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The Bricks ‘n Mortar Threat Redux

April 27, 2005

First there was Amazon.com. Then smart analysts predicted the threat to Amazon and other e-tailers from bricks ‘n mortar companies like BarnesandNoble.com and Walmart.com. These companies have real brands and with their combined online/offline presences offered better consumer experiences. The analysts mostly had it wrong. Just visit Lowes.com or Kmart.com and you will find that progress has been made but the number of SKUs offered online still pales and in comparision to what the big-box stores carry offline. These companies just didn’t have Internet cultures and it’s taken them a lot longer than anyone predicted to get to the starting gates.
Now VC Bill Burnham has floated a new idea – that online retailers, both the Amazons and the Kmarts, face the threat of an end-around from their suppliers, the John Deeres, the Addidas, and the Standard Toilets. While we acknowledge that history could be on the side of Burnham’s thesis, we wouldn’t expect this trend to play out for at least the next ten years. For sure, there are and will be a number of suppliers who get the direct-to-consumer model, have the guts to invest in it, and will risk being sidelined by their retailers for their practices. But we would challenge Mr. Burnham to pick 10 suppliers at random, visit their facilities and ask to speak with their Internet GM. Odds are it’s their controller who was forced to take on EDI duty by default, or it’s the owner’s son who built their Web site on summer break from college. Compared to big-box retailers who are still behind the 8-ball, suppliers are living in the electronic stone age.
bricks.jpeg
As Burnham’s post mentions, there is a huge trend towards eCommerce drop-shipping – “I’ve heard some estimates that as much as 60% of their SKUs are shipped from non-Amazon warehouses.” Certainly this is true, however, there is a vast difference between a supplier receiving an order from Amazon to ship a pair of sneakers directly to a consumer via UPS, and that supplier finding and satisfying that consumer itself. It’s just not in the supplier’s DNA.
And as we noted in a post last summer, Amazon’s strategy of partnering with retailers seems to be working well. We haven’t seen the latest numbers, but the press release we cited last August stated that in the first two months of 2004, AMZN moved 52,000 pairs of shoes, 48,000 pairs of pants and jeans, 25,000 pairs of underwear, 21,000 jackets, and 15,000 men’s dress shirts. Not bad.
Read – Are Online Retailers An Endangered Species? (Burnham’s Beat)
Read: Storefront to the World – (a:c)

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