Amazon didn't start the retail apocalypse

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By: RickFerguson |

Posted on June 13, 2017

Much as been written - including by us - about the so-called Retail Apocalypse, with shopping malls, department stores, and specialty retailers plummeting into the fiery chasm of destruction as Amazon drone-ships the Four Horsemen to your closest suburban mall to lay waste to Macy's and its neighbors while Jeff Bezos blows the trumpet of doom to consign their CEOs to oblivion. While it's easy to blame retailers' troubles on Amazon rather than, say, a market correction driven by retailers' overbuilding in the last few decades, Bloomberg contributor Barry Ritholz argues that it isn't retail that has changed - it's us.
By Rick Ferguson
Ritholz rightly points out that, rather than Amazon purposefully setting out to obliterate the retail sector, the company has simply been better and faster at exploiting seismic shifts in culture, technology, and consumer behavior about which traditional retailers have either been in denial or have been slow to act. Money quote:
"What if something else entirely is occurring? What if many factors are creating an enormous economic shift that we cannot see because we are right in the middle of it? Consider the following: We have been slow to adapt to an ever-increasing set of economic, cultural and technological changes; excepting the young, most of us are not very good at the required adjustments. We increasingly resemble the slowly boiled frog.
"The word 'revolution' is tossed about too easily, but it is appropriate for the pace and scale of changes we see. We can hardly fathom the long-term ramifications of enormous sociological progressions that have been taking place before our eyes.
"Retailers have been having difficulty understanding these changes, much less responding to them. Perhaps the old economic rules of thumb are no longer as useful as they once were."
This notion is hard to argue against. Ritholz cites such factors as stagnant household incomes beyond the top one percent, new product categories such as smartphones and netflix vying for the consumer dollar, the desire for experiences over possessions, and the unprecedented time crunch in consumers' lives as some of the macro-forces that have combined to drive consumers away from traditional retail shopping. 
He's right, of course. The question raised by this point: Why has Amazon been able to capitalize on and profit from these macro-economic trends, while most traditional retailers have failed to do so? 
For the answer, we turn to one of the most evergreen treatises on marketing ever written: "Marketing Myopia," written by Harvard Business School professor Theodore Levitt in 1960, and republished in the Harvard Business Review in 2004. In it, Levitt lays out the case against "premature senescence:" that death spiral that occurs in business when a company becomes too product-focused and fails to respond to the changing needs of its customers. As an illustrative example, Levitt used the decline of the railroad industry in the 20th Century. Money quote:
"The railroads serve as an example of an industry whose failure to grow is due to a limited market view. Those behind the railroads are in trouble not because the need for passenger transportation has declined or even because that need has been filled by cars, airplanes, and other modes of transport. Rather, the industry is failing because those behind it assumed they were in the railroad business rather than the transportation business. They were railroad oriented instead of transportation oriented, product oriented instead of customer oriented.
"For companies to ensure continued evolution, they must define their industries broadly to take advantage of growth opportunities. They must ascertain and act on their customers' needs and desires, not bank on the presumed longevity of their products. In short, the best way for a firm to be lucky is to make its own luck."
That, my friends, is revealed wisdom, as applicable to the retail industry in 2017 as it was to the railroads 60 years ago. One moment that sticks with me is participating in a National Retail Federation Expo panel discussion about ten years ago with an executive from Macy's who said that his only job as a retailer was to "make sure the socks make it onto the shelves." In other words, he saw Macy's success as dependent solely on its ability to get products onto the shelves more efficiently and cheaply than its competitors.
My guess: That executive was probably cashiered by Federated in one of their many corporate downsizings over the course of the past decade. There was no mention of the customer in this executive's worldview; as far as he was concerned, the customer didn't exist.

Now contrast this attitude with that of Amazon CEO Jeff Bezos. Bezos has been relentlessly focused on his customers ever since he began shipping books out of his garage in Bellevue, WA in 1995. This Bezos quote sums up Amazon's focus in two sentences:  "The most important single thing is to focus obsessively on the customer. Our goal is to be earth's most customer-centric company."
So laser-focused is Bezos on delighting his customers that he has convinced his investors to trade short-term profits for long-term goals. In an April 2013 letter to shareholders outlining the company's long-term vision, Bezos said:
"I think long-term thinking squares the circle. Proactively delighting customers earns trust, which earns more business from those customers, even in new business arenas. Take a long-term view, and the interests of customers and shareholders align."
So Ritholz is correct when he outlines the market forces driving retail decline. The Macy's guy, on the other hand, was dead wrong: retailers aren't in the business of putting socks on the shelves; retailers are in the business of saving their customers time and money, providing a great experience for them, and building strong, mutually-profitable relationships with them. The sooner retailers realize that their business isn't retail, but rather selling customer relationships, the better able they'll be to act on Ted Levitt's advice.
Look, retail is a tough racket; unless you've walked a mile in a retailer's shoes - which I haven't, other than a brief flirtation with buying a small bicycle shop a few years ago - you really don't have the standing to criticize. So let's not. Many retailers today are relentlessly focused on their customers; they're innovating every day, and building trust, commitment, and reciprocity in their customer relationships. Many of them will thrive in the age of the customer, and find their place in the world alongside Amazon.
Some, however, won't. The simple truth is that Amazon didn't create today's retail climate; they simply exploited the opportunities better than most (and the cash cow that is Amazon Web Services helps, of course). By focusing as relentlessly on their own customers as Bezos did on his, any retailer can do what Amazon did. So what are we waiting for? Let's go!
Rick Ferguson is CMO and Editor in Chief of the Wise Marketer Group.