The Death of Traditional Retail?
Last month, we talked about the decline of mass merchant monolith, Sears, in an increasingly diverse, online retail environment. Sears is not alone in this struggle – brick and mortar retailers around the globe are struggling to adapt and thrive in a changing marketplace where online retailers have the economic advantage. Whether traditional retail will survive this shift has become a hot topic among those making bets on the future.
In his conversation with PandoDaily’s Sarah Lacy, internet icon and Silicon Valley VC, Marc Andreessen (a16z), recently predicted the death of all traditional retail. The way he sees it, retail doesn’t have a chance.
“Retail chains are a fundamentally implausible economic structure if there’s a viable alternative,” he says. “You combine the fixed cost of real estate with inventory, and it puts every retailer in a highly leveraged position. Few can survive a decline of 20 to 30 percent in revenues. It just doesn’t make any sense for all this stuff to sit on shelves. There is fundamentally a better model.”
In his view, online retailers not only have the economic advantage, but software is progressing in such a way that online shopping will soon be able to compete as an equally rich shopping experience. As Andreessen puts it, “software eats retail.” And he is putting his money where his mouth is, making bets on pure ecommerce plays with companies like ShoeDazzle, Zulily, and Fab.
But there is another side to this conversation. Just a week after Andreessen predicted total doom for traditional retail, Reid Hoffman, another heavyweight Silicon Valley prophet, responded to say that he thinks that offline retail is here to stay. Hoffman believes that software will simply continue to enhance and transform our traditional retail shopping experience, and he is making his bets accordingly. His firm, Greylock Partners, is investing in software companies like Shopkick, Wrapp, and Swipely that, “amplify” the traditional shopping experience. Both are putting their wallets where their words are, and what’s clear is that in both views, the traditional stand-alone retailer does not have much of a future. Which means there are probably going to be some killer sales.