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Fast Five: Amazon is disrupting retail faster than we expected

I loved this week! While last week was a bit of a snore, this week was CRAZY! We saw some really cool headlines, and these headlines have already generated a ton of great dialogue amongst Omni Talk’s readers on LinkedIn and Twitter too.

To sum it all up, Amazon is winning, and the subsequent disruption from their ability to kick everyone’s asses is now starting to happen even faster than anticipated.

I cannot wait to continue the conversation with all of you after today’s edition of the Fast Five, so let’s get right to it . . .

#1) Walmart pummeled on slower e-commerce growth — Retail Dive

To start, anything with the world “pummeled” in it is awesome. Stanford pummeled Cal. Kylo pummeled Snoke. The guy talking on his speakerphone next to me at Starbucks should be pummeled. They all work. You can’t go wrong with the word “pummeled.” Nice headline Retail Dive.

Click on the above headline, and it does not disappoint either. As I feared in my 10 surprising retail predictions for 2018, this year could be an inflection point for Walmart. Walmart is now entering Act II of the Marc-las (McMillon and Lore) bromance. Act I was awesome — a veritable love fest of press releases, acquisitions, and Bloomberg Businessweek news articles about how digitally forward and innovative Walmart was starting to become.

Now we are entering Act II, and I fear things may take a turn for the worse, like an Empire Strikes Back turn for the worse, where the role of the rebel alliance is about to be played by Walmart. I hate to say it, but spending the money Walmart spent to buy Jet.com ($3B) and others was a really easy way to get digital growth. Give me +$3B, and I honestly think I could have delivered digital growth near the numbers Walmart and the press were giddy with glee over in Q2 and Q3. But, admittedly and rightly, that is a myopic viewpoint on my part. The investment was for the long-term, not just 2017.

Until we see tangible evidence of how Walmart plans to differentiate and get traffic back to their stores for the long-run though, I cannot buy into their plans, no matter how sincerely I want to. The makings are there for something great, but Act II will be the defining moment.

Act II will determine if McMillon and Lore ride off into the sunset like Thelma & Louise, forever preserved for posterity, or if Lore instead ends up like Luke Skywalker’s hand at the end of Empire Strikes Back, with the role of Darth Vader being played, not by Amazon, but by the Walmart Board of Directors.

Plus, how can you not bet against a photo like this . . .

Souce: Bloomberg Businessweek

And, yes, I did just drop three Star Wars references in one section about Walmart. Holla!

#2) Wayfair sales rise 48%, but losses widen — Retail Dive

Wayfair reported earnings this week too. Like Walmart, Wayfair’s performance was below expectations, possibly signaling that Wayfair’s predicted sophomore slump may indeed be underway — Wayfair’s stock was down a whopping 20% most of Thursday.

After last week’s Fast Five on the alarming “Wayfair Riddle,” I did some more digging.

Fun fact: Disney paid roughly $4.0B for Star Wars. Wayfair’s market cap, even after Thursday’s price drop, is still right around $6.5B. While the following comparison is in no way scientific, what would you rather have?

Darth Vader for $4.0B?

Or a company whose brand logo looks like it was the leftovers of a marketing project by a summer intern with the Utah Jazz?

Going forward, I will be closely monitoring Wayfair against what I am newly dubbing the Darth Vader scale.

#3) Amazon plans to open as many as six more cashierless Amazon Go stores this year — Recode and Amazon’s latest Prime perk: 5% cash back at Whole Foods — CNN Money

In the latest “oh shit, what did Amazon do this week headlines,” rumors spread that Amazon is opening up more Amazon Go stores, and Amazon also announced that Whole Foods shoppers who use the Amazon Prime Visa card will get 5% back on all their Whole Foods purchases.

One word on Amazon Go sums it all up — merde.

That’s French for “poop.”

Looks like Amazon has found the latest apex to its pyramid scheme with the public. C’est la vie — urban convenience stores.

In regards to 5% cash back at Whole Foods — this is also another brilliant move by Amazon.

It counters the pre-acquisition “whole paycheck” concerns about Whole Foods, it gives Prime members another incentive to love Amazon (because they need more), and, as always, it makes Amazon even stickier for the American public.

My wife and I got the Prime Visa card months ago. Saving 5% on Amazon purchases is a no brainer.

Saving 5% on the ingredients to avocado toast — that’s yuppie nirvana.

#4) Albertsons, Rite Aid deal creates U.S. supermarket healthcare giant — USA Today

The Albertson’s/Rite Aid merger is important not because it is smart, but because ultimately it shows just how desperate companies are beginning to get in the wake of the Amazon threat.

The combined annual revenues of these two companies will become roughly $83M, but I could not care less. I should care, but I don’t.

Why? Because this move is like the Polish army coming to meet the German blitzkrieg on horseback. In the long run, it won’t matter one bit. Merging a grocery store with a pharmacy? Ok, but haven’t we seen this move like 100 times already?

I guess putting more people inside the Alamo would have helped the Alamo survive a little bit longer, but it was still the Alamo.

Ok, enough with the war analogies — the sleeping giant (Amazon) has already awoken.

Tora! Tora! Tora!

Sorry, I just had to.

#5) Toys ‘R’ Us reportedly facing loan troubles — Chain Store Age

If the above four items were not convincing enough, this headline highlights how quickly the retail platform is burning. Reports are circulating that Toys ‘R’ Us is at risk of breaching the covenants on its loans.

While saddened by this potential turn of events, it may just be time to say good-bye.

Toy ‘R’ Us doesn’t have a “hook” anymore. The products it sells are available everywhere, at the push of a button, from many competitors. Its position as the toy superstore no longer holds the value it once did. Toys have gone past the tipping point of e-commerce penetration.

Like many, I was a “Toys ‘R’ Us Kid” of the 1980s. I was also a kid who went in and out of Sears with his father every weekend. My kids will likely never know either retail experience.

Further disruption is going to happen. How we now accept it and work to cushion the blow is all that really matters at this point.

Be careful out there,

Chris

P.S. On a positive note, this week J. Crew hired Adam Brotman, formerly of Starbucks, to be its new chief experience officer. I applaud this hire, and hope it is a sign of things to come.

As I wrote in Product Management, not Product, J. Crew’s recent tough times may have been due to their confusion over product vs. product management. The merchant princes no longer reign supreme at retail companies, and, as this hire may indicate, it is time for them to pass their torches onto men and women skilled in the art of product management.

Bar none, Starbucks has the best omnichannel retail experience in the United States right now. I would take the Pepsi Challenge with Starbucks against anyone. While coffee and apparel seem like apples and oranges on the surface, the discipline of product management requires the same skill set regardless of the product category. Understanding the intersection of user experience design, technology, and business is the same whether you are selling chinos or cappuccinos.

Good luck Adam — we are pulling for you!

P.P.S. If you are a faithful reader of the Fast Five each week, you of course probably religiously share this material with your friends and colleagues (please and thank you) and you also probably quickly identify that 30% to 40% of my headlines each week are taken from Retail Dive. If you want even more great retail news each week, and haven’t yet subscribed to Retail Dive, here is the link to subscribe to their daily emails. If you want to be doubly cool, you can sign up for Retail Dive and Omni Talk too.

P.P.P.S. Yesterday I celebrated my 41st birthday. My father passed away when he was only 38 years old, so every day that passes has started to take on new meaning for me. Thank you to all of you, Omni Talk’s readers, for inspiring me to do and to write about what I love in my own voice.

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Retail

Chris Walton View All

Chris Walton is an accomplished Senior Executive with nearly 20 years of success within the retail and retail technology industries. He is well-versed in merchandising, store operations, inventory management, product design, forecasting, e-commerce, pricing and promotions, and tech product development.

Chris was most recently a Vice President with Target, where he led the retailer’s Store of the Future project and also ran the Target’s home furnishing division for e-commerce. He previously worked for GAP, Inc., as a Distribution Analyst and Manager.

Chris holds a BA in Economics and History from Stanford University, and a MBA from Harvard Business School.

He likes to dress as Darth Vader for Halloween, and his wife also frequently asks him to ask Alexa, "to turn off the music."

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