The future of retail revolves around the Internet

During his keynote breakfast presentation on Nov. 16 at the Private Label Manufacturers Association's (PLMA) Private Label Trade Show in Rosemont, Ill., Dan Schulman, president and CEO of PayPal, San Jose, Calif., compared the Internet, and all things digital, to a tornado that sets down on industries, sucks them up and spits out new businesses models and companies.

“Do not think you’re immune to it,” he told attendees. “Commerce is going to fundamentally change [because of it.]”

Specifically, Schulman focused on how smartphones will fundamentally change how retailers and consumers communicate. No longer are consumers content with retailers pushing information to them. Instead, consumers are now telling retailers what they want and are beginning to form intimate relationships with their retailers.

The Internet is also blurring the online and offline experiences. Consumers have the ability to purchase almost any product from almost any retailer online. They no longer need to visit a specific website or store, Schulman says. Retailers, therefore, need to reassess the way they are thinking about demand, promotions, displays and even pricing.

Retailers that could be at risk the most are those that think they’re “too big to fail,” Schulman cautioned. He gave the example of Blockbuster, which was given the opportunity to purchase Netflix for $50 million in 2000. The CEO of Blockbuster at the time turned down the proposal and instead decided to invest about $500 million in Enron Broadband Services.

According to Schulman, the Blockbuster CEO said to his advisors: “I don’t understand why all of you are so obsessed with Netflix because we can beat them any time we want. We have all the assets.”

Of course, Netflix went on to become hugely successful, while Blockbuster eventually went bust, he added. Netflix changed the way consumers accessed and watched movies. Instead of improving on an old model, it offered something completely new.

“The biggest impediment to our future success is our past success,” he stressed to attendees. “Because what happens is that all of us under time and pressure look back to what we did to advance instead of looking forward at what could be.”