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The changing face of retail

First let me dare you to watch this entire video

Now I dare you to read this entire article

When a paradigm shifts, everyone goes back to zero. Your past success means nothing” By Joel Barker in Future Edge

Nothing can be more threatening for a business than the external environment to change in such a dramatical and fast way that the business became obsolete. There are many examples where businesses have shut down because they did not adjust fast enough or refused to see that the market where they were had changed.

During the past 2 decades nothing has played a bigger role in the change of industries than technology, and those who understood the central role that this emerging trend would have, did profit highly against those who didn’t.

One of my favorite examples is Blockbuster, a company that ruled the movie rental industry, by 2005 it was valued in the billions, with thousand of employees and millions in revenue. One the other hand Netflix was this much smaller company trying to find its way up.

Few years later, Blockbuster filles for bankruptcy and Netflix is one of the hot stocks of the moment, going from 11$ a share to more than 470$ – just yesterday it was up more than 6%, with a total market cap of $28B, more than 3 times what Blockbuster was ever worth.

The executives at Blockbuster didn’t see or didn’t want to see that technology would play a major role on their industry and the way to approach the customer.

This example can also teach us how sometimes small companies, even with fewer capital, people and facilities, because they can adjust faster, win battles against the big players – I guess this is a good timing to recommend Malcolm Gladwell’s book David and Goliath: Underdogs, Misfits, and the Art of Battling Giants

Today, big companies are more aware of the outside competition coming from small companies with new ideas, and tend to buy these “netflixs” at their early stage to compensate for the fact they struggle to innovate.

Years ago, when Bill Gates was asked which of his competitors he feared most, he replied:

“I fear someone in a garage who is devising something completely new”

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The off-line Retail as a whole is taking a big hit from online retailers, and as the picture above shows, although in some markets more than others, it’s affecting every single of them.

Problem is just like Blockbuster didn’t want to see the change happening, most off line retailers think they can stick to their old business models, and did not make a name for them selves in the online, allowing companies like to became bigger then they have ever been.

The very things that used to make off-line retailers valuable, like amounts of real estate and people, are now at the technology age seen as a liability to growth.

As it will become even easier to shop online with mobile playing a major role, with shipping times being reduced as much as possible, and with the new generations growing totally comfortable with technology, the future belongs to the online retailers.




Image source:

Pedro Pimentel

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