BOSTON, Feb. 27, 2015 /PRNewswire-USNewswire/ -- In their
new book, Retail Revolution: Will Your Brick-and-Mortar Store
Survive (Amazon.com), Harvard
Business School faculty members Rajiv Lal and José Alvarez
and former HBS Research Associate Dan Greenberg explore the
strategic options available to brick-and-mortar retailers in the
age of eCommerce. "Based on our extensive research," said
Prof. Lal, "there is an urgent need for rethinking the stores and
taking immediate action, without which many chains will quickly
enter zombie territory."
They present bold predictions for the future of retail: the end
of the one-stop-shop, increasing levels of price transparency
coupled with a flattening of overall prices, hard times for
one-size-fits-all retailers, and two very different retail futures
that will be dictated by whether Walmart or Amazon wins the battle
for eCommerce. They also repudiate the common misconception
that retail is a monolithic industry and introduce a framework that
brick-and-mortar retailers can use to determine their store
strategy in the face of the growing eCommerce threat.
Retail Revolution also explores the future of eCommerce.
Whether Walmart or Amazon becomes the central online player will
determine the future of retail. If Amazon wins, the focus of
retail will be on convenience. Shoppers will rarely leave their
home, and so much volume will be sucked out of stores that large
numbers of retail operations, including supermarkets, will no
longer be able to support their store base – to the detriment of
low-income consumers.
In the price-focused Walmart future, Walmart will use
supermarkets and dollar stores as eCommerce pickup points.
Retailers can then cluster around these collection points in order
to benefit from cross-traffic when customers arrive to pick up
groceries and eCommerce orders. While other retailers have for
years competed with Walmart, Walmart may become their saving grace
in the future.
The authors also identify three challenges eCommerce poses for
brick-and-mortar retailers, including fundamental shifts in
core categories to digital content and distribution; clear
advantages in cost, inventory, and selection on the part of online
retail; and for retailers mostly protected from the eCommerce
threats described in the first two challenges, the need to find
ways to build more store defenses and leverage online activities to
drive more traffic to brick-and-mortar operations.
Depending on which threats a brick-and-mortar retailer faces and
the unique advantages it may possess relative to online retailers,
physical stores have three possible solutions. First, they
can "Wind Down" in a process that continuously rationalizes the
organization and its store base to maximize the generation of cash.
Or they can "Shrink and Transform the Box" to cut the costs of
overly large stores and focus on the unique values that the store
can deliver to customers and brands. A third solution is to
"Enhance the Value of the Box" by providing in-store services and
education, merchandising private-label products, bundling products
for use in do-it-yourself projects, and using online tools to
direct traffic to the more experiential brick-and-mortar
channel.
The authors note that two of these solutions involve shutting
down and/or shrinking stores--processes that have major
consequences for the U.S. economy. Combined with the
increased labor productivity of online retail, these actions will
lead to decreased employment in the store-based retail sector,
which, since it accounts for at 11 percent of jobs in this country,
has long formed a large and fundamental piece of the American Dream
and safety net. To make matters worse, increased numbers of
blighted empty stores and a shrinking property tax base for
municipalities are other likely outcomes. Finally, a growing
increase in e-Commerce market share and the coming of Millennials
as the primary consumer segment may also negatively impact the 27
percent of GDP for which retails sales are accountable.
About the Authors:
Rajiv Lal is the Stanley
Roth, Sr. Professor of Retailing at Harvard
Business School, where he has been responsible for the
retailing curriculum and has served as course head of Marketing in
the required first-year MBA curriculum. He currently co-chairs the
Executive Education program on Building and Leading a
Customer-Centric Organization.
José Alvarez is Senior Lecturer of Business
Administration at Harvard Business
School. He was previously president and CEO of Stop &
Shop/Giant-Landover, a subsidiary of Royal Ahold, from 2006 to
2008. He has nearly twenty years of experience in
retail management.
Dan Greenberg is a 2012
graduate of Harvard Business School.
Before attending HBS, he was a consultant at The Lucas Group,
advising retailers, wholesalers, and distributors on new market
development, growth strategies, and supply chain optimization.
ABOUT HARVARD BUSINESS
SCHOOL
Founded in 1908 as part of Harvard University, Harvard
Business School is located on a 40-acre campus in Boston. Its faculty of more than 200 offers
full-time programs leading to the MBA and doctoral degrees, as well
as more than 80 open enrollment Executive Education programs and
more than 60 custom programs. For more than a century, HBS faculty
have drawn on their research, their experience in working with
organizations worldwide, and their passion for teaching to educate
leaders who have shaped the practice of business and
entrepreneurship around the globe.
Media contact:
Jim Aisner
HBS Marketing & Communications
jaisner@hbs.edu
617-495-6157
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SOURCE Harvard Business School