Historical Disruptions in Retail

Cryptonomos Team
Dec 15, 2017 · 5 min read

The innovative INS platform is just the latest in a long line of massive transformations to retail during the last two centuries

Embattled brick and mortar retailers are finally succumbing to their long fight with e-commerce. The writing has been on the wall for twenty years, but retail bankruptcies are now coming thick and fast, and include a raft of household names once considered too big to fail. JC Penney and Macy’s are clinging on but shutting stores across the country, with the latter earlier this year. Veteran brands like Radio Shack are gone for good.

Meanwhile, Amazon has quintupled sales since 2010 and now sells five times as much as Sears, another doomed retail giant. Enterprise software, a $317 billion industry, is taking consumer goods markets like packaged foods, a $2.14 trillion industry, and leaving traditional grocery stores in the dust. Amazon’s acquisition of Whole Foods was a watershed moment in the transition from brick and mortar grocery shopping to online delivery services. INS are taking it a stage further, cutting out the retailer altogether to connect shoppers with manufacturers.

These are the latest disruptions to a retail market that has experienced long periods of relative stability interrupted by — usually brought about by new technologies. There are valuable lessons to be learned from the most innovative disruptions to retail that came long before e-commerce.

Before globalization accelerated international trade in the 19th Century, retail was dominated by small local merchants who handled every part of the supply chain: credit extensions, storage of large inventories, repairs, customer service. Being a merchant was a high risk venture — and goods came attached with high prices to match. This type of profit-driven enterprise was the first major disruption to commerce which had for centuries been based on barter economies. Small market retailers became cornerstones of communities, sourcing and delivering a wide range of products on request. It was a personalized, know-you-by-name service, and there were no corporate structures for merchants to hide behind. The buck stopped and started with the retailer.

The advent of print advertising brought about the next major disruption: the catalog retailer.

With Sears now acknowledging ‘substantial doubt’ about its future, it’s easy to forget that this is the company responsible for inventing remote shopping — a hundred years before the internet. Sears, Macy’s and others took the first steps towards building faceless retail brands, offering hitherto unimagined choice at lower prices, but with a significant drop off in the levels of customer service consumers had come to expect from their friendly corner store. Thus — as with every disruption — there was ample reason for the two to co-exist. Consumers could use catalog retailers when they prioritized choice and price, and local retailers when they needed accountability and high-service. What Sears et al lacked in personalized service, they made up for with money back guarantees and the lure of free delivery to remote areas.

By the turn of the 20th Century, those remote, rural areas were beginning to lose their spending power. Urbanization gave rise to department stores, malls, and supermarkets, which allowed city dwellers to visit one or two large retailers and get everything they needed. Traditional, local food markets were supplanted by large grocery stores offering lower prices and, eventually, imported goods from around the world. This disruption was enabled by increasingly sophisticated technological solutions for logistics, storage and distribution. The rail and road networks facilitated the delivery of goods to far flung corners; refrigeration and plastic allowed grocery firms to maintain massive inventories. Concomitantly, consumer priced goods companies (CPG) began to consolidate: large retailers with widespread distribution networks acquired small, local outlets in order to keep growing. This development marked the beginning of Big Retail as we know it, with a handful of CPG companies (J&J, Unilever etc) controlling the market.

The next major disruption arrived courtesy of the internet. It fundamentally overhauled the market, delivering a greater choice of products to more places at lower costs and within tighter timeframes. E-commerce not only made everything more convenient for the consumer, it optimized profits for retailers on an almost limitless array of products. This crucial point is what made Amazon so attractive to canny investors, despite the company making a net loss for more than a decade.

Despite the e-commerce revolution appearing to have changed everything, there is still one aspect of retail that’s ripe for disruption: the retailers themselves. To be sure, the online grocery market has given consumers a more convenient way to choose — but those choices are from the same pool of brick and mortar retailers, supplied by the same handful of CPGs. Outdated trade promotions practices are keeping a small number of manufacturers in business, preserving in aspic the same food supply chain we’ve been dealing with for decades.

Blockchain-based platforms like INS are set to change that and deliver the knockout blow to retailer domination. INS directly connects grocery manufacturers with consumers. High quality products can be bought online at low prices, which means no more shopping around to find the one store that stocks your product of choice.

This innovative use of blockchain technology is taking commerce full-circle, restoring slices of the pie long gobbled up by middlemen and centralized monopolies back to where they belong — in the hands of consumers who’ve paid a fair price to the piemaker.

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