A Brief History of Retail — Amazon Part 1

Just last week I wrote a blog post justifying my decision to go into online grocery retail; the millennials around me seem to find the industry decidedly unsexy. But last weekend, it seems to be the only thing people want to talk about. In case you live under a rock or are reading this in 2020, Amazon announced that it’d buy Whole Foods for $13.7B.

Of course, I want to write about that merger, but I believe in context. I also believe history has a lot more to teach than a bunch of old guys’ names. So, I’ll start this discussion by going back to the 1960’s.

Sears was a superstar in retail with nationwide dominant market share, basking in its seemingly invincible glory: everybody bought everything at Sears.

Source: Wikipedia

One day, some lackluster mid-westerner who owned a dozen small stores out in Arkansas visited the glistening Sears tower in Chicago. Sears gave him a tour of the majestic building, the Sears way of retail, and the nobody, Sam Walton, went on with his life to build the next biggest retailer in the world, Walmart.

Their strategy was to secure low costs at all costs. They made a promise, with themselves more than with their customers, that they will never be beat on price.

I probably need not go into the superb growth Walmart went through, but there may be millennials who only think Walmart as a breeding ground for PeopleOfWalmart.com. To quickly highlight, Walmart enjoyed 21.8% CAGR in the 80’s and quickly became the biggest retailer and the biggest employer of America, if not the world.

Fast forward to 2000’s, people couldn’t imagine a world where Walmart was outpaced. Hundreds of business school cases and books were written about Walmart’s success story and Sam Walton’s entrepreneurial legacy. “Walmart, everyday low cost” was accepted as a colloquial adage.

But at some point, Walmart had stopped becoming the lowest priced retailer. A startup in Seattle selling used books online started venturing into selling clothes and electronics online. There was one poignant board meeting where someone brought up “Hey, we aren’t the cheapest priced retailer on this thing.” Corporate leaders said “well, they’re small and they only beat us on one small thing; look, we’re still better than so many other people on so many other things.”

In 2015, Amazon’s market capitalization outpaced that of Walmart. While Walmart is still the biggest retailer (and Amazon is not a profitable retailer), Amazon now has almost double the market cap of Walmart. Walmart started playing catch up in e-commerce with massive vertical mergers, so I guess the jury is still out.

When you think about it, Amazon, Walmart, and even Sears are made of the same cloth. Amazon’s vision of connecting different people and goods through technology is not novel. Sears was started in 1890’s by a railroad station agent who began connecting people from far places and selling things through mail order catalogues. Walmart’s core competency was bargaining power through scale and low overhead costs. An analyst could use the same words to describe Amazon. Finally they all had distinctive, charismatic founders.

I could never summarize what makes one retailer soar and one plunge in a blog post. But I had two clear take aways from this story.

There is a definitive point in time when the big guy gets outpaced by the little guy. When you start to compromise on promises you made to yourself and fall into complacency, you might as well announce to the world that that time is now.

Next up, I can finally talk about the current affairs.

Because I should start including a disclaimer: I am just a curious woman who thinks better when her thoughts are written down. I write more for my benefit more than anyone else. All opinions expressed here represent my own personal thoughts and are not those of my employer, present or previous.