Even Amazon is not immune to disruption … or death
Kevin Coupe's Eye-Opener on Disruption reminded me of Redbox. It seems like only yesterday that I was posting about Redbox as the innovator and disrupter of the movie rental business. Redbox kiosks and $1 movie rentals totally disrupted the movie rental giants like Blockbuster. In less than a decade, Redbox has been disrupted by services streaming movies. In an effort to compete with the likes of Netflix, Redbox teamed with Verizon to create Redbox Instant service. Just this month, it was announced that service died. There is no safe harbor in retail today. Even disruptors must quickly adapt or face certain demise.
Why this is important: Omnichannel consumers are also the single most disruptive force in retail today. Disruptors disrupt established players by creating new ways to serve consumers. If disruptors fail to adapt with consumers, they will perish.
Oh how the once mighty disruptors have fallen and perished
Before there was a Walmart, there was absolute giant of department store retailer commonly called Sears. Sears, Roebuck and Company was founded in 1886 and pretty much dominated US household sales in the days when "catalog retailing was king". Along came a disruptor called Circuit City, who created specialty retailing in the consumer electronics category. Circuit literally thrived by bringing the TV into America's living room.
While Circuit was logged as one of the "Great" retailers of the US, it was in term disrupted when consumers changed their preferences and behaviors. With the advent of both Walmart and Amazon, the consumer now had options to visit thousands of Walmart stores, or simply shop unlimited variety online. And, what about the grand old retailer Sears? It appears to be the "walking dead" of retail, now leasing out its prime real estate to other retailers.
Disruptor, Disruption and Death
Blockbuster pretty much owned the US video rental business. When families literally planned their weekends around picking up movie rentals from Blockbuster, there was not much cause for concern about being disrupted. I'm quite sure that few if any in the Blockbuster boardroom paid much attention when Netflix got into the rental business. No one perceived much of a threat when consumers did not have enough internet bandwidth to stream movies, and consequently had to wait for Netflix rental movies to arrive via "snail mail".
But as technology caught up, on demand video streaming became possible on cable and internet. And, as Blockbuster market share began to erode, enter the new disruptor Redbox. Redbox not only offered very cheap DVD rentals of popular movies, they disrupted by having thousands of "Redbox kiosks" everywhere … including grocery stores and McDonald's. Blockbuster was a disruptor to DVD sales. But, it went belly up when it didn't adapt to changes. Redbox was not the sole disruptor for Blockbuster, but the convenient red kiosk with low cost rentals siphoned off a lot of consumers. Netflix emerged as a real disruptor when it evolved its model from mail rental deliveries to both streaming movies and original content. Blockbuster's death was not necessarily quick, but it was inevitable when it did not adapt to changing consumer behaviors and consumption patterns related to video media.
Death is inevitable when change is too little … too late
Perhaps, Blockbuster never saw its demise coming because they were so entrenched and content with their business model. The case should be different for Redbox who was one of the major disruptors leading to Blockbuster's extinction.
The key to survival today is realizing that change is a) inevitable, and b) the pace of change is accelerating. Redbox did in fact recognize more consumers were streaming videos, and that Netflix was a primary disruptor. So, Redbox teamed up with Verizon to create "Redbox Instant". Too little too late. Last week, Verizon and Redbox announced the death of Redbox Instant. One wonders how long the Redbox kiosks will survive.
Results Count … and the only vote that counts is the consumer
So, why did Redbox Instant die in this age of the internet and streaming everything? The joint statement by Redbox and Verizon stated: "The service had not been successful as either partner hoped it would be." Said another way, they built it and consumers did not come and consume. Too many other attractive options.
In the days of limited choices in physical retail, disruptors like Circuit City could create a relatively long lasting business through a unique format and offerings. In today's omnichannel world, consumers have almost unlimited choice. They are using that power of choice to change how they shop and consume everything. While Netflix adapted to streaming content, they must now differentiate themselves from a host of streaming content providers such as: Hulu, Apple, Amazon and even Google (YouTube). It will be interesting to see if Netflix services and original content are differentiators that will continue to attract consumers who will play Netflix monthly subscription.
Nothing lasts forever … even mighty Amazon can be disrupted and die
No one has the "secret sauce" that lasts forever. One area of disruption comes from competitors who can provide consumers with a compelling alternative. The world's largest online seller is now at Amazon's doorstep – Alibaba just launched their IPO and website in the US this past year. Will Alibaba disrupt Amazon? Only time will tell, but they have the size and sophistication to compete and attract omnichannel consumers worldwide. Another form of disruption is the functional equivalent of wearing the "blinders of success". To say that Amazon has been on a roll is an understatement. A decade of double digit growth revenue growth is simply unimaginable by any "normal" retailer.
But, will Bezos' mantra of investing in the long term future be Amazon's Achilles heal? To survive requires returning a profit to investors who will fund the future. Amazon recently reported quarterly loss of $437 million, compared to $41 million loss during the same quarter prior year. Amazon's sharp drop in stock price is a signal of how some investors are voting.
"The chickens are not coming home to roost at Amazon just yet, but they are checking the flight schedule to Seattle." ~ New York Times
No one is immune from Disruption … Consumers will decide who dies
The largest and most successful retailer in the history of the world is in the process of being disrupted. On the one hand, Walmart is losing traffic and sales to the "Dollar" stores. On the other hand, even Walmart's consumers are turning to e-tailers, who can offer better prices and at home delivery.
In the past, most disruption for retailers came from competitors who created a new format or offering. That is still happening today. However, the single most disruptive force in retail today is the changing behaviors of consumers. How consumers shop and consume changes almost monthly. At the end of the day, their vote to purchase is the only vote that counts.
Resistance is futile. Size is irrelevant. Change is inevitable. Consumers decide.
"It is those most adaptable to change that will survive." Charles Darwin
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Sources:
- MorningNewsBeat: Disrupter, Disrupted, & Now Deceased, Kevin Coupe; October 6, 2014
- Redbox Kiosk Image: Redbox.com
- Neflix Living Room Image: Netflix.com
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