Last week, roughly ten years after it was purchased by private equity in the wake of the Great Recession, Toys-R-Us announced it is finally closing its doors. Although its demise isn’t a surprise now, it certainly was unfathomable when I was growing up in the 1970s/80s as the iconic toy company was the store-of-choice for millions of kids on birthdays and holidays.
My guess is the next big-box retailer to fall are office supply chains, organizations which also never fully recovered from the financial crisis, and whose market share is being summarily gobbled by changing consumer preferences. Staples has gone private; OfficeMax was purchased by Office Depot in 2013 and its performance has been terrible: the stock was trading at roughly $15 a share in 2008; these days it’s closer to $2.30, a decline of 84%. What’s more, walking into one of these stores is truly depressing: there’s little inventory, fewer employees, and God bless if you must go during Back to School when lines are slower than molasses in snow. Why would a consumer bother? Buy the same products online and you can both price/product compare plus have everything delivered to your door without hassle. It seems especially crazy the entire segment failed to learn anything from the dead pool of companies -- from Polaroid to Blockbluster -- that came before, despite the same, obvious signs.
On March 20, Walmart and FedEx announced a joint-venture, a savvy move designed, obviously, to combat Amazon. Among other benefits, people will be able to have packages shipped to a FedEx office where they’ll be held for five days without additional cost. This is a compelling twist on “omni-channel,” certain to entice the estimated 26mm Americans who have been victims of so-called Porch Pirates. Why FedEx makes an especially good partner-choice is its sophisticated high-tech infrastructure, one lauded for helping catch the Austin bomber this week. (The Street has rewarded FedEx’s evolution into a technology company; the stock is from a low of $34 in ‘08 to $249 a share today, a return of over 630%.)
I have written a lot lately about how Costco is at risk, something that is almost outrageous considering the warehouser’s stalwart reputation, enviable market cap, and legions of loyal customers. I make the assertion because Costco, as evidenced by my horrible experience over the holidays, has clearly not yet transformed into a technology company, something customers and shareholders increasingly demand. Any C-Suite exec who disagrees need look no further than Toys-R-Us to see while it won’t happen in five years or even ten, Blue Chips that fail to create a digital ecosystem able to support seamless multi-channel experiences will struggle to stay relevant because Generation Z is coming for everyone and without a doubt they are the ultimate disrupter.