Technology has caused many industries to shrink, frightening some entrepreneurs. But the smart and brave ones can find opportunities if they’re able to adjust or disrupt amid the decline.
“Generally speaking, manufacturing has been the principal industry that has been shrinking as a result of technology,” says Mark A. Cohen, the director of retail studies at Columbia University’s Graduate School of Business. “Think of the typical auto assembly line that robotically welds chassis and paints car bodies in place of humans. Today, retailing is now facing tremendous change driven by technology—principally the influence of e-commerce taking market share away from brick-and-mortar stores.”
The retail industry is staring a dark future in the face thanks to e-commerce giants like Amazon. Landlords have had to adjust to the new world of same-day delivery and, very soon, drone delivery and even custom-made clothing if Amazon CEO Jeff Bezos has his way.
The New York Times reported that e-commerce grew by $30 billion annually, on average, between 2010 and 2014. That increased to $40 billion annually during the past three years.
But there are ways for entrepreneurs in any shrinking industry—whether it’s retail, manufacturing, accounting, transportation, print media, or hospitality—to take advantage of technology-driven changes. The best way, Cohen says, paraphrasing hockey legend Wayne Gretzky, is by “not fixating on where the puck is but where the puck is going.”
The New Landscape
The changes in retail are happening so fast that in just the past few years there’s been a boom of pop-ups shops—and not just during holidays—because fewer people are willing to rent a space on a decade-long lease.
Samantha Elias, a co-founder of Vintage Twin, told The New York Times that just a few years ago she would cold-call landlords looking for space to boost her online retail because “brokers had never heard of pop-ups.”
Landlords are starting to adjust to the shift, and a new market for brokers is emerging because of it.
“Landlords have their backs against the wall right now,” Elias says. “I tell them that some money is better than no money, and I promise not to bother you.”
The new landscape has also given rise to another kind of entrepreneur looking to capitalize, such as Space in the Raw, which bills itself as “a marketplace for short-term real estate in New York, Los Angeles, Miami, and Atlanta.” Its first deal in New York was a pop-up in SoHo that paired Sony PlayStation with Taco Bell.
Appear Here has also capitalized on the trend. TechCrunch reported last month that the company raised $12 million in Series B funding, which brings its total funding to $21.4 million, according to CrunchBase.
“With our international expansion, we’re excited to continue to build deep relationships in the top retail cities around the world,” founder and CEO Ross Bailey said in a statement. “Appear Here is the world leader at what we do, and this is the perfect time for us to scale.”
Bailey told the Times that “it would be a sad world if everybody was staying at home looking at screens.”
How to Reinvent and Capitalize
This is the kind of reinvention that David Dworin, a management consultant, believes is essential no matter the sector:
“The typewriter industry died when it was supplanted by the personal computer,” he wrote. “But the typewriter company that realized they were actually experts in selling business machines is now a multibillion-dollar global behemoth. The internet and e-mail destroyed the market for postage meters, but Pitney Bowes is still around because the internet also created new commercial opportunities for an expert in tracking and moving physical goods. It’s been decades since telegrams were meaningful, but Western Union realized that the trust required to transmit messages across borders also worked for transmitting money.
“These companies were all in a dying industry. Then they realized that their industry was more than their product.”
Change is a like a wave, and entrepreneurs have to learn how to ride it, says Tanya Hall, the CEO of Greenleaf Book Group.
“Simply acknowledging that your industry is shifting does nothing to help you evolve with it,” she wrote at Entrepreneur. “Many newspapers have acknowledged their industry’s challenges in the internet age while simultaneously failing to evolve their business models to reflect a digital-first world.”
That kind of “legacy thinking” is the enemy, she says.
“Bright entrepreneurial minds frequently shy away from shrinking industries (think publishing) in favor of sexier growth industries (think mobile),” she wrote. “Interestingly, the same disruptive factors that earn an industry the scarlet ‘shrinking’ letter are the same factors that present great opportunity for those entrepreneurs who think in terms of evolution rather than extinction.”
See Where the Puck Is Going
Joy Gendusa is an entrepreneur who saw that exact thing in direct mail, another industry that has been said to be dying because of technology. She is the founder and CEO of PostcardMania, which sent 135 million postcards in 2015 and earned $45.7 million.
She told Entrepreneur that she decided to start PostcardMania after a bad experience as a customer “and that we’d sell direct to business owners. Nobody was doing that.”
Like Cohen (and Gretzky) said, that’s seeing where the puck is going. Rather than viewing the digital landscape as a threat, she saw an opening. About 45% of people act on email immediately while 79% do on direct mail, according to UnitedMail.
“We’re not just selling a commodity,” she said. “Small businesses are the backbone of the U.S. economy, and we want to help them grow.”
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from Fundera Ledger https://www.fundera.com/blog/industries-shrinking