Most people know that new sales online have been increasing.  In 2018, e-commerce increased 14.2% from 2017. The increase has been steady for years while we see retail stores struggling with stores closing in large numbers. This includes large retailers like Kmart and Sears but also involves smaller stores in strip malls. 

However, an interesting statistic is that, though retail sales in brick-and-mortar stores have been stagnant while e-commerce has increased; the increase is clearly at the expense of growth that would have occurred in traditional stores.  It is also true that while traditional stores have suffered decline, there is still a tremendous amount of retail activity. Over 90% of sales are still conducted through traditional storefront locations.

When I meet with entrepreneurs looking to start a business I ask them to identify their main entry barriers.

A person who wants to start a new airline will experience formidable barriers to entry. The cost of aircraft is only the first step. One must acquire gate space at major airports which is costly and difficult because most gates are leased long term.  In addition, there is the cost of hiring pilots, cabin attendants and setting up a reservation and ticketing system. While it isn’t impossible to start a new airline, the entry barriers are significant.

Most business people want to start out with everything new:   new facilities, new equipment and new vehicles.  However, new is expensive.  For example, consider the difference between purchasing new clothing in a retail store and used clothing in a good thrift shop. While I understand why there is a reluctance to buy secondhand clothing, there should be no reluctance to buy secondhand business equipment.

Business models and the landscape for them change quickly. Several recent examples include Kodak's bankruptcy because they failed to embrace the new digital camera technology.  We all know that Amazon is wreaking havoc on the traditional brick and mortar stores.  Newspapers all over the country are folding because they are unable to compete with new online models.

I have written before about how much of business results from unpredictable and random events.  This is why following King Solomon’s advice is wise, “Invest in seven ventures, yes, in eight; you do not know what disaster may come upon the land. (Ecclesiastes 11:2, NIV)

For example in the 1800’s if the railroad went through an area, prosperity typically followed. Unless someone had inside information, you would not know what path the railroad would take. While you could research likely routes, you couldn’t confirm the final route. A business located at the right time and the right place would prosper.  During the gold rush in California, businesses in places where prospectors gathered prospered greatly. Clearly they did not have advance knowledge about a gold strike that would create a boom.

Consider television programs. TV networks works spend millions of dollars in research to produce new shows.  Many of them still fail to get viewership and are canceled.  Sometimes these new shows make you wonder what the networks were thinking in the first place.  However, many of the hits followed unpredictable paths that led to their success. It is true that careful research and effort go into planning these shows. However, the same effort goes into the shows that fail. My point is that one cannot predict accurately which shows will be successful and which will fail.  If one had the skill to accurately predict a foolproof formula, they would earn millions of dollars each year in directing the efforts of each network.