top of page

The Next Chapter For Retail

Bold Yet Overly Optimistic Pandemic Predictions

There were many bold claims made about the ways the pandemic had supercharged eCommerce spending and changed consumer shopping behaviour forever. A common idea that was cited widely in 2020 was that the pandemic had accelerated eCommerce growth 4-6 years in just a few months. In May 2020 eCommerce spending was up 77% year-on-year. Amazon was obviously in the perfect position to benefit from this digital surge and retail giants like Walmart, Target and Tesco posted very impressive eCommerce growth numbers with categories like gaming, apparel, furniture and house plants leading the charge.

Seeing huge growth in supporting SMEs to get in on the eCommerce growth train, Shopify briefly displaced the Royal Bank of Canada as the most valuable company in Canada. Companies like Shopify and Buy Now Pay Later provider Klarna invested heavily at the time, believing that the way people shop had been permanently altered and this was their moment.

Fast forward to today and it's a very different picture. Across the world we are seeing the highest persistent inflation in 30 years, supply chain issues, and challenges finding staff, which have created a completely different retail landscape that is considerably less rosy. Shopify’s CEO Tobi Lutke bet on rapid eCommerce growth continuing and has now said he got it wrong, resulting in a 10% company wide layoff. Klarna saw its stock price decline 85% from 2021 to 2022 reducing their valuation from $45.6bn to $6.7bn. For retailers, making bets on the future is critical, but what is the best way to balance risk and reward in the future?

A Fall From Grace

If you read that there was a retail giant that was focused on executing their strategy, summarized internally as “The Store Of The Future”, which consisted of revamping almost a 3rd of their locations to fit the changing needs of consumers and address threats from new competitors, I suspect you would think the business was on the right track. It might surprise you to learn that this was the Sears strategy in 1980 and I imagine you can guess how it worked out.

The decline of Sears is a fascinating one, which today's retailers and businesses more broadly can learn a lot from. Started in the late 1800s Sears Roebuck had created a massively successful catalog business to meet the needs of the 70% of Americans that lived in rural regions and couldn’t easily access stores. Later their demography obsessed future CEO and former army General Robert Wood correctly saw the move to the suburbs on the horizon and the rise in mobility offered by automobiles. He began opening stores outside of city centres, where real estate was cheap and parking plentiful between the 1930's and 1950s. This led to the boom of the suburban mall. By 1972 Sears was the largest retailer in the world by a mile, four times larger than their nearest rival with over $30 billion in revenue and 400,000 employees. At their peak 1% of US GDP was accounted for by Sears.

Much like the earlier demographic shifts that saw families move to the suburbs between the 30s-50s, the 1970s again saw significant demographic shifts across the US. This time however Sears did not capitalize on these changes which were driven more by immigration to the country rather than migration between states. As a result there were fewer young blue collar families looking to outfit their entire home with Sears products. Consumers were givenbmore product choice as the competitive landscape also changed with the rise of specialty retail stores and a greater focus on lower prices at discount retailers like K-Mart and Walmart.

So What Went Wrong?

The hubris of Sears and their view that their dominance in the market meant they didn’t need to change to meet the needs of these new consumers or compete with a growing number of competitors is ultimately what led to their downfall.

Donald Katz, the author who wrote The Big Store: Inside the Crisis and Revolution at Sears in 1987 stated that Sears “leadership had been taught only to grow, not how to change”. This resulted in a focus on doing what has made them successful, but just a little bit more efficiently. This focus on doing what you know and the fact that the company had become extremely bureaucratic with layers of hierarchy made it difficult to explore new opportunities and bring those learnings back into the business until it was too late. As everyone knows, Sears never recovered from losing ground in the 70s and 80s and ultimately filed for bankruptcy in 2018.

These are common challenges faced by many retailers, especially ones that experience significant levels of success. Consumers are constantly changing and new competitors are emerging, both online and in brick-and-mortar. Retailers need to find ways to constantly evolve to put themselves in a position to capitalize on new opportunities when they arise, but not become too dependent on one dominant business model. It will be interesting to see if Amazon finds themselves in the same position as Sears in the decades to come.

Ambidextrous Retailers

The authors Charles O’Reilly and Michael Tushman analyzed what it takes for businesses to succeed over the long run and their findings are all about balance. Their view is that like many leaders in businesses, retailers must ask how they can exploit existing assets and capabilities through efficiency, while sufficiently exploring new opportunities so that they are not rendered irrelevant by changes in markets and technologies. The organizations that do this well are described as ambidextrous companies and have the right organizational alignment to ensure that these two competing priorities can be delivered at the same time.

Retail presents a number of challenges that makes investing in future opportunities more difficult. From signing long leases, purchasing inventory long in advance based on demand predictions, to often requiring high staffing levels, there are many reasons why retail leaders tend to focus more on operational efficiency to drive growth. However as we have seen there are many retailers that are struggling or have gone bankrupt. Even recently successful retail start-ups like the online furniture retailer have gone under as changes in consumer demand and supply chain challenges were too much to overcome.

It's not all doom and gloom though as there are many retailers exploring the potential of new approaches today. Here are three examples:


Concept stores can be a great way to assess new ideas in real life, however they can be a bit static and too focused on determining if a specific concept will work or not, rather than a wide range of ideas. H&M's new concept store in Brooklyn NY has recognized that flaw and is designed to constantly evolve. Every 4-12 weeks the brand unveils a new "chapter" with updated fashion, visuals, experiential events and a crop of celebrated, local neighborhood partners – bringing to life a new store concept that moves at the speed of style. While this approach will help make the experience in the store fresh, it will also allow H&M to try out new concepts quickly, gather key data points and evaluate performance. Then the ideas that work well can be executed in other stores across the US and adapted for stores in other countries.


As the largest company in the world based on revenue today, Walmart has resisted the temptation to focus on operational efficiency alone to beat their competitors and in fact has been exploring new areas for growth. Healthcare is one such area. Walmart Health recently announced that they will open 16 new healthcare centres in Florida in addition to their 30+ centres across Arkansas, Florida, Georgia, Illinois, and Texas. Walmart Health has a compelling proposition and has made it easy for patients to get a variety of healthcare services on demand running from primary care services to behavioural health, dental health and even imaging services. Leveraging their strong retail presence and trust with consumers to move into the $1 trillion healthcare industry is a great example of exploring growth and tackling competition from Amazon in an unconventional way.


Large retailers like H&M and Walmart are often cited as examples of businesses that are exploring new opportunities, however they are in a financial position to do so. The vast majority of retailers are smaller businesses, many of whom have started online. The changing demand for brick and mortar retail units driven by the pandemic has created interesting opportunities for smaller direct-to-consumer brands to try out having a physical presence. This is especially relevant to online businesses that have reached a point where they are spending more and more on digital marketing to acquire new customers. Direct-to-consumer brands can approach retail stores as brand building opportunities and may consider taking a showroom based approach to limit the complexity of offering inventory from retail stores. To successfully adopt this approach as Clearly Contacts and Glossier have, the location must be a good fit with target customers and mechanisms must be in place to try new ideas and use the results to inform improvements in the core business

It can be tempting to make bold claims about how retail has changed for good, especially for the companies that want to communicate that they led this change in the market. Success at retail is not about predictions or bold statements, however it’s about sales. Looking to adapt and change before sales decline should be a top priority for all retailers. Ongoing success over the long term requires continual evolution, as there have been and will continue to be many chapters in the retail story. Early indicators from Black Friday 2022 show a resurgence of sales in-store, driven by an unlikely source, Gen Z. In the US, The National Retail Federation estimates that 123 million people visited brick-and-mortar stores over the Black Friday weekend, up 17% from 2021. An apparel industry analyst with market research firm NPD was quoted in a article saying

“Younger consumers flooded the mall, treating Black Friday as a social event. They came early, they came with friends, and they came to shop.”

Maybe we’ve already turned the page and are now onto the next chapter?

  1. Forbes, COVID-19 accelerated eCommerce growth 4 to 6 years. 2020

  2. Freight Waves, Shopify cuts 10% of workforce. 2022

  3. CNBC, Klarna’s valuation plunges 85%. 2022

  4. D. Katz, The Big Store: Inside then Crisis and Revolution at Sears. 1987

  5. C. O’Reilly, M. Tushman, Lead and Disrupt: How to solve the innovator’s dilemma. 2016

  6. D. Katz, The Big Store: Inside the Crisis and Revolution at Sears. 1987

  7. C. O’Reilly, M. Tushman, Lead and Disrupt: How to solve the innovator’s dilemma. 2016

  8. PR Newswire, H&M unveils year-long rotating style destination. 2022

  9. Forbes, Walmart continues rapid expansion in health care. 2022

  10. Retail Dive, How DTC brands will approach physical retail. 2021

  11. CNN, Who are the eager beaver holiday shoppers unhindered by inflation? Gen Z. 2022


bottom of page