A Cautionary Tale for Conventional Retailers

By Mark Roberti

The print publishing industry was slow to adapt to the changes the Internet brought. As a result, many publications did not survive.

The news is full of articles about retail stores closing in the United States. CNN Money ran a story recently with the headline "Store closings have tripled so far this year." Very few conventional retailers have been immune. To some extent, this is a needed correction. Retailers opened too many stores in the pursuit of sales growth, and they are now paring back. But it's no secret that conventional retailers are struggling with how to incorporate online sales channels into their business and with how to compete with online retailers.

For me, this is déjà vu all over again. The publishing industry was one of the first to be disrupted by the Internet. That's because anyone who could write a little code could create a website and start publishing. Publishers saw an opportunity (they could post print articles online at little extra cost and sell ads online), but failed to see the threat (readers would get most of their news daily online and did not need weekly or monthly magazines or newspapers).

In 2001, I left CMP, where I was the managing editor of InformationWeek, to join the Industry Standard, a weekly magazine focused on Internet companies (the "dotcoms"). The Standard was booming because startups raising tens of millions of dollars had nothing to do with the money but advertise products and online services that didn't yet exist. Our owners were signing long leases for office space in San Francisco and London at high prices, at a time when news was moving to the Internet and the bubble was reaching unsustainable levels. When the bubble burst, the Standard went bankrupt. Surprise, surprise.

InformationWeek, meanwhile, struggled to find a successful business model as more news was being delivered online. Management resisted committing fully to the Internet for fear of losing the existing print revenue. Everyone saw that print revenue was shrinking, but it was still much larger than online sales. While at a trade show, I met a reporter whom I managed at InformationWeek, who told me, "It's all about online now." I asked how many new reporters were hired to write only for the website and how many print writers were assigned to write only for the website. "None," she said.

It was striking to me that the established print publications found it so difficult to adapt to the Internet. I used to say to my wife, in the early days of RFID Journal, that the established IT trade magazines should buy RFID Journal just to learn the secret of publishing in the Internet Age, because we had clearly figured it out (as had others). InformationWeek ceased printing magazines in 2013, and I suspect its revenue is a fraction of what it once was. It's among the lucky ones. Many print publications, such as PC Magazine, went the way of the Industry Standard.

Why do companies struggle with change that clearly threatens their very existence as a viable business? There are several reasons. One is that companies are afraid to cannibalize their own revenue. Another is that people who grow up doing things one way find it hard to see that there are alternative ways of doing things. And lastly, change often involves making significant investments, and this seems risky when a company is struggling. If the investment fails, the company might not survive.

The illusion, of course, is that if you just keep tinkering with minor changes, you'll find the right formula. But failure to invest in big changes usually means the company won't survive.

Conventional retailers are experimenting with "buy online, pick up in store" (BOPIS), "ship from store" and other forms of omnichannel retailing, but most are tinkering. Most are not fully committing to truly merging their online channels and stores. I know that because—with the exception of Macy's and a few others—they are not investing in the radio frequency identification solutions that would give them the inventory visibility required to execute successfully.

Amazon is now moving from online to brick-and-mortar stores with the acquisition of Whole Foods. We'll see if Amazon can create a new model for others to follow. Or perhaps one of the smaller, upstart retailers will show everyone how true omnichannel is done. But if my experience in publishing is any indication of the future of retail, change is going to be very painful for the existing players and profitable for some new players who figure it out.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.