The Change in Market is Crushing Retailers Who Are Unwilling to Change

The Change in Market is Crushing Retailers Who Are Unwilling to Change

Attachment 75039It’s no shocker that Amazon is putting a hurting on everyone these days. We saw a huge shift on the ecommerce side once Amazon started bringing sports nutrition to their website. The big bad wolf (Bodybuilding.com) was feeling the pressure and eventually was overtaken in sales by Amazon. Now, Bodybuilding.com is trying to restructure how they do business in hopes that they can once again engage the audience and customer-base they once had. But, how does all of this look for brick and mortar businesses?

Big brands showing their bruises

GNC has been going through some changes the last year in hopes of bringing people back through the doors at their retail locations. Former GNC CEO, Michael Archbold, tried to fix the falling sales in 2016, but nothing seemed to move the needle. Archbold tried everything from cutting promotions and restructuring product pricing on shelf along with trying to move towards more of a franchise model rather continuing to maintain corporate locations. When they found their strategy failed, it was back to the drawing board they went—eventually relaunching their brand in 2017.
The Vitamin Shoppe is no different. When looking at their Q2 earnings report, they were down around $30M compared to the same timeframe the previous year. What category was most of those losses from? Sports nutrition. While they claim two-thirds of their business comes from vitamins and minerals, a $30M decrease in revenue is cause for some concern. Colin Watts, CEO of The Vitamin Shoppe, mentioned “The sports customer tends to be less channel loyal and more price sensitive than our core VMS consumer. There has been a low level of innovation in the sports nutrition category, and as it becomes more commoditized, price and convenience have become bigger drivers of consumption behaviors. We have seen a significant increase in advertising and promotional spending in the market and that caught us by surprise, frankly. The results during the quarter were disappointing and the challenges are clear. The market environment evolved more quickly than we anticipated particularly in the Sports categories. We have taken decisive actions to improve our performance directly focused on customer acquisition, price/value and customer retention with programs rolled out across the chain. Additionally, we continue to make progress on our reinvention initiatives and further cost restructuring programs that will help improve results well into 2018.”
While I don’t disagree with what Watts is saying above about the lack of innovation, I feel as if he is making excuses for their ability to change with the market. There’s no shortage of people purchasing sports nutrition products, so why are they not buying from you any longer? Convenience? So what? People are buying online every day from sites like Amazon. So, why aren’t they visiting your website to buy? Is it because you aren’t willing to work off of lower margins like the competition? It can’t be due to your shipping policy—you have free shipping on orders over $25 compared to Amazon’s $35 (assuming they don’t have a Prime membership).
But, let’s visit the Prime members on Amazon. Why not create your own “Prime” for The Vitamin Shoppe? You pay a certain amount each year to gain access to special offers, free 2-day shipping, etc.? Evolve or die. It’s that simple. And to be completely honest, I don’t see The Vitamin Shoppe making the changes quick enough to pull them out of the hole they dug for themselves. When you don’t have your finger on the pulse of the industry and market with the ability to see trends and adjust, you will inevitably die.
The future of brick and mortar

If you think 10, 20, 30, 50 years down the road we will be driving to stores, I’d say you’re nuts. Look at how our behaviors have already changed and shifted more to an ecommerce structure. We buy clothes online. We buy supplements online. We can even buy groceries online now. Soon there will be nothing we can’t buy online. Heck, we can order brides and grooms online! Everything you need can be purchased from the privacy of your home—in your underwear even. So, where does that leave all our favorite corner supplement stores? Well, in my opinion, it leaves them holding on for dear life. Hoping that their customer service, knowledge, and smile can continue bringing people through the doors. As much as I don’t want to see people losing their business, I think we all know the end is near.
How do we save brick and mortar businesses? We don’t. As a society, we are becoming lazy. On top of being lazy, we are becoming more cost effective. We can browse online and find anything we want ultimately less expensive than we can in retail. Not only that, but it cuts down on the cost to drive there as well as the amount of time it would take to drive to a retail location, go in and browse, then make the purchase and drive all the way home. That’s time in your day that you’ll never get back. It could even be a wasted trip if you get there and they don’t have what you want or not in your size/flavor. By going online, you see in the click of a few buttons if what you want is in stock and all you need to do is type in your credit card info and you’re done—on to the next part of your day.
We are changing and evolving every single day. Technological advances are making life simpler for us and changing the way we shop and buy. Ultimately shaping our behaviors and reducing wasted time. Will Amazon continue to be the big black gorilla of the industry and overtake just about every market? That’s yet to be determined, but it sure appears to be the direction things are going.