Does Macy’s tell Gimbels?  Gimbels, Korvettes, Gertz, Lechmere, Lafayette, Woolworths, Montgomery Ward, Bradlees, and Zayre are amongst the dozens if not hundreds of retailers that I recall from my youth that have long since disappeared.  Many others merged into that blob now known as Macy’s, which isn’t Macy’s at all.  Macy’s itself suffered the indignity of being swallowed by arch-competitor Federated Stores, along with almost all other department store chains in the country, who then homogenized them all under the Macy’s banner. And Sears, once the undisputed king of retail in America, lost its leadership position to Walmart and has spent the last few decades steadily slipping towards oblivion.  More on Sears, its sister Kmart, Korvettes, and the interesting story of Zayre, coming up after this commercial break.

Do you suffer from Amazon.com anxiety?  Is your industry about to fall victim to this irresistible force?  Relax!  With Time Machine in a Bottle you can go back to 1994 and tell your younger self that the millennials and centennials are coming.  Yes, you too can try to convince your younger self that they’ll survive Y2K and Walmart only to have their throats ripped out by generations who never knew a world without universal computation and connectivity.  And you can regale them with stories of how Boomers and Gen X were happy to help the millennials and centennials feed on your entrails.   That’s Time Machine in a Bottle; When you really want to understand the futility of trying to get non-technologists to understand the coming impact of technology.

Retail is a tough long-term business.  The winners and losers change with consumer tastes, demographics, and shopping habits.  With a few exceptions, the retailers who dominated the city and town center shopping scenes of the 19th and pre-WWII 20th century failed to capitalize on the post-WWII move to the suburbs by what we today call the Traditionalists (aka, “The Greatest Generation”).  Many that did failed to hold the attention of the Baby Boomers and GenX.  Malls died, big box stores took over.  The headlines are about Amazon now, but for over a decade the headlines were focused on how Walmart was destroying local retail. Life still isn’t easy for Walmart, for example they are still banned from opening stores inside the New York City limits.

Woolworth defined the “5 and 10” store concept and was joined by S.S. Kresge amongst others.  Woolworth was the largest retailer in the world as recently as 1979, but “5 and 10” was a dying format.  It was one of the ones that didn’t really translate to the suburbs.  Woolworth tried other formats, eventually selling its WoolCo department stores to Walmart.  It closed the U.S. Woolworth stores, but the company still exists.  Although it was failing overall, Woolworth was being successful with sporting goods.  Today we know it as Foot Locker.  S.S. Kresge also moved beyond its “5 and 10” roots by opening larger general department stores under the name Kmart.  That happened about the same time as Wal-Mart (as it was then styled) was founded and Dayton’s started Target.  This was a really rich category actually, with chains such as Zayre, Bradlees, and Ames also coming into existence in the late 50s and early 60s.  Too many apparently, as most disappeared leaving Walmart and Target to become America’s iconic Brick and Mortar general merchandise retailers.  They were joined by specialty big box stores like Home Depot and Best Buy, and membership stores like Costco and BJ’s Wholesale Clubs, to dominate the late 20th Century/early 21st Century retail scene.  With the exception of Federated Stores a.k.a. Macy’s, few pre-50s major retailers are relevant today.

I could write pages on my perspective on retail history but, beyond probably being boring, I really want to focus on the current transition in retail and other histories.  I posit that everything we “blame” on Amazon would have happened anyway, it is just happening 3-5, maybe even 10, years faster than if Jeff Bezos and company weren’t in the picture.  Well, you say, if it weren’t for Amazon then Walmart, Target, Best Buy, etc. would be dominating e-commerce.  Really?  That’s not what the history of previous transitions in retail suggests.  It suggests that new leaders emerge from each transition, with most old leaders struggling and either coming out the other side significantly diminished (ala Kmart and Sears) or gone entirely.  If Amazon wasn’t there then someone else would have emerged to become “Amazon Light”.  But it likely wouldn’t have been one of the top brick and mortar retailers.

Let me illustrate this with a company whose name I actually don’t recall.  A former colleague had come from leading IT at a medium size multi-store general merchandise retailer.  He told me that the CEO, a very sharp retail guy, had signed over their website to a third part under a 10 year contract because “the sales from the web didn’t even add up to the sales from one retail store”.  A couple of years later e-commerce had exploded, but this retailer found itself unable to participate.  It’s unclear if they will still be in business by the time they can reclaim their online presence.  That’s a pretty typical story for a legacy player in a transitional environment.  Think back to how tentative the brick and mortar crowd really was at the start of eCommerce.  Barnes & Noble, which was expected to wipe out Amazon when it started selling books online, formed a separate company (bn.com) with other players to go after the new market, before eventually buying back the piece it didn’t own.

Recall what Jeff Bezos said last year when asked what Day 2 looks like?  “Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death.”  That is Sears.  Sears was Amazon in oh so many ways.  It was a Day 1 company from the 19th Century through the 1980s.  Its catalog operation was as important, and I believe as loved, as Amazon.com is today for many decades.  Even as a technology provider Amazon may have AWS, but Sears had Prodigy. In other words, it had enough foresight to see the coming importance of online almost a decade before the explosion of the public Internet.  But in 2003, just as e-commerce was really starting to take hold, it closed its general merchandise catalog business.  Sears had become a Day 2 company, and it is closing in on that final step of Day 2.

If Sears, the first A-to-Z national retailer that delivered everything to your doorstep (or at least the local railroad or stage-coach station) in even the smallest communities, and made the transition to bricks and mortar as American’s first embraced cities and then suburbs, couldn’t lead America into eCommerce then no existing retailer was going to do it.  How a company that had all the pieces, from the catalog to the online system to a century of “last mile” experience to having thrived over the course of 100 years of dramatic changes in retailing could so thoroughly miss this transition is almost beyond comprehension.  But there it is, they left a gap and Jeff Bezos was happy to fill it.

Which brings us more towards current battles, particularly the battle for customers’ between Walmart and Amazon.  This is less about “Day 2” then about long-term consumer preferences.  Let me start with two examples.  Korvettes was a large east coast discount department store chain that later in life fancied itself a competitor to Macy’s.  Actually think of the positioning as like Walmart to Target today.  While there was overlap, they largely appealed to different audiences with Macy’s being more upscale.  Korvettes wanted to attract the more upscale crowd and upgraded its merchandise (and correspondingly prices) as it tried to change its image.  The move failed as the more upscale shoppers, epitomized by my first girlfriend’s older sister who said “I’d never set foot in Korvettes”, resisted all incentives.  I think Korvettes’ executives finally realized it when they ran a heavily advertised sale on Mr. Coffee machines at something like half of Macy’s prices, then stood at a conference room window (the offices and flagship store were in Herald Square, across the street from Macy’s flagship store) and watched numerous shoppers still walking out of Macy’s with Mr. Coffee machines.  At least my father, a (IT) VP at Korvettes, came home that night knowing the magnitude of the problem.  Korvettes attempt ended up alienating their core customer base and they didn’t come back, becoming a factor in Korvettes’ demise.

The second, and shorter story, involved Walmart itself.  They decided to go upscale to get the shoppers who were frequenting Target.  I heard the exact same quotes from my affluent friends who were big fans of Target, that they wouldn’t be caught dead in Walmart.  And while I do shop there, I hate the experience and will always go to Target instead if one is convenient (and I haven’t already ordered online, which is the more common case the last few years).  Walmart itself recognized the lack of success, and reversed course before incurring much harm.

So as you look at on-line retail over the next few years Walmart has a much bigger challenge in front of it than Amazon.com.  It both has to defend against losing its core customer base, and it has to attract customers to shop at Walmart online who have a poor overall view of the brand.  This problem would exist even without Amazon in the picture.  Meanwhile Amazon, with a brand that is viewed as Nordstrom-like service at Walmart-like prices, can work to attract Walmart’s core customers with little risk of harming the brand.

One retailer that has been successful in spite of the growth of Amazon and eCommerce is actually Zayre.  Zayre, the brand and original stores are long gone, but the company lives on.  Back when I got my first apartment I mentioned to my father that I was largely furnishing it from a store called Zayre.  He proceeded to tell me how respected they were in retail, particularly for their advanced use of technology but also just for being forward thinking.  And indeed Zayre saw the future of retailing and started to shift.  It opened an early competitor to Costco, BJ’s Wholesale, and one comparable to Home Depot called Homebase (which later closed). It opened T.J. Maxx.  It then sold the Zayre name and stores and renamed itself TJX Companies.  Eventually it spun out the membership-based stores, bought off-price competitors like Marshalls and Sierra Trading Post, and created off-priced home furnishings store Homegoods.  TJX continues to thrive even as most retailers struggle, although it too must figure out how to better address Millennials and Centennials or someday face the music.

What Amazon is good at is focusing primarily on customers, rather than raw technology, products, or the competition.  It finds unmet, or poorly met, needs and tries to delight the customer with alternate solutions.  It also tries to skate to where the puck is going, not where it is.  It keeps course correcting until it intercepts the puck.  And if it smells blood in the water, that is if Amazon has enough success with an initiative to really know it is going to intercept the puck, it goes all in.  If Amazon enters your market the reaction shouldn’t be “Oh S&^( Amazon is going to kill us”, it should be “what can we do to serve our customers better?”  Put another way, if Amazon is entering your market then the problem isn’t them, it is you.