Paradigm Shift: From Bricks to Clicks

Paradigm shift means a significant change that happens when the traditional way of doing something is replaced by a totally new and different way. For example, the switch from photographic film to digital photography dramatically changed the way we take pictures. Another example from history would be the industrial revolution, which was a paradigm shift from the agrarian economy of colonial days.

In the early 21st century, the internet ushered in a paradigm shift in modern consumer shopping habits. Today, more people are buying and selling products and services over the World Wide Web than ever before. But online commerce was not always taken seriously. Did you know that Blockbuster Video in 2000 turned down an offer to purchase Netflix for $50 million? The Netflix CEO said, “They just about laughed us out of the office.”

Today, there is only one Blockbuster store left in the world (it’s located in Bend, Oregon). Meanwhile, Netflix was the fastest-growing brand from 2018-19 as its value grew 105% over the past year to $21.2 billion. Blockbuster clearly didn’t keep up when there was a paradigm shift in consumer demand from DVD rentals to online video streaming.

Now more than ever, the number of online startups continues to grow while many of the old standbys are going out of business. In times past, the brick and mortar storefront gave a strong message to consumers that said “this is a real business.” But for those of us who have grown up with Amazon, eBay, and Etsy, e-commerce seems totally normal.

The Retail Apocalypse

The online sector, referred to as “clicks,” has been gradually taking away market share from the “bricks” over the past two decades. In the last ten years, the paradigm shift has been so dramatic that the term “retail apocalypse” was coined for the loss of a large number of brick-and-mortar retail chains, including many big names: Toys R Us, Circuit City, Sports Authority, Borders Books, and Family Christian Stores to name a few.

Regular retail does indeed appear to be dying, when you see the headlines about all the stores that are permanently shutting their doors. Earlier this year, Payless ShoeSource announced that it plans to close all of its 2,500 stores in what could be the largest retail liquidation in history. Last month, it was announced that Dressbarn will be closing all of its 650 stores nationwide due to lackluster sales. Barnes and Noble, the Gap, Pier 1 Imports, Gymboree, Party City, and Staples are also closing stores. The total number of retail store closings across the country in 2019 is expected to be over 7,000.

Some retailers such as Wet Seal, Bebe, The Limited, and LifeWay Christian Stores decided to close their retail branches but the stores are still operating online. Last year, Sam’s Club, a subsidiary of Walmart, closed 63 stores but 12 of those locations are being converted into online order fulfillment centers to compete with Amazon. Even Nike, Inc. announced plans to shift towards e-commerce and decrease its retail partners from 14,000 to 40.

It’s clear what’s driving this shake-up. The rise of e-commerce is making brick-and-mortar stores less appealing, and mall traffic has subsequently declined, so that even the strongest companies are struggling in this paradigm shift of shopping. It’s not just savvy shoppers seeking the best deals, either. Wealthy buyers crave the convenience of online shopping, so luxury brands are being forced to adapt as well. Oscar de la Renta’s CEO Alex Bolen admitted, “We could not have been more wrong in our expectations of the Internet.” Oscar de la Renta now operates a successful online branch.

A New Milestone

In April, the U.S. Commerce Department reported a new milestone for online sales. In February 2019, the total market share of “non-store” online retail sales beat general merchandise stores, including department stores, warehouse clubs and super-centers for the first time in history!

“The days of the internet and online shopping being ‘just a fad’ have come a long way over the years,” said Paul Hickey, co-founder or Bespoke Investment Group. More and more people are coming to realize that they would rather not spend their precious leisure hours driving to a shopping center and wasting time trying to locate items in a store, when they can just order whatever they want online from the comfort of their homes and have it delivered in a couple of days.

The economic impact of online business is clearly a force to be reckoned with, and for the foreseeable future, has nowhere to go but up. While the web was not always considered to be a viable “storefront,” in the modern digital age that once-crucial middleman is no longer necessary. Online shopping will continue to take an increasingly bigger bite out of traditional retailers, and that trend shows no sign of slowing down anytime soon.

This means that if you dream of setting up shop on the web, e-commerce is definitely the best way to go. As more multi-million dollar businesses make their debut from a humble home office, we see that success doesn’t demand brick and mortar. So who cares if you’re starting out with a website in your mother’s basement? Try to be patient with those telling you to get a “real job.” We’ll see who gets the last laugh. 🙂


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