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distribution

A great episode from a great podcast

Peloton - Your Startup Guru

NPR’s How I Built This is a fantastic podcast that brings the stories behind some of the world’s best-known companies. How I Built This interviews innovators, entrepreneurs and idealists about the movements they built.

Peloton co-founder:  John Foley

In this episode, they interview John Foley, one of the co-founders of Peloton; the fitness and media company that you’ve probably seen commercials for.

In the interview, they greatly undervalued John Foley’s network and experience but nonetheless, this episode touched on several relevant topics my clients often face.  I picked this episode because it was a little more in-depth and enlightening than other episodes in that Foley he talks about:

  • having the discussion with this wife about moving in with her parents if the company fails,
  • how everyone is similarly able including Harvard MBAs,
  • the CEO being the janitor when starting out; something I discussed in a previous post about bootstrapping
  • how VCs are not very adventurous,
  • how Peloton is only recently profitable after 7 years

There are also great questions asked by interviewer that touches on market trends such as arcades no longer thriving due to user experience-to-price dynamics (i.e. video game consoles vs arcades due to quality of experience), penetration/awareness strategy which led to their distribution model given that malls are making an industry correction, and lastly the trademark question: “How much of this was because of your intelligence and hard work, and how much of this was just luck?”

FYI, I always discuss market and industry trends, launch and penetration strategy, as well as bootstrapping in all my business plans.

The entire podcast can be heard here

Market adjustment in the retail space

According to a new Credit Suisse report, up to 25% of U.S. shopping malls may close in the next five years.

newsouthchinamall-downemptyhall

What are the reasons?  Of course Amazon and online shopping is a major reason.  However, another factor is mall overexpansion.  Currently there around 1,200 malls in the US.  Between 1970 and 2015, the number malls grew more than twice as fast as the population.  As such, it is predicted that within the next 10 years, that number will decline to 900.

Of course brick-and-mortar retail stores will never completely disappear because of the needs listed above and because of the fact that humans are social by nature.  Just the type and make-up of retail stores will change.  Possibly pop-up stores (a strategy utilized with great effect by Halloween stores) will become more common?

 

Another considerationmacys_dep_store

What to do with vacant buildings?  That’s a lot of land that could be used for other use.  Maybe mall owners will lower their rental rates.  In some areas of Manhattan, retail rents have declined 10-15%.

More housing? Closures from major chains like Macy’s and J.C. Penney are pouring up to 37 million square feet of space back into the market.  That could reduce some housing costs.  Although, generally more expensive housing markets have greater discretionary spending which is often used for shopping.  Also, the time and cost to demolish existing structures, rezone, and rebuild into residential properties along with its infrastructural linkages is not insignificant.

Some mall owners have indicated that vacant properties will be renovated and updated in efforts to attract new tenants and raise rental rates.

 

What to do?mindmap-2123973_640

Who knows that the future will bring but keep in mind that juggernauts like Walmart, Macy’s, and Sears are affected.  So starting a service or online store that doesn’t compete with what Amazon sells is a safer option.  Brand your own product (e.g. Bonobo, Dollar Shave Club) and controlling your own distribution is another option (of course be aware of knock-offs).  B2B businesses (e.g. no one buys industrial components at malls) is insulated from mall closures.

Services such as dentistry, restaurants, car mechanics, large difficult-to-ship products such as mattresses, etc. will remain (so far) an insulated industry.

Analyses such as what I have done above is a small and cursory part of the industry/market analysis and strategy consulting services I provide to clients.

 

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