Note_005: Retail's ecomm first future is now - Amazon, Shopify, and the future of Neiman Marcus

Coronavirus may have pushed ecomm's up timeline by EIGHT years

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While brick-and-mortar faces insolvency...

Coronavirus has been a tough experience for brick-and-mortar retail. Take Neiman Marcus, for example. The company was set to file for bankruptcy this week, but instead its investors are pushing for a sale of the company. The company was purchased in a debt-loaded transaction by Ares Management and Canada Pension Plan Investment board in 2013. However, all that debt became an anchor as soon as coronavirus hit. Without revenue, it couldn't service that huge debt load. Even before coronavirus, stores like Neiman Marcus and Macy's couldn't invest to grow their (lower-margin) online operations and compete with faster growth online-only options. Add in high-cost retail space to slower revenue growth, and you've got the recipe for insolvency.

Even if Neiman Marcus were to file for bankruptcy, that doesn't mean it goes away. It just means it would have an opportunity to shed itself of its least-productive assets, and somebody else can try to turn it around with a new strategy

...Amazon and Shopify hit all-time highs

On the other side of all of this are Amazon and Shopify. Both companies shares recently hit all-time highs So far this year, Amazon's market cap has grown by $270B to $1.17T+, which basically more than offsets the losses across the entire rest of the publicly-traded US retail industry.

Shopify has grown by $26B to $73B. That means Shopify is now larger than Target, Five Below, Kohl's, Nordstrom, Macy's, Dillard's, JCPenney, L Brands, Gap, and Urban Outfitters combined.

It's $25B growth basically offsets the year-to-date combined decline in Lululemon, Under Armour, Skechers, Foot Locker, PVH, Ralph Lauren, Hanes Brands, and Tapestry.

All those Instagram ads for Allbirds shoes or Ball and Buck coats (both of which run their ecomm platforms on Shopify)

This isn't a zero sum game in retail - that would imply that every ecommerce purchase comes at the expense of a brick-and-mortar transaction. Ecomm has been taking share from physical retail for a long time.

What’s surprising this is how fast coronavirus has pushed on the accelerator.

Web Smith recently argued that ecomm will see a 25% penetration rate by September - at least eight years before it was supposed to.

But this doesn't necessarily mean all commerce will be done on Amazon and Shopify. It just means a lot of physical-only retailers now are going to have to adjust to what is quickly becoming an ecomm-first world. Online grocery shopping, curbside pickup, food delivery - those are all the types of transactions that currently happen on the margin, but if Smith is right, that's going to be the core of a lot of businesses in the future.

More than likely, even Neiman Marcus.

+Data through April 23, 2020

All notes

Note_005: Retail's ecomm first future is now - Amazon, Shopify, and the future of Neiman Marcus (Apr 28, 2020)

Note_004: Companies are advertising... just not with ads (Apr 22, 2020)

Note_003: The $5,000 dollar jacket that is the light at the end of the tunnel (Apr 19, 2020) (Apr 19, 2020)

Note_002: Patek Philippe watches and Thursday Night Football - What changes in the post-coronavirus world (Apr 16, 2020)

Note_001: Will New York and Chicago become permanent ghost towns post-Coronavirus? Um, no. (Apr 14, 2020)