Predictions. Predictions. Predictions.
It is that time of the year again, the time where every retail pundit, from yours truly to the guy with a half dozen followers who loves to troll people on LinkedIn, offers up their thoughts on what the future holds in store (pun very much intended).
2021 is coming to a close and good riddance!
From a satirical pundit’s perspective, the past year was about as boring as the English Patient. Retailers (and the headlines) were so overwhelmed with talk of everything, from supply chain disruptions, staffing shortages, and inflation, to also a little something still called a “pandemic,” that it left very little room for even the most well-placed barb on the most ill-timed gaffe by a multi-million dollar earning CEO because this year was, well, damn hard for just about everyone. Everyone, it goes without saying, deserved a little break.
So, with the year coming to a close, it is time to sweep 2021 into the dustbin of retail history and to look to the future. It is time to predict tomorrow’s headlines today.
And, to do that, let’s start right off with a bang:
Prediction #1 – Amazon’s New Department Store Is Real And It’s Spectacular
This past August news broke that Amazon plans to open a new type of department store. The planned locations are said to be roughly 30,000 square feet (much smaller than a traditional department store), the stores will carry an assortment of clothing, electronics, and household items, and the first locations are said to be in California and Ohio.
The concept, if it plays out as described, will likely be Amazon’s biggest and boldest move in physical retail to date . . . had it not just opened up a 40,000 square foot “Just Walk Out” Amazon Fresh
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In a move that garnered very little attention, Amazon took its “Just Walk Out” technology to full scale in grocery the week before Christmas. This move was significant for two reasons.
First, getting “Just Walk Out” tech to work at that size and scale is hard. Really freaking hard.
For comparison, no other retailer has broached anything more than 3,000 square feet as a live, public operation at this point. Amazon took its tech from roughly that same size when it first opened Amazon Go in 2018 to 40,000 square feet in just over three years, and it is, therefore, rationale to conclude that Amazon now believes the tech is ready for anything.
Second, which brings me back to my prediction, it is also reasonable to assume that the same tech could cover the footprint of a 30,000 square foot department store, which implies that it is all the more likely that the rumored department store will be a “Just Walk Out” store as well.
So, imagine, just imagine, an Amazon department store where you walk into the store, try on anything you want and just walk out. All of which means no more waiting in lines or having to flag down an unfindable Macy’s employee to fold and take the security tags needlessly off of one’s garments ever again.
There’s kind of a lot to like about that idea already.
But, if one extrapolates out the tech platform to also include a new wrinkle, RFID, then things get even more interesting because the likelihood of smart fitting rooms takes on new dimensions, as do other digital interactions throughout the store or on one’s mobile phone.
Or, said another way, the retail world could be looking at the coming advent of the first truly personalized store in the United States.
2021 was the year Amazon redefined the modern grocery shopping experience. 2022 will be the year it does the same for the dying department store.
Prediction #2 – Instacart Will Become The Company Formerly Known As Instacart
After a whiz bang, pandemic-fueled 2020, Instacart began to lose the polish on its third-party delivery vehicle car wax in 2021.
There are now a number of indications that things are going to get worse before they get better, too.
First, top level executives have begun leaving the company faster than a Gopuff delivery. In the past month, Carolyn Everson, formerly Instacart’s President, and Seth Dallaire, formerly Instacart’s Chief Revenue Officer, both exited the company stage left.
Second, Instacart has begun pushing itself as an “as a service” platform for nearly every aspect of retailing out there – delivery, microwarehousing, curbside pickup, etc. Some of which are adjacent to its core third-party delivery activities, and some of which, particularly the microwarehousing as a service concept, couldn’t be farther from them. No matter how one slices it though, it is difficult being a business that says, “yes,” to everything.
Third, retailers have gotten wise to the situation. For example, retailers are desperate to claw back their first-party relationships with their customers and to bring delivery in-house to save costs, and some of them have even begun deploying delivery orchestration software that enables them to bid out deliveries to multiple third-party services, as opposed to being beholden to one provider, thereby forever relegating Instacart deliveries to white label status for the long-run.
Fourth, and finally, they have a young CEO at the helm, Fidji Simo, who spent 10 years at Facebook and whose experience is about the farthest thing from operations and logistics as one gets, even in the metaverse.
All of which implies that Instacart is about to have a tough year. Its valuation will suffer and, therefore, no one should be surprised when it becomes an acquisition target.
The likely acquirers?
DoorDash, for sure, as the two have done the partnership dance already, and DoorDash also feels much farther afield on the next level steps it will take to differentiate itself within the space, like opening up its own store fronts and leveraging its strong position in restaurant delivery.
And, finally, don’t be surprised if Walmart
Doug McMillon had the guts to buy something of far less strategic value before (Jet.com), so what’s to say he wouldn’t pull the trigger again for Instacart at the right price?
Prediction #3 – The Buy Now, Pay Later Craze Gets Even Crazier
The BNPL craze took off like a rocketship this past summer when Square acquired Afterpay for $29 billion and has not looked back since.
Adobe recently reported that BNPL sales jumped over 400% this past November compared to 2019. That is a startling statistic to say the least, but one that gets even more startling when one realizes that BNPL activity primarily occurs online at this point. The bulk of retail, where some 80% to 90% of sales happen, i.e. in stores, has still remained relatively untouched by the BNPL trend.
It, therefore, is only a matter of time before legacy retailers continue to get wise to the fact that, one, BNPL is a superior credit instrument to traditional credit card financing when used and understood appropriately, and, two, they can begin to look for ways to allow their customers to use it in their stores. The conversion impact of BNPL in the online world is so huge that it is easy money for the taking once it comes into stores.
Smart retailers like Target have already begun the process to make this happen. 2022 will be the year many other retailers follow the trend.
Prediction #4 – Bed Bath & Beyond’s
BBBY Private Label Strategy Gets Exposed
Bed Bath & Beyond CEO Mark Tritton arrived in late 2019 and told the world how he would makeover Bed Bath & Beyond one new private label brand at a time.
However, the problem with this strategy, one which Tritton brought with him from his days as the Chief Merchandising Officer at Target, is that it is built upon a false strategic premise – one called the “Product Problem,” which is the mistaken belief that, if a retailer puts better products on its shelves than the next guy, people will come.
Well, they most certainly won’t, Ray. Scratch that, Mark.
The reason being that, even if the private label products that get introduced at Bed Bath & Beyond are all knock your socks off, people will still over time begin to buy more and more of these products online, meaning they alone cannot work as store traffic drivers.
People often forget that Target’s private label products work well because they also operate inside of a bigger hook – Target’s one-stop shop appeal.
What is that appeal for Bed Bath & Beyond? The coupon?
Sadly, this answer is still undetermined, which is why, come 2022, when the new private label lines are all tucked in and launched on the shelves, the Bed Bath & Beyond c-suite will soon turn to each other, look, and say collectively, “Oh sh*t, what do we do now? Our strategy has no clothes.”