True e-commerce. Why don't brick-and-mortar and online hybrid stores work

True e-commerce. Why don't brick-and-mortar and online hybrid stores work

"Offline + online" hybrid stores multiply the cons of each type without any of the pluses; the sales floor doesn't become smaller (and warehouses only grow), and there only becomes more people.

A profoundly negative synergy.

"If you chase two rabbits, you will lose them both"

The revolution in store formats has come from the dramatic advantages of the new over the old.
In other words, the capacity to efficiently use resources in general and productivity in general. From shops to department stores in the 40's. In the 19th century. From department stores to cash-and-carry (super and everything stores) over a hundred years. From everything stores to online stores in the 1990's-2000's.  

The traditional and new formats can exist simultaneously (see the variety of goods in chain stores), but they cannot be in a single store.

The many attempts of offline stores to "move into e-commerce" over the years have returned nothing; just megabytes of press-releases of over-hyped achievements and billion-dollar "investments" with no chance of a return.

There isn't a single everything store in the world who's profit (not talking about a dollar for 80 cents sales) from e-commerce compares to their traditional business.

And it never will.

"Offline + online" hybrid stores combine and multiply the cons of each, without any of the pluses (except the constant murmuring of ignorant "analysts"): sales space doesn't decrease (and warehouse space increase), and the number of employees only increases.

Carrying out business-processes in a hybrid business is fundamentally worse than in two separate businesses.

For example, take a central warehouse.

This warehouse should:

  • shipments to stores, planning (approved months in advance) a small amount of overhead. For clarity, a dozen shipments a day, each the size of a truck.

  • a variety of online retail orders: a constant stream of random, small orders that require a rapid, if not immediate, turn around.  For clarity, thousands of orders a day, each the size of a bag.

Everyone who has practical experience with warehouses understands that combining opposing business-processes within a single unit is impossible.

If a warehouse holds offline and online goods separately, it becomes two parallel businesses only connected under a common brand (it isn't a fact that this is a good thing), and consolidating the numbers for profit or, more commonly, for losses. The same can be said for the other links in the value chain; no where does true synergy occur.

In the long run, hybrid forms are not sustainable (the most reliable proof of this is 4 billion years of biological evolution). In a less distant time frame it's the transitional form between the old and the new.

Many people in retail understand this in principle.

But, the system is blinded by its focus on stock prices: "analysts" for investment bankers (ignorant paper pushers) demand that retailers "develop e-commerce". Retailers, cursing, branch into e-commerce. What else can they do? "Analysts" say that "the overall market is moving towards e-commerce", so they have to... Starting fresh everytime.

How would a healthy market naturally develop without the "King's new robes" effect?

Stage 1.
Traditional retailers and solely e-commerce businesses would exist side-by-side.

Stage 2.
The market share of e-commerce would continually grow; the industry eventually becoming a self-sustaining (as opposed to the unprofitable Amazon) industry.

Stage 3.
The e-commerce industry, standing on its own two legs, would move into a phase of specialization and consolidation of stand-out, logical platforms. The earlier mentioned everything stores.

That is the eventual conclusion. The question is: how much time and money will be wasted until people realize "the Emperor has no robes"?

November 21, 2016 by John Galt