Shopping: A going concern

When it comes to the new world of retail, what company comes to mind as being on the cutting edge?

In June Sears Canada issued a financial update on its first-quarter 2017 results that included the following: “the ability of the Company to continue as a going concern is dependent on the Company’s ability to obtain additional sources of liquidity in order to implement its business plan. Based on management’s current assessment, cash and forecasted cash flows from operations are not expected to be sufficient to meet obligations coming due over the next 12 months.”

In an attempt to survive, the company has sought protection under the Companies’ Creditors Arrangement Act and announced plans to close 59 of its 255 stores and lay off 2,900 of its 17,000 staff. Why did this happen to such a storied institution?

The answer is that the existing model of selling through large department stores is being attacked by the proliferation of online shopping sites. But wait, Sears is the company that started its mail-order business in 1888. If anyone was going to be ahead of the curve in delivering through the mail, it should have been Sears.

When it comes to the new world of retail, what company comes to mind as being on the cutting edge?

How about Amazon? (Disclosure: I am not in any way connected to Amazon.) I started using it a few years ago and now only drive to the mall if I have to. In addition to the inconvenience of finding a parking space (argh!), there are several reasons why online shopping is replacing in-store shopping.

Choice. We had our living room updated a while back and we were looking for an end table to match the new décor. We spent a number of hours in various furniture stores and found a couple that were OK, but nothing that seemed quite right. Then we went onto Amazon and entered “end tables for living room.” There were 6,015 results. How on earth is a traditional brick-and-mortar company ever going to compete with that?

Customer reviews. I find reviews very helpful. Obviously some of them are bogus, but if you are comparing product A with product B and A has 125 reviews with an average rating of 4.5 stars and B has 12 reviews and an average rating of 2 stars, which one are you likely to order?

Price. The price is the first thing you see. Even if you don’t buy the product via the website, it’s a great way to find the best price.

Convenience. Items are shipped to your door and often quickly. For example, Amazon Prime offers free two-day shipping on some items and free same-day or one-day delivery on items in select areas.

But Amazon is not just an online store. Amazon Web Services offers cloud-based services such as web and mobile applications, data processing and warehousing, storage and archiving. Prime Video is an on-demand service that includes TV shows and movies developed by Amazon Studios. It recently announced a Wardrobe service where you can try on items at home before you buy them. And it’s a leader in how people will be interacting with their computers soon — through its voice-activated smart speaker, Echo, and its personality, Alexa (not available yet in Canada). She can answer questions, read the news, report on traffic and weather, provide sports scores and schedules, read audio books and place phone calls and send texts.

But the company is not just focusing on online services. It recently paid US$13.7 billion for grocery chain Whole Foods Market, with more than 460 physical stores. Perhaps it plans to use the locations for warehousing and distribution purposes so it can reduce delivery times even more. Or maybe it is going to bring grocery shopping into the 21st century by eliminating the routine of wandering down aisles looking for something you need while the store hopes you buy something you don’t (which is why milk and bread are at opposite ends of the store).

It’s not just effective use of the Internet that makes some organizations more successful than others; it’s the company’s desire to seek out what people want and to give it to them. Companies such as Amazon are more likely to survive and thrive because they are focused on the future and have the management expertise and financial backing to create services that people want. The key for retail, and any business for that matter, is not to just offer great products or services, but to have management that is interested in what the next great product or service is going to be. My guess is you’ll see more going concern notices from companies that don’t think this way very soon.