The Great Fragmentation: And Why the Future of All Business is Small

CHAPTER 9 The infinite store: rebooting retail

Working in retail has never been harder. And I’m not talking about traditional bricks-and-mortar retail, I’m talking about retail in general. It doesn’t matter if we sell online, in a store or via a combination of the two, the change in landscape, which has opened up the market, has made it more competitive. The more competition we have in any market, the harder it is to operate profitably. Again, the first rule in economics is that increased supply results in reduced prices.

It’s the most basic economic fact that everyone seems to forget. In a world where choice is increasing exponentially, it presents two simple options for retailers: be the cheapest and quickest, or live deep inside the long tail.

The physical and virtual challenges

Initial thinking as retail moved online was that online retailers were eating store operators for lunch, and this was sometimes the case. Excluding the online megabrands (Amazon comes to mind), it’s much harder for everyone than it was before the web, even those who are solely online retailers. Online retailers don’t have the benefit of foot traffic. Instead, they live in a search-engine quagmire with 20 chances per page to be found or they have to invest heavily in creating a fan base and community around their brand. The point is, there’s no online audience that will magically drop onto their www doorstep. Meanwhile, the physical retailer faces new challenges of customer bases evaporating due ...