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Karnak Speaks: A Look Back At My Retail Predictions For 2019

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Like all good retail pundits, I made the obligatory predictions for 2019, the year that is just coming to a close. Now, in all honesty, I can’t figure out where the heck the year has gone, but gone, it has, and here’s a quick look at how accurate I was overall. It wasn’t a home run, but… well… judge for yourself.

By the way, I’m probably going to pick just one of these topics and go into depth in Forbes, but for our purposes, a quick fly-by should do.

Prediction #1: Amazon’s retail growth is going to start leveling out

Well, Amazon’s growth hasn’t exactly leveled out, but it’s clear that the mystique is gone. New York City said no thank you to the giveaways expected for HQ2, Amazon pulled out of the deal, only to return just last week announcing it was taking significant office space in Hudson Yards.

Prime Day was a big home run, but it’s my opinion that Prime Day was a real drag on profits for Q3. While Amazon says its profit miss in Q3 was caused by investments in next day delivery, it would be a neat trick to put that money into cost of goods sold. If the company did (there really is no standard around that), then I stand corrected. But a look at the P&L says that the company took a gross margin hit. Period, full stop.

Grade: B-

Prediction #2: Carelessly implemented tariffs will be the act of killing the goose that lays the golden egg for retailers

I suspect we have Doug McMillon (who still speaks with President Trump), to thank for this one. The president was persuaded not to implement further tariffs until December 18, to allow for goods to flow in for the Christmas season. Never mind that those goods flowed in in the summer and fall, Mr. McMillon (or whoever…) saved the Spring 2020 season as well with that move. Well done, sir and poorly done, Paula.

Grade: D

Prediction #3: Retailers will be under more pressure to improve the lot of their workforces, both in store and in distribution centers

This turned out to be true. Amazon has raised its base wage to $15/hour. Costco beat them to that punch, with base wages of $15 and $15.50. Target lags a bit at $13/hour but has committed to getting to $15/hour by 2020(better hurry!). Walmart lags at $11/hour, but claims that with benefits the number is $17.50.

The fact that companies are being asked about this publicly and are commenting (and being quoted) tells us how much pressure they are under. In all fairness, it appears that in exchange for these higher wages, workers are expected to do more – as anecdotal reports of workforce reductions have been floating around the industry.

Still, with a relatively robust economy, retailers remain under pressure to find ways to hire, train and retain workers. It has been a long time since I’ve seen this many “Help Wanted” signs in stores and restaurants.

Grade: A-

Prediction #4: Data privacy will be one big fly in the conversational commerce ointment

Well, it seems I understated this one. Data privacy is the fly in all kinds of ointments. Retailers are not alone in their inability to maintain the sanctity of data they gather. Marketing companies have been hit very hard, and ironically, one of the impacts seem to be in the number of robo-calls we all receive.

Firefox has a new feature, Firefox Monitor. Put your email addresses in there and take a look at all the breaches you’ve been part of. What’s interesting is that in many cases, passwords and deep personal information wasn’t stolen. Frequently, it’s just email addresses (hello spam!) and phone numbers (on with the robocalls).

Kids, we’ve got to get better at protecting the data we gather. For some unfathomable reason, the data collection by Google and Ascension, without permission of patients, doctors or hospitals, and reported by the Wall Street Journal has fallen into the dustbin of history. I talked about it here, but have read nothing more on this matter since. I don’t who or how this tide has been held back, but I still think it’s a problem about to explode.

Grade: C

Prediction #5: Alibaba will start making an impact in the West

Well, Alibaba has certainly made an impact in the East, with its Singles Day event (gross merchandise sales: $38.4 billion) far dwarfing Prime Day in the West, and in fact, dwarfing Amazon’s entire quarter for online sales!

This may not have made an impact with consumers in the west, but for brands that sell on Alibaba like Apple, L’Oreal and Fast Retailing Co (Uniqlo), who each brought in more than 100 million yuan (~$14 million) in the first hour we can say the impact was strong.

It’s still not clear that Alibaba will figure out how to excite customers in the West and most especially in the US, but it seems that China’s consumers may be all it needs to become an enormous, healthy, profitable company. In fact, that ties into another prediction I have been making for some time: the 21st century is the next Chinese century. The country is on a serious economic role. And no, tariffs aren’t slowing it down in the slightest.

Grade: C

So, I guess I’m not the greatest prognosticator, but I didn’t do badly, really. I certainly did better than all those “retail apocalypse” people, who continue to use the phrase as click bait, with virtually nothing behind it besides the death of Sears and some private equity backed firms that became over-leveraged.

I’ll be back with some predictions for 2020. In the meanwhile, I’ll be scratching my head trying to figure out where the heck 2019 went! Enjoy your holiday selling season. May the best retailers win!

 




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Articles & Opinions December 10, 2019
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