Retailers – What’s Happening to Them

It’s been a rocky road the last couple of years, since the recession started.  On top of that, a lot has changed with the Internet too.  Mix the two together, and it’s a boom for some and a bust for others.  So without getting technical, what happened to get us here?

Let’s turn the clock back to 2000, when Internet retailers like CarParts.com and Wrenchead.com, both investor owned companies, born during the dot com boom, were running at full tilt, and looked like they were going to own the automotive aftermarket parts landscape all by themselves.  The Wall Street dot com crash that year changed everything.  Valuations on companies changed overnight, so investors abandoned retailing, thinking that other directions could be their meal ticket to an IPO.  Investors soon found out there was no shortcut to financial stardom, so they pulled back and stayed away from participating in any major way.

What followed was the birth of thousands of private Internet only retail sites.  Since these companies were small, no one really paid much attention to them.  The big retail chain’s continued to struggle with the Internet, simple because they couldn’t relate, didn’t feel motivated enough to do what would eventually be necessary, or felt it was a fad.  The mail order companies on the other hand realized they needed to change, but moved slowly.

By the time we got to 2005, the little sites weren’t so little anymore, and continued grabbing more and more market share.  Consumers were now comfortable with purchasing online and were responding in kind.  Times were good for the aftermarket, so larger retailers felt no need to step up their Internet programs, thinking there is no rush to change.

A funny thing happened in 2006, Google bought YouTube.  We thought videos, that’s nice, but no worry it’s only video’s, we can make those.  Then in 2007 Google decided social media mattered for page ranking.  For years websites followed basic rules that if done correctly, allowed a site to rank well, meaning you would see it on page one.  But this simple change that most companies paid no heed too, thinking it’s another fad, began having an impact on rankings.

In early 2008 it became clear that something was wrong, but everyone thought it’s the economy.  Months later the bottom dropped out and it was all about the economy.  What no one realized is, we were headed into a perfect storm, where social media was taking over the Internet, and larger companies and small ones were too hammered to respond.  Many companies went out of business, others merged with competitors, others became second rate, and others simple disappeared.

In 2010 we finally saw an uptick over the previous year.  Still nowhere like it was in years past, but the companies still around were surviving.  Google again made changes, but this time not once, but numerous times, creating a real dilemma for Internet retailers.  How to afford to keep up with being relevant.  Just having a Facebook account, YouTube videos, a blog, and content focus sites wasn’t enough.  You needed high traffic on each to rank well, something not in the budget for almost all retailers.

So now what?  A good example is what happened to J.C. Whitney, a 95 year old company.  They weren’t able to stay up to date with all the Internet industry changes over the years.  So by 2010, there was nowhere to go, other than sell the company.  US Auto Parts, one of the small companies who became a public company, and grew big as a pure Internet retail only business, ended up buying J.C. Whitney.

We have in effect come full circle, back to a mammoth financially funded company, being the major force of Internet retail.  My prediction is, more companies will follow and they will continue the change that peaked in 2000.  But this time, they’ll get it right!