavy fees - they're going to have to eat some profits just like everyone else. I have to laugh because with the best match they stubbornly cling to most sellers can't get the views they need in order to make sales. Now, they may as well go to Bonanzle or some other site where its free to list. They get just as few sales as they do on Ebay - without the listing fees and hefty FVF's! Ebay is making itself undesireable as a sales platform - don't they realize this?

Anonymous said...

I sell new and used name brand clothing and doing pretty well on Ebay. I have heavily discounted prices. However, Ebay is eating a big chunk of my profits.

I was really encouraged reading the interview with the seller who runs Fashionphile (on Auctionbytes). To me, this seller epitomizes what Ebay was really about. She sells used authentic designer purses and shoes. She is knowledgeable and honest and has a product consumers really want.

What was encouraging is that in 2008, she really amped up her own website and to her astonishment made more than her Ebay sales. Eventually Ebay will lose her as her web site grows and her revenues increase by not paying Ebay fees.

And Ebay will become just another junk Chinese product mall.

Randy- I don't think Ebay will cut it's fees. Donahoe seems to be extremely cheap. I think he's more greedy than any CEO currently out there. He's tanking Ebay yet he'll walk away with millions and probably never admit to himself (or anyone else) he had anything to do with it's downfall.

Randy Smythe said...

Siva,

Its nice to have data available to support my 15% :)

Anonymous,

eBay won't cut fees but they should, its just not in their DNA

Anonymous said...

Amazon doesn't own inventory? Sears and jcPenny are luxury?

Randy Smythe said...

Anonymous,

Amazon does own inventory, but you are correct JCP and Sears are not luxury.

Basically, everybody but the discounters (Target, Wal-Mart and CostCo) is struggling.

It isn't yet retail Armageddon but the weak companies in each of the segments (Luxury, Department Stores, Specialty, etc.) are going away. The strong will survive and take share from the weak.