There is some really interesting and contradictory stuff going on in retail.
On line shopping is continuing to expand at breakneck speed, so we are told. According to Statista.com the current percentage in Australia is 7.2%, but the percentage varies enormously from very little to an astonishing (estimated) 19% in China.
Small brands are being created, that rapidly become big brands, such as Shoes of Prey, that would not have been able to get off the ground pre internet, and bricks and mortar retail is struggling, going out of business at a rapid rate.
The latest casualty is Sears, the ‘Amazon’ of a former era, started in 1886 by Richard Sears, selling watches on the side of his day job as a railroad station manager. After the first catalogue was produced in 1896, 
to bring access to goods to the widely spread American population, Sears expanded geometrically. It was an entirely mail order operation, ‘analogue on line’ until the first store bricks and mortar store opened in 1925 adjacent to the distribution centre. The following rapid spread of stores, saw the end of ‘Mum and Pop’ stores around the country, who could not compete with the range or prices that Sears offered.
Sound familiar?
Sears became a huge diversified business, accumulating a huge property portfolio as well as associated businesses and brands they owned, but it started to unravel in the mid 90’s, just as ‘Big Box’ retailers moved in, and the net evolved as an alternative channel.
Now we have Apple and Amazon investing billions in bricks and mortar stores, re-imagining them, but they are still bricks and mortar, and they are profoundly successful. Apple, on a sales per square foot basis, the standard retail KPI, is the most successful retailer in the world. Amazon effectively acquired Whole foods for nothing, paying $US13.6 Billion for the chain, then seeing the share price rise in the following days by more than that amount on the back of the purchase. While Whole Foods is yet to make the expected profits, it is early days. On top of that you have Amazon bookstores and Amazon Go carving out a niche.
When the two most innovative and successful retailers in the world double down on a business model, it might be worth a close look, and when it resembles an older model, but is clearly superior, that examination should be very thoughtful indeed.
The factor that has driven the success of Amazon, and all other on line retail, is Artificial Intelligence. The ability to write code that can trawl through mountains of data, identify patterns, and alter the output as a result of that recognition. They get better with use, but within the boundaries of the algorithms. The factor that made Sears, and all other analogue retailers successful over the years, and has taken Apple to new heights, is the opposite side of the coin.
Organic Intelligence.
That ability of human beings to exercise empathy, and make connections an algorithm cannot yet make, and perhaps never will.
Apple and Amazon are learning to use both together, and are streaking ahead as a result. Meanwhile, those legacy retailers who have not figured out AI are struggling, and more often than not, reducing their investments in Organic Intelligence as a short term means to reduce costs, so assisting in their own demise, as did Sears.
I wonder of any of the legacy retailers in this country will still be around in a decade?. To me it looks like the only one in the FMCG market that has demonstrated an understanding of the power of Organic Intelligence is Harris Farm.
