
A Brief History of Shopping: From Sears to Amazon in four uneasy upheavals - acsillag
https://www.city-journal.org/brief-history-shopping-16232.html
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Animats
The really big operations of each generation each had a breakthrough in
information processing. Sears figured out to do fulfillment from a big catalog
for a large number of orders without O(N * M) operating cost. If you just have
a big warehouse and people running around picking orders (like Safeway
Select), the bigger the inventory, the costs climb with the product of the
inventory size and number of transactions. Sears in Chicago covered several
city blocks with multi-story buildings; they needed a better approach.

The breakthrough was the "schedule system". Orders came in and were recopied
onto pick slips for different departments. Each order was given a temporary
bin and a 45 minute pick window. Only orders for a given time window were
picked in that window, and picking was by people close to that area of
merchandise. Picked items were sent to the bin for that order, and at the end
of each window, the bins went off to the checking and shipping station. If
something was missing from the order, a second try was made in a day or two,
and shipped separately. This is O(N * log(M)). Huge win.

This was all done with carbon paper, pneumatic tubes, and other advanced 19th
century technology. They had the key idea - move data, not merchandise.

WalMart had a similar edge. They were one of the first retailers to bar-code
everything. All the scanners were networked. HQ in Bentonville, Arkansas knew
within hours what was selling and what needed to be restocked. They were able
to keep unsold inventory down without being sold out. Unsold inventory is the
curse of retail. Over half of apparel is eventually discounted or dumped. Sam
Walton once commented that their edge wasn't size, but data.

Amazon everyone here knows about, so there's no need to explain them.

~~~
m_coder
>> Unsold inventory is the curse of retail.

Absolutely. I run a small retail pet-farm store location. This is such a
curse, that I often wonder why it isn't talked more about among small
retailers. Certainly the salespeople from the different suppliers never ever
talk about about it for obvious reasons. The problems with not talking about
it to me is that I may go out of business if I don't understand this
principle/curse.

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fatnoah
IMHO, Sears is going under because it's a terrible shopping experience. I
worked next door to a Sears - my office was literally 50 feet away. I'd
occasionally pop in to pick something up and the checkout process never took
less than 15 minutes. There was only one person handling the checkout and that
person was operating at the speed of a sloths up to its neck in molasses.

It never ceases to amaze me that for all of the money brick and mortar
retailers spend on marketing, etc. they cheap out on the most fundamental part
of retail - taking the customers money.

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adventured
Reminds me of this slide from a Walmart presentation from last year. Leading
retailers by revenue, 1970 vs 2017:

[https://i.imgur.com/GK2kvh3.jpg](https://i.imgur.com/GK2kvh3.jpg)

~~~
newnewpdro
How long before Amazon and Walmart swap places?

~~~
adventured
Amazon has to roughly triple in size in retail to pass Walmart, with zero
growth on Walmart's side.

In retail sales, I would guess Amazon could catch up to Walmart in 10 to 12
years if everything goes well for Amazon, assuming Walmart holds steady (which
impressively they have so far). Walmart did finally grow for the first time in
years in 2017, jumping from $485b in sales to $500b (they were stuck in the
$482b-$485b range for three fiscal years).

Walmart has perhaps ~$450b in strictly retail sales globally. Amazon should be
at something like $160b to $180b this year (in retail, including Whole Foods).
Walmart's US retail sales were 270% larger than Amazon US for 2017. One of the
not often discussed data points, is that Amazon's traditional online retail
sales are no longer growing very quickly. That big retail growth slowdown has
been hidden by the success of AWS and more recently advertising. I'd bet on
their online sales growth being a slugfest going forward, with their online
growth rate dropping to near single digits within a few years.

There's actually a very plausible scenario where Amazon never passes Walmart
in retail. That premise is that it's between very difficult and impossible for
Amazon's online sales to match what Walmart's epic physical store position
makes possible in terms of retail sales volume. It's not a popular media
premise though, the Amazon-crushes-all story is what sells. Perhaps Amazon
will divert a lot more resources toward expanding physically going forward to
counter that (at least they seem bent on that, maybe they've figured out that
online retail sales will never match offline sales in the US).

Amazon so far has been mostly eating other retailers, and perhaps robbing
Walmart of some growth it would otherwise have picked up. As Amazon pursues
its next $100b in retail sales growth, is it possible for that to not detract
from Walmart's $500b in sales? It's difficult to picture Amazon getting as big
as Walmart in retail, without killing Walmart. If that does happen - they both
survive intact - the rest of retail will be a complete wasteland of
destruction (there's not enough growth in the US economy to accomodate two
mainstream retailers the size of Walmart anytime soon, without _a lot_ of
other retail getting killed in the process).

~~~
classicsnoot
Fascinating. Simply fascinating.

I have so many questions for you. Have you been studying Walmart long or is it
just a passing fancy? How does a company just squeeze out ~$15 billion dollars
from a revenue machine in motion (was there some long term plan that came to
fruition? Did the pull some Office Space kind of caper and "find" it in their
books?)? I have had this picture in my head of Walmart being very similar to
fungi (mushrooms specifically): all people see is the storefront, the spiteful
and mean-spirited "people of Walmart" caricatures, and the evil business
destroying monster (these would be the toadstools); hidden beneath the surface
is a massive network of nodes, pathways, connections, and raw infrastructure
constantly shifting mass and energy at every moment in every type of climate
and condition. I read somewhere that they lose ~$4 million a month in theft
and damage. I thought that was a lot... $500 billion... that was one of the
stimulus packages that saved the banks...

Fascinating. Your comment was a delight and I am off to dig up more on the
company that will hopefully carry humanity to the asteroid belt.

~~~
adventured
Walmart is so large, they're projecting to save $200 million per year on
energy costs by switching to all-LED lighting and away from fluorescent
lighting in their stores, parking lots, etc. That savings is almost equivalent
to the full-year operating income for Salesforce.com in their last fiscal year
($235m).

The $15b gain in sales was in part due to ecommerce gains, while physical
retail remained steady with modest same store sales gains. Thanks in part to
the Jet.com acquisition, they grew by 44% online in 2017 (fourth quarter
online growth dropped to 23%, with the Jet.com boost rolling past). They've
been going around buying up independent retail brands, like ModCloth, Bare
Necessities, Bonobos. They view that brand accumulation as building up a moat
vs Amazon, I'd expect them to continue with that.

The most interesting thing about Amazon today, is that at least 3/4 of the
value in their business is outside of traditional retail. Their relatively
young ad business will be worth more than their retail business within a year
or two (if it's not already). Sometimes I think Alibaba was their primary
inspiration for going aggressively that direction, more so than Google or
Facebook. With enough of a thriving ad business on top of retail, they can do
things no other normal retailer can ever do when it comes to margins, they can
safely take their margin in retail to zero (ie intentionally yield zero profit
in retail, and build an ad business as big and profitable as Facebook's).
Walmart can't compete with that tactic, it'll draw intense anti-trust scrutiny
over time if they do it.

Competing with Amazon has helped push Walmart's annual profit down
considerably over time, despite sales doing well: $15.9b (fiscal 2014 profit),
$16.3b, $14.7b, $13.6b, $9.8b (fiscal 2018). If Amazon uses the nuclear option
on margins with a thriving ad business (not to mention AWS) as a profit
buffer, they might be able to push Walmart into losing money in retail in a
price fight. I'll be curious to see if that's the direction Amazon goes
competitively.

I spend four to five hours per day reading and have a very strong memory, so I
hoover up a lot and remember most of the things I read. No particular focus on
Walmart.

~~~
TheBeardKing
I had no idea Amazon advertising could be so profitable it could out-earn its
retail business but looking into it it makes sense. Amazon search results by
keyword has to be the most effective form of advertising I'm aware of. Google
searches, social media ads, TV ads, etc., are mostly just throwing up noise.
But when I search on Amazon, similar to how I used to search eBay, those
promoted results are relevant to something I'm actively looking to buy. And
since Amazon is my go-to retailer for nearly all non-basic necessities, it's
probably the most relevant and targeted advertising I see by far.

