Retail in the 21st and a half Century
I spoke a little about how the landscape of retail is changing on my youtube video and I’m expanding here.
I recently lost everything after buying a bricks and mortar store and this was after I considered and studied all the retail trends that were happening and where I thought retail would end up.
The large shopping centres and malls are in big trouble. They have millions and millions of dollars tied up in real estate and less and less people trekking there to buy anything. We all know we can get just about anything on Amazon now and that is by design. I spoke about The Everything Store by Brad Stone and once you read that, and reflect on it, you will understand without a doubt where the world of retail, and particularly Amazon, is going. So how are the shopping centres to compete? They need to feed and entertain you.
To do this, they have gone all in on food first. They already have movie theatres and they think that’s enough, they’re wrong, but for now they think that’s enough. So they want to draw you in with food choices, because everyone has to eat 3 times a day and that is where the money in retail is going to be.
Enter Uber Eats.
Now, people don’t need to even enter the malls. Everything they want is a click away. This is the model. This is where I positioned myself. Somebody has to make the food to fill those clicks right? That was going to be me, and it nearly worked, more on that later.
So let’s talk about wholesale/retail for a minute which I briefly touched on in the video.
At the moment you have a creator of a product. Let’s call it the remarkable pen. The remarkable pen is going to revolutionise how you write anything, not that people actually write much anymore, but stay with me. So the remarkable pen goes into manufacture and now needs a distributor to reach the market. The creator finds a distributor and they agree to buy 1000 lots at 5c per unit. It cost the creator 2c to create the pen so they’re happy because they just doubled their money and now waits to see if the pen gets into stores etc.
The distributor now tells their retail base that this new product has come out and you better get it into your stores straight away because it’s going to blow up. It will retail for about 50c and kill anything else on the market. The retailers buy through the distributor and pay them 25c per unit, feeling pretty happy that they will be able to double their money. The distributor has just made 20c per unit.
So you can see, the distributor is just the middle man. The creator is using the distributor’s contacts in the field to get their product to market.
Enter social media.
So a lot of creators are going straight to market now, and so they should. You can bypass your big retailers altogether and go straight to their Chinese sources. The catch is volume. You have to be able to move or use usually 1000 units of everything. This is where it gets tricky.
Amazon is already years ahead of you. The sellers on Amazon are often the Chinese manufacturers undercutting you at every corner or shutting you down for copying their ideas (ironic but true given Amazon’s policies on this).
As a food retailer, there are only a few distributors that have the ingredients I need. We’re talking bulk produce here. What I found during my research of these though, was that there are only 2 or 3 companies that manufacture these goods.
At the moment, food manufacturers have basically outsourced their shipping and fulfilment to a third party distributor who handles all the order filling etc. This makes it extremely difficult for the retailer to make any kind of profit because the margins are super low, and customers are drowning in competition for the exact same product which the food retailer next to you, is buying from the exact same place as you.
Enter the big supermarkets.
It’s cheaper, believe it or not, to buy your produce and ingredients from your local supermarket, take them back to your shop, and turn the ingredients into food, than to buy these ingredients through the wholesaler. It’s cost effective and imperative if a food retailer is going to survive the extremely high rents in most capital cities and shopping centres everywhere.
The only thing the food distributors have going for them right now is convenience – I get everything I need in one delivery – and serving size. I can get the large bottles, the large containers of butter, but the price per gram is the same as if I went to the large supermarkets.
Enter Costco.
Now I can go to a big retailer who stocks the large serving size (and more) and buy up everything and lug it home.
OR
The manufacturers of these products (really there are only 3 who make all your food worldwide whom I shall not mention cos their power scares me a little bit) should now move directly into distribution and cut out the middle man if they are going to survive. There is no reason, none whatsoever that I can fathom, why any of these manufacturers don’t have their own online store so I can just go and order what I need, and they control their margins without a third party taking a cut.
So are there still opportunities in retail? Hell yes and I will talk about those in another post. The opportunities are not however, trolling through Alibaba and trying to find a hot or unique product to buy, throw up on Amazon, Ebay or your own website and get rich. There are thousands, including the Chinese who made the product, already selling that crap AND you are competing against all those $2.00 stores that are filled with every item you can find on Alibaba. Do the exercise. Go check out Alibaba and then go to your local $2.00 store and then you will realise how doomed you are – but not entirely.
There is hope and I’ll talk about that a bit later.
If you enjoyed this post please share with your friends.
