A New Secular Trend You Can’t Ignore

I think that the General Growth bankruptcy filing is only the tip of the iceberg as it relates to what is to come for retail and content distribution. With landlords under duress and acting irrationally leading up to the bankruptcy filing, and with cost of capital on the rise for those retailers and brands who would otherwise buy store locations themselves, the smart CEOs are sitting in their war rooms planning how to reach the consumer regardless of what happens in the world of real-estate. Of course, they're playing catch-up to the best management teams who proactively prepared for this years ago.


The one and only answer? Invest in content to boost relevance with the core consumer while simultaneously investing in direct/virtual distribution. Create a ‘pull model' where the consumer comes to you, and have a dot.com platform that enables conversion into dollars.


Keep in mind that this is easier said than done. Most legacy wholesale models are streamlined and efficient, but are good at processing one shipment of a thousand units, but are structurally not set-up for a thousand shipments of one unit.


Companies that have invested in this regard over the past 1-3 years include Nike though (still too early to get involved for other reasons), Ralph Lauren (check out the Ralph Lauren iPhone app), and Lululemon (launching dot.com right now).


We'd also highlight less obvious companies that have a particularly strong fulfillment platform, such as Williams-Sonoma, and Zappos. Amazon.com, of course, remains the gold standard from a fulfillment standpoint. Offerings from FedEx and UPS are increasingly helping the brands without bricks and mortar step up fulfillment operations, we prefer those that have organically built and perfected their own proprietary systems.


We think that this theme will play a massive role in the upcoming wave of industry consolidation - both in bankruptcies and M&A. We'll be going deeper and deeper into this theme in the coming weeks to ferret out t he winners vs. losers.


Here's an analysis of a collection of retailers as ranked (by us) in terms of both shopability and brand consistency.


A New Secular Trend You Can’t Ignore - .com Matrix