September 02, 2020

Where Do The Sales Go?

In a BOAR model, traditional e-commerce is being nibbled down to nothing ... I suggested that e-commerce is being "burned down". By that, I mean the 1995 - 2009 version of e-commerce is ending ... likely "has ended".

This doesn't mean e-commerce sales will decrease. Quite the opposite. The business model changes, and that means sales flow in different directions.

E-Commerce In A Box (B):  You can build a new business from scratch, you can stitch Shopify and Mailchimp and others together and create a brilliant Instagram presence and guess what? You can cannibalizing sales from the OAR portion of the BOAR model. Viewed independently, these brands are irrelevant. Viewed collectively, these brands are a force. Shopify stock was < $50 at the start of 2017. Shopify stock is north of a thousand dollars today. If that sounds like a missed investment opportunity, trust your instincts. E-Commerce In A Box (B) as a collective is a competitive force you're likely not studying, for if you were studying it, you would own Shopify stock.

Omnichannel E-Commerce (O):  Lauded as the future in 2014 (ask Macy's ... the embrace of the model cost a lot of Macy's execs jobs), the "O" in the BOAR model is being fundamentally transformed by multiple concurrent forces.

  • Government-Chosen Pandemic Winners = Target, Walmart, Home Depot, Lowes.
  • Government-Chosen Losers = Any Retail Brand selling apparel, dying now that Zoom owns your meeting structure.
  • Losers (and any brand embracing omnichannel retail strategy prior to COVID) closing stores, which help e-commerce in the short-term but harm the ability for e-commerce to grow sales in the long-term because there won't be enough new retail customers to fuel e-commerce in the future. Store closures will yield short-term gain and long-term pain. I hope I'm wrong here.
  • What To Do With Empty Stores?  Best Buy is converting several to distribution hubs, thrilling omnichannel software vendors and absolutely nobody else.
  • If you are not a Government-Chosen Pandemic Winner your sales are going elsewhere, they are flowing OUT of the (O) portion of the equation. You are the Prey in the Predator / Prey model.
Amazon (A):  A third or more of e-commerce, marketplace sales going bonkers, delivery vans bypassing USPS chaos (real or imagined), bypassing UPS / FedEx package surcharges. They took control over the future. In a Predator / Prey model, only the (B) portion of BOAR is not Prey. Everybody else is Prey. Amazon thanks you for taking your one-down stance in respect of their dominance. FYI - the FAA is allowing Amazon to test delivery via drones. They're two steps removed from being throttled by the USPS / UPS / FedEx.

Recurring (R):  Taking a lot of business. A dollar of clothing at J. Jill goes to a recurring payment at Zoom. No need for business apparel, plenty of need to pay Zoom. Classic Predator / Prey situation. You double-pay for internet access (your ISP and your mobile phone provider) ... that $200+ a month had to come from somewhere, again, classic Predator / Prey situation, with your business being the Prey. By the way, if there were ever a case where the Predator / Amazon situation "could" be threatened, it is in the "R" portion of the equation.

The reader (that's you) is likely saying "Hey, we have a standalone e-commerce business or an old-school catalog business, where do we fit?"

You don't fit. That business model is being burned down ... 80% to 90% of e-commerce sales fit into BOAR.

Which means that every aspect of BOAR is a Predator in some way and you are Prey.

This is where you (the reader) say "we're fine"!!!!

As a traditional cataloger, for instance, you align much more closely with "O" than any other part of the equation. Your catalog is controlled by the USPS, you have vendor forces that are pushing you into expensive solutions while you are the Prey that B/A/R are feeding off of.

Say you are a standalone e-commerce brand ... you are part of the old-school Google / homemade e-commerce solution / classic ESP ecosystem. You cobbled together all of these solutions on your own. The "last mile" of delivery solutions you cobbled together are going to extract $3/$4 per order out of you this fall as their way of capitalizing on the pandemic. You lack the e-commerce-in-a-box flexibility of "B", you are being cannibalized by "A", your customer makes choices between your merchandise and myriad digital options in "R". You, too, are being forced into the "O" bucket over time (think Warby Parker for instance) and you, too, become Prey for the first time.

You'll say, "We're L.L. Bean, we're different." Nah. You've got stores. You've been in the "O" camp for a decade.

Simply put, here's where the sales are flowing.
  • Out of classic e-commerce ... as classic e-commerce is forced into an omnichannel business model.
  • Out of classic o-commerce ... the omnichannel business model is being obliterated by government pandemic-based winners/losers, with store closures throttling e-commerce growth. That being said, many traditional e-commerce brands are thriving due to a COVID-bump.
  • In to e-commerce-in-a-box (B).
  • In to Amazon (A).
  • In to Recurring e-commerce (R).
When your COVID bump ends sometime in 2021, the BOAR model really takes over. Plan today for what tomorrow will look like.

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