Steve Dennis wrote an article for Forbes titled Retail Apocalypse? Maybe It’s Time To Worry About A Disruptor Meltdown?
« As time goes on, the evidence continues to mount that a significant number of these businesses look to be the Pets.com of the approaching new decade. I have been pointing out the challenging economics of e-commerce for many years. I knew the flash-sales market and its goofy valuations would inevitably crash. The difficulties inherent in scaling most pure-play retail businesses have started to gain more attention and are pushing virtually all of these brands to open the physical stores they once decried. »
« Wayfair is my favorite canary in the coal mine. Yesterday Wayfair reported its earnings, revealing yet another quarter of robust revenue and customer growth (35.9% and 37.6% respectively). The leading online retailer of home furnishings is well on its way to surpassing $10 billion in annual revenues next year. But they also managed to lose $272 million, a loss that was up a staggering 80% from last year. »
« Outside the public markets’ view, we have Everlane CEO Michael Preysman on the record as one of the few insider’s to suggest that there are quite a few disruptor emperors with little or no clothing. »
« Yet, it seems eminently reasonable to ask whether part of the reason that consumers love many of these brands is because their prices are artificially low and/or the service and product benefits that are built into the business model are over-engineered relative to the prospect of ever earning a decent return at the scale at which these brands need to grow. Importantly, their marketing costs are often alarmingly (insanely?) high, suggesting that they are over-investing in customer acquisition and retention. »
« As we have seen with the meal-kit madness (and are about to see in restaurant delivery services, I suspect), there is eventually a reckoning. »