eCommerce has certainly been the buzzword in recent years, yet BMO Capital Markets’ Simeon Siegel says brick-and-mortar is the future of retail.
Siegel’s remarks on CNBC’s ‘The Exchange’
On CNBC’s “The Exchange”, Siegel said brick-and-mortar was the easy way to make money.
You pay once, you pay your rent, and then every incremental dollar, you make money on that. The problem with eCommerce is that it is continually variable.
Last week, VF Corp said its direct-to-consumer sales were up in the fiscal second quarter, yet the segment margins and profitability took a hit. Siegel added:
Everyone assumes that if you sell directly to consumers and eliminate the middleman, you make more money. But the middleman serves the purpose of driving higher sales and profits. We saw that with VF Corp, and we’ve seen it with many other very large businesses.
Online players are embracing brick-and-mortar
According to Siegel, online players like Warby Parker are now embracing stores – a clear indication that brick-and-mortar is not dead by a long stretch.
These companies are embracing the retail model that they disrupted. What we’re acknowledging is that to become a big business or scaling up involves following the path that others have outlined in the past. So, I think we’re going to see many businesses embrace stores.
The BMO Capital Markets’ analyst suggests going “omnichannel”; a wholesome approach that incorporates both eCommerce and brick-and-mortar. He said:
If you’re a big brand, simply walking away from department stores or wholesale is a mistake. That’s how you got to where you are. So, you need to figure out how to incorporate it all. But even if you’re a small brand, the word is go direct, do not go wholesale, and I think that’s a mistake.
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