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iControl CEO TJ Zlotnitsky on Risks to Brick & Mortar Retailing
Saving newspapers and the vital impact
iControl CEO Tal J. Zlotnitsky published a post this week on Medium.com, expressing concerns that so called "Brick and Mortar" retailers -- those whose main form of business is reselling goods to consumers from store fronts -- "have less than 5 years to figure out how to survive, or there will be mass extinction of brick and mortar retail."
In the article, featured by Medium in its Business section, Zlotnitsky expressed concern that what could "ultimately kill brick and mortar retailing is dithering and handwringing by brick and mortar retail executives," and not the online competition.
The stress under which brick and mortar retailers find themselves in,particularly in grocery, drug and mass, is a well-known fact. Zlotnitsky cites "the global economy and the supply chain it enables — the cost of nearly everything has plummeted, except the average hourly earnings and cost of benefits for employees and except the cost of commercial retail real estate space in major cities. It so happens that wages, benefits, and real estate costs profoundly stress brick and mortar retailers’ Profit & Loss statements and balance sheets." At the same time, the "gig economy" has substantially increased the potential workforce for online retailers, reducing "last mile" costs substantially.
Zlotnitsky expressed concern for the fate of brick and mortar, in part because brick and mortar doesn’t just provide goods. It provides jobs. It provides an opportunity for face-to-face interaction between humans, including those from different cultures, backgrounds, ages, sexual orientation and the like. Interaction between humans is somethings 74% of consumers agree is important."
He encouraged brick and mortal retail executives to "address this problem through providing all members of the value chain with access to information; the opportunity to hold themselves and value chain partners accountable; the chance to take action —proactive or corrective; and the chance to accelerate recognition of outcomes (fail fast, or ride the wave)." Without "better visibility and extensive cooperation," he said, "everyone is operating at a deficit. Raw material producers are guessing, manufacturers are guessing, distributors are guessing and retailers are guessing."
The only party not guessing, he said, is ultimately the most important, and that's consumers. Consumers respond to what they see with their choices. "Consumers don’t guess, they act. They make decisions. A decision is a derivative of the word decisive. And the reality is that today’s consumers are — if nothing else — exceptionally decisive."
Zlotnitsky was surprised that "“50% of the retailers say their systems are not capable of the levels of localization that modern retail customers demand," whereas "53% report that their company is 'reluctant to change'”
He called on all participants in the brick and mortar supply chain, including retailers, distributors, manufacturers, software providers and other value supporters or creators, to "look past our narrow and typically selfish and even greedy definitions of success, and demand that our value chain counterparties (and regulators) do the same. We must ignore (and depose) any leader who believes that preserving the “art” of retailing supercede the need to preserve retailing itself. We must make investments together, share the risk, and share the rewards. We must take calculated risk, and find the right partners and partnerships to nurture."