I don’t have to tell most of our readers that ecommerce is a very big deal these days. Since market, I have had the good fortune to be in the buying offices of many of my major customers. The biggest complaint I hear is that traffic is down. Business is OK, but traffic is down. My sense is that customers are doing lots of pre-shopping online so they do not need to physically shop all stores before they narrow in on their new home furnishings purchase.
But we also hear from some of our major internet only retailers that their business is still quite robust. Obviously that business is coming from somewhere and I would suggest it is keeping the store traffic down as well.
Merrill Lynch Weekly Letter on May 23 noted three main themes in the quarterly comments from executives of publicly traded retailers. They are:
- The industry is over-stored.
- Companies need to invest in their existing infrastructure to create a more enticing environment for consumers, and they’re doing so.
- They’re putting a big focus on boosting capital expenditures tied to e-commerce and growing that part of their business, including mobile apps, and expanding the use of artificial intelligence and big data.
This past week I had meetings with executives from Fujifilm and two insights came from listening to their discussion of the history in the evolution of pictures.
First, at some point in the not to recent past there was a company called Kodak that had close to 100% of a very profitable film and processing business. They were making enormous profits off of a printing, paper and cameras. When digital cameras came on the scene they actually developed one of the first models. But this did not fit their view of the world because their legacy processing business was so profitable. Fast forward several years and there is no more Kodak re-placed rapidly by all things digital.
Second conversation revolved around their new Wonder Store in New York City. It is purely designed as a laboratory to understand the customer and her needs. Fujifilm has designed this store to interact with the consumer and give them a reason for coming in and doing business together. It is as much about the experience as it is about the product sold. They have no intention of competing with retailers. But they understand that their customer, the mom and pop retailer, one hour photo processor, etc. is being very challenged in the business model because of all kinds of competitive pressure brought on by new technology and internet. Their objective is to design a business model that is effective for the brick & mortar retailer and allow them to prosper with Fujifilm.
My takeaways for the furniture world are as follows:
- All retail is being upended by technology and the internet. You can either be a victim or you can ride the wave of new markets and efficiencies this will unlock.
- I don’t care how big you are, how big your checkbook is, or how much market share you have. If you are not paying attention to the tech upstarts, at some point your business model will get flipped on its head and you will end up like Kodak – a great name that’s no longer around.
- Experimentation is important to see what works. Fujifilm consistently tries different things, does usability studies to understand their customers, uses new technologies and over time this investment has made them the dominant player in pictures. We are working with them on a mobile application that solves the consumer problem of how to finish off a room with wall art that is customized to the consumers wants. It also solves the retailer’s problem of how to buy the right wall art for the customer’s needs without the overhead costs of shrinkage, delivery, dam-age, and obsolescence since the customer customized what she wants and it delivers right to her home.
There are going to continue to be lots of very cool applications developed that will make it easier for the consumer to customize their purchases. Retailers that pay attention to these opportunities will ride this next retail wave. Get out of the store, look at other industries, stealing the best ideas for your own. As always we are here to help. Just give us a call.