Did traditional retail die this Valentine’s Day?

Last week Warren Buffett’s Berkshire Hathaway sold US$900 million of Walmart stock, choosing to invest billions in airline stocks and Apple instead.Over the last six months, Buffett’s holding in Walmart has gone down from $3bn to $100K. When he invests or disinvests people ask questions. Many publications have asked whether this signals the death of retail as we know it.

Given the change in market value of Walmart over the last ten years, and the growth in that of Amazon over the same period, you can begin to see why Buffett made the move.

Market value 2006Market Value 2016Change
walmart$214.0Bn$212.4bnDown 1%
amazon$17.5bn$355.9bnUp 1,934%
Figures from Yahoo Finance via Business Insider UK

Although Walmart’s revenues and profits dwarf Amazon’s, it just cannot catch up on ecommerce, and this is the main reason why their share price is so flat. Walmart has $13.7bn of sales online compared to the $107bn of Amazon.com.

Which retailers are getting it right in Europe?

Adam Simon, Global Managing Director, Retail Business Development at Context, will outline in his speech at Europe´s leading TCG conference that some of the hero retail brands in the tech world have done rather well in the eight years since the financial crash – Dixons Carphone and Fnac, to name two of the highest profile.

Some of the hero retail brands in the tech world have done rather well in the eight years since the financial crash – Dixons Carphone and Fnac, to name two of the highest profile. They are doing things that are right, and we will be examining the factors that have made them successful.Other tech retailers have disappeared (Comet, Darty), or begun a downward spiral like that of some European big-box retailers– Tesco & Carrefour are two high-profile sufferers who have seen major declines in the last ten years.

Threecritical factors for future tech retailer success

Tech retail has been particularly vulnerable to ecommerce competition, but we have identified three areas where successful tech retailers are getting it right:

  1. Omnichannel – Today’s consumers expect to shop and purchase anytime and everywhere. The successful tech retailers have moved beyond traditional stores to omnichannel, with more options online and hybrid choices like “click and collect”.
  2. IoT – Investors look for growth and one of the areas with huge potential is IoT – the Internet of Things– a broad category including areas such as smart home which are projected to grow rapidly. Tech retailers should, naturally, play strongly in categories with high growth in 2016, such as gaming and VR.
  3. Everyone needs a digital plumber – There is a seismic shift amongst consumers from purchasing standalone computing devices to buying multiple devices that must connect. The home is rapidly becoming a connected network, which must also connect to multiple clouds. Who will you call to get it hooked up? More importantly, who will maintain it and fix it when it crashes? The digital plumber. Digital plumbers provide tech retailers with the opportunity to offer warranties and maintenance and service contracts that have much higher profit margins than most products.

Investors will not be looking at the metrics used to evaluate traditional retailers of the past.The new investment criteria will be focused on those retailers who can do more than make a transaction sale at a price today.The future will be based more on the ability to attract and retain customer relationships that generate loyalty and lifetime value in repeat purchases.

Adam will speak at the 4th European TCG Retail Summit, the leading international conference dedicated to electrical retail, on 29-30 March in Berlin.

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