For some, July 5, 1994 is the date that will live in infamy in the retail industry. That’s when Jeff Bezos founded Amazon and turned the world of shopping upside down.
Bezos elicits extreme reactions: he’s either the “whiz kid” whose fledgling online bookstore launched the ultra-convenient world of E-commerce, or he’s the narcissistic Croesus who settles divorces for $38 billion but is ruthlessly oblivious to his employee’s concerns. Politicians crying for the “breakup of Big Tech” use him as a poster boy — this is the same person who is one of the world’s leading philanthropists.
Love him or not, Bezos has changed the way business is conducted.
The shopping world pre-Bezos is epitomized in the scene in the 1988 film, “Big,” where actors Tom Hanks and Robert Loggia buoyantly hoof out “Heart and Soul” and “Chopsticks” on a sixteen foot floor piano in FAO Schwarz’s New York Flagship toy store.
Generations of children dreamed of going to Schwarz (founded in 1862) to soak up the magical, Santa’s Workshop intimacy — Schwarz had 40 stores around the country, each of them a shrine to destination shopping, especially at Christmas. In the film, Hanks and Loggia perform their number encircled by appreciative shoppers.
Two bankruptcies and a temporary closure later, Schwarz emblematizes how fast paced market forces can reduce a retail shrine to a shell of its former self.
The impact of online sales is startling evident in the numbers: in 2007, 5.1% of total retail sales were done online. Last year that percentage had grown to 14.3 %. Translating that to cash, $517 Billion was spent online in 2018.
And generational trend figures continue to point toward more of the same: 67% of Millennials prefer to shop on the web, 56% of the Gen Xers do and even 41% of the aging Baby Boomers agree.
Why is all this occurring, what happened to the magic of actually being at the FAO Schwarz’s of the world?
The list of answers is not complicated: consumers want the availability to quickly compare prices, shop at any hour of the day, the convenience of not trudging from shop-to-shop, the ease of finding hard-to-locate items and avoiding crowded checkout lines.
So previously impregnable retail giants are turning into shells because of the internet?
No, not entirely.
Take the Schwarz’s toy industry as an example. It’s not just the presence of the web that has made the difference — today’s consumers don’t seem to want toys, or at least the same toys as previous generations.
Barbie isn’t as popular today as digital games are — so the quickly evolving tech landscape is one of the chief drivers merchants must consider. Businesses need to reinvent themselves, and that doesn’t mean just establishing themselves online.
When Toys ‘R’ Us expired in 2018 after 70 years in business, the causes were high debts, poor management decisions, the lack of a reorganization plan, nervous vendors and changing society tastes.
The business cycle cannot be repealed, nor can a basic theme of natural behavior be ignored: change over time is the most certain human dynamic.
The funeral business has been overhauled in the last twenty years, particularly the last ten. Once upon a time, it was believed that the cost of a funeral should be roughly equivalent to the cost of your daughter’s wedding — nowadays, it’s hardly equivalent to the cost of wedding rings.
With the brisk growth in cremation, the business savvy consumer and the desire to personalize services more popular than ever, the business has evolved in ways few could have predicted. An internet presence is mandatory, but even with a great website, directors could not sell the public what was popular twenty years ago.
Frank Sinatra, Jr, who died in 2016 at the age of 72, spent most of his performing career singing standards written by Cole Porter, Johnny Mercer, and Alan Jay Lerner. In the age of Hip Hop, Sinatra Jr’s music was no longer charting. “It was like I was trying to sell antiques in a modern appliance store,” Sinatra, Jr. said. Fortunately, he had other sources of income or some adjustment would have been required (it’s hard to imagine Frank Sinatra, Jr. singing Kid Rock, but…).
Whole categories of business just disappear, it’s the way of the world. How many livery stables can be found on Main Street today? How about lamplighters, or human pin setters at bowling alleys or switchboard operators? Where did Blockbuster go? Pan Am? Woolworths?
Jeff Bezos is, as poet Carl Sandburg wrote, “Bringing changes into a world which resents change.”
He may not be the most admired man in the country, but Bezos is only the latest pioneer – static operating practices guarantee that a business will eventually bury itself.