CEO Thoughts

Success in a Post Amazon World

The future is clear for the last generation of major American Brands. It’s going to be death by a thousand cuts.  

Last year, Amazon’s sales were up 40% and the share of holiday sales attributed to online purchases rose double digits for the tenth consecutive year. Forrester Research predicts that by 2017, 60% of all retail sales in America will involve the web in some way. In the 4th quarter of 2015, Amazon snagged 39.8% of those online sales, more than the next 28 retailers combined.

This is a juggernaut that can’t be stopped and it spells doom for old-school business models. 

Brands that rely on top-heavy, unwieldy, and enormously expensive networks of thousands of retail stores are finished. Abercrombie and Fitch, The Gap, Wet Seal, Banana Republic and all the rest are descending into the ninth circle of financial performance hell. In the jewelry market we play in, much the same can be said for Zales, Kay’s, Jared and the whole mall jeweler mess.

If they don’t evolve quickly they will be squeezed out and die between the two new dominant forms of retail brands which are reshaping how America (and soon the world) buys things.

The first of these are the “Automator’s”. These are companies that brilliantly, diligently, and ruthlessly squeeze out every efficiency possible in bringing the product to the customer in the most convenient, cost-efficient and error-free way. These brands are exemplified by Amazon at the top of the market and Walmart at the bottom. 

In the late 1800s, Sears and Roebuck revolutionized retail by sending out millions of catalogs with thousands of products in them to homes across rural America. They brought the ability to browse and purchase an incredible array of goods to a customer’s fingertips, and to have those products delivered to the customer’s doorstep.

Amazon has simply done the same thing in the digital age, and they have done it in such a dazzlingly impressive way that their position is virtually unassailable. Their business is simply impossible to compete against for many retailers.

Walmart has basically become the same thing for people without credit cards.

On the other end of the spectrum, there is another new type of competitor that is changing the landscape: the “Humanizer’s”. (Automator’s and Humanizer’s are the terms used by the brilliant Bayard Winthrop, CEO of American Giant)

The Humanizers are new-school companies like Warby Parker, Nasty Gal, Lolly Wally Doodle, and of course, your friends here at Forever Companies.

For the Humanizer brands, size and scale do not define success. Efficiency, quality, customer service, and company values do. They are keying on the few things that Amazon can’t do: Have a human touch, listen and talk to customers from all over the world in real time, and most importantly – mean something.

The Humanizers take all of that enormous cost that is wrapped up in the old-school brands investment in thousands of stores, thousands of retail employees, boxcars of inventory, layers of management, multi-million dollar television ad campaigns and all the rest of the expense that really doesn’t benefit the customer, and they invest it in three things: product design and quality, customer experience, and customer care.

The old-school retail brands with their 20th-century cost structures and suffocating complexity are caught in the middle. They can never compete with the Automators in convenience, selection, and ease of use, and they can’t compete with the Humanizers in product quality and customer care. They are caught in the middle, and they are being squeezed at both ends. Their reaction so far has largely been a desperate attempt to cut costs by outsourcing more and more manufacturing offshore, which further lowers quality, and laying off staff, which further worsens customer service.

I believe the beneficiary of all of this will be the customer. The customer will be able to choose from extreme efficiency and ease of use from the Automators for commodity-type goods, and higher quality products with better service from the Humanizers. And, they will be able to choose Brands that fit their personal thoughts, beliefs and truths.