The Diffusion of Innovations is a framework created by Everett Rogers to understand how innovation spreads over time. It is a good prism to understand retail’s evolution through. Opponents of retail have been chipping away at its reign for over a decade. It took a turn for the worse in 2015 as the Amazon ecosystem tipped customer preferences dramatically towards E-commerce. In 2015, the ‘early majority’ was embracing internet retail.
Good article. The mathematical problem facing mall softlines retail is trading Profitable store sales for Ecom sales. Trading a 50pct incremental margin for a 5pct incremental margin (if you are lucky before returns and markdowns online). As Ecom mix increase, not only do EBIT margins decline materially but EBIT dollars decline 15pct per year as we have seen for 5 consecutive years in mall apparel during this channel shift. Consumers are unwilling to pay for shipping and return rates are high for department stores and mall apparel. WSM has benefit of low return rates and charging for shipping heavy items and is less impacted by channel shift.
Good article. The mathematical problem facing mall softlines retail is trading Profitable store sales for Ecom sales. Trading a 50pct incremental margin for a 5pct incremental margin (if you are lucky before returns and markdowns online). As Ecom mix increase, not only do EBIT margins decline materially but EBIT dollars decline 15pct per year as we have seen for 5 consecutive years in mall apparel during this channel shift. Consumers are unwilling to pay for shipping and return rates are high for department stores and mall apparel. WSM has benefit of low return rates and charging for shipping heavy items and is less impacted by channel shift.