Newsletter #22: Steve Jobs’ Retail Crystal Ball

Young CPG companies regularly ask me: “If my business is growing fast online, why should I sell into brick and mortar retail?”  The short answer is “if done correctly, each channel provides you with different value and is important for different reasons.  Being omnichannel is valuable to nearly all consumer products companies.”  But given my love of history, the longer answer invariably includes Steve Jobs, of all people. 

On several occasions, Steve Jobs made prescient statements which were proven true decades later.  For instance:

• At an Aspen International Design Conference speech in 1983, he said "Apple's strategy is to put an incredibly great computer in a book that you can carry around with you and learn how to use in 20 minutes. And we really want to do it with a radio link in it so you don't have to hook up to anything." The iPad launched 27 years later.
• In a 1985 magazine interview, Jobs predicted the internet four years before Tim Berners-Lee's 1989 work to develop the World Wide Web: "The most compelling reason for most people to buy a computer for the home will be to link it into a nationwide communications network."
• One of his most impressive predictions was the rise of eCommerce. In a 1995 interview commemorating the 20^th anniversary of the launch of the personal computer, he said “As you know, about 15% of the goods and services in the US are sold via catalogs or over the television.  All of that is going to go on the web- and more….A way to think about it is it is the ultimate direct to customer distribution channel.  Another way to look at it is the smallest company in the world can look as large as the largest company in the world on the web.”  At that time, eCommerce accounted for less than 0.5% of retail sales.  Steve Jobs on the Web and eCommerce (1995)

In the years that followed, Jobs’ eCommerce prediction proved correct: in 2000, eCommerce accounted for 0.9% of retail sales.  It grew to 2.5% in 2005, 4% in 2010, 7.3% in 2015, and 14% in 2020.  Today, eCommerce accounts for 16.3% of retail sales- slightly above the greater-than-15% number Steve Jobs predicted in 1995 as “going on the web.” 

And with the growth of eCommerce came waves of pronouncements that brick and mortar retail was on its death bed.  These waves often followed large retailer job cuts, store closure announcements, strong reported Amazon growth numbers, and more recently Covid-19.  Contributing to these apocalyptic forecasts were some financial services firms and lots of media outlets.  Headlines such as “The Great Retail Apocalypse of 2017 (The Atlantic), “Retail Apocalypse Engulfs US Economy” (Thegreatrecession, 2017), “25,000 retail stores might close in 2020” (Bloomberg), “Retail is Dead” (2021, Greenprofit) and many more added to the concerns.

These media stories were hot topics at my retailer and manufacturer employers beginning around 2005.  At first, they were scoffed at and ignored.  Later, they were taken as fact.  For instance, in 2019 when I was COO of a beauty manufacturer, one of our investors asked me, “why would you even want to go into retail?  Just sell via DTC- retail is not relevant.”  And during the pandemic, while chief merchant at Guitar Center, I was told by one of our biggest manufacturers “retailers are going away.  Everything will be sold direct in a couple of years.”

My responses then were the same as my response now: “don’t believe the headlines hype- just look at the data.”  It was untrue then – and untrue now - to say that the rise of eCommerce is killing retail.  At the same time, it is true that eCommerce exposed bad or antiquated brick & mortar retail strategies and rendered some retailers obsolete. 

What the data does show is retail is indeed changing- but where it is done right, it is thriving.  First, the bad news:

• A huge number of uncompetitive retailers went out of business since the emergence of eCommerce. Sadly, millions of jobs were lost over the past 25 years as those retailers closed.  One of the biggest and most visible implosions was Sears, Roebuck & Co: founded in 1886 in Minneapolis as a watch seller, by the early 1900s it had become one of the most powerful retailers in the world.  Sears was a sophisticated logistics company, an incredible developer of private brands (such as Craftsman tools, Kenmore appliances, and Allstate insurance) and was the “everything store” nearly a century before Amazon.  In 1995 it had 350,000 employees, over 3,000 stores, and the best-known mail-order catalog in the world.  It now has eight stores remaining and no catalog.
• Mall closings are real: according to the International Council of Shopping Centers, since 2016 there has been a net closing of almost 19,000 mall stores, and the number of large shopping malls in operation has fallen drastically. At the end of 2024, the remaining malls had a vacancy rate of 8.7%. 
• Retail job cuts are broadcast monthly and paint a dire picture: Challenger, Gray & Christmas regularly reports on job cuts. For instance, it reported on November 6^th that “Retail has announced 88,664 job cuts, a 145% increase from the 36,136 announced through October last year.  The sector continues to face cost pressures, shifting consumer habits, and ongoing store closures.” 
  • These reports are consistently misleading, because they do not report net jobs lost. Said differently, they do not consider offsetting job additions elsewhere in the world of retail.

The retail industry continues to change- inducing pain for incumbents.  But now, for the good news:

• Overall, brick & mortar retail establishments continue to grow, and overall retail vacancy rates are low: vacancy rates in general retail were 2.5% at the end of last year. And in each of the past 15 years in the US, the number of retail establishments has grown consistently 1% per year, every year, including during the pandemic.
• Net retail job growth is consistent, contradicting the disturbing headlines: Since 2000, the number of total retail workers in the US has grown consistently, year over year. And as a percentage of total American civilian workers, retail workers remain remarkably consistent (2000: 10.5%; 2016: 10.3%; 2024: 10.0%). 
  • Walmart alone has added over 1 million net new jobs since 2000.
  • Costco has added over 235,000 net new jobs since 2000.
  • Target has added over 100,000 net new jobs since 2000.

• Despite the steady and uninterrupted growth of eCommerce over the past 30 years, over 83% of retail sales still occur in brick & mortar stores, accounting for $25 trillion in 2025.
• Perhaps surprisingly, in dollar terms brick and mortar retail sales growth was larger than eCommerce growth in 90% of the years over the past decade, and in 90% of the years over the past two decades. Yes, on a percentage basis, eCommerce has taken share from brick and mortar retail in 80% of the years over the past decade and 90% of the years over the past two decades.  The point is, both are consistently growing.

Looking ahead, more change is coming for retail- change that Steve Jobs could not have foreseen in 1995.  These changes could disrupt both brick & mortar and the eCommerce retailers which supposedly killed store-based retail:

• Social media as a discovery engine for products. TikTok Shop and Instagram exploded onto the scene in recent years as ways to inspire customers and induce trial of new products.  As of this year, 44% of GenZ and 43% of Millennial Americans have made a purchase on a social media platform, and 70% of US consumers have used social media to find inspiration for making purchases.  But which retailers seem to be benefitting the most from repeat purchases of those same items?  Amazon, and to a lesser extent, brick and mortar retailers which also carry those items.  It has now come full circle, with some brick & mortar merchants primarily choosing items solely because of high initial purchases on TikTok or Instagram.  This strategy is risky, because those retailers are thereby guaranteed to be slow, undifferentiated followers utilizing widely available data which may not translate to brick & mortar retail environments.
• Agentic AI shoppers are the next disruption. Andy Jassy (Amazon’s CEO) recently said of retail sales, “80% to 85% of it lives in physical stores.  That equation is going to flip over time.  And I think AI is only going to accelerate that trend.”  Currently only 24% of Americans are comfortable with AI purchases, but this will change quickly.  Undoubtedly agentic AI shoppers will make product research way faster, and will reduce confusion and irritation that product listing ads create today by obfuscating desired products.  AI shoppers will likely challenge paid ad and paid search term providers (such as Google), and will probably disrupt retailer loyalty programs and third party cashback companies (like Rakuten or Ibotta).  But we don’t yet know if agentic AI shoppers will shift market share to or from brick & mortar or eCommerce at a total level.  Could it hurt both by destroying brand value and pricing power?  Help both by solidifying consumers’ favorite retailers and brands?  Will agentic AI shoppers collaborate with social media, or disrupt initial purchase behavior on those platforms?

Too bad Steve Jobs and his crystal ball aren’t here to make predictions in this current, dynamic environment.

In conclusion:

1. Steve Jobs foresaw the rise of eCommerce. But he did not portend the end of physical retail.  In fact, in 2000 he hired Ron Johnson from Target to start Apple Stores because he believed in the future of good physical retail. 
2. Without a doubt, eCommerce is growing - and growing faster than physical retail. That will continue for a period of time- and it will expose the retailers focused on the wrong things and which have lost their customers’ love.
3. At a total level, brick & mortar and eCommerce both continue to grow as channels. Brick and mortar retailers still account for the vast majority of retail sales, and provide billboards and credibility for brands that eCommerce cannot.  As such, they must be part of an emerging brand’s distribution strategy.
4. Change in retail is a constant, and consumers are fickle. But just as eCommerce didn’t kill brick & mortar retail, nor will social commerce or agentic AI commerce kill retail.  Established retailers will just need to respond (keeping their changing customer wants and needs in mind), as good retailers always do.
5. The best brick and mortar retailers are totally customer-centric and embrace their own attributes of positive differentiation. Just ask Trader Joe’s, Costco, Sprouts, Dick’s Sporting Goods, Sephora, Five Below and others.  Moreover, have you been to a Stew Leonard’s, or a Scheels, or other small but high-growth, totally consumer-focused retailers?  In the years ahead, eCommerce, Social Commerce and Agentic AI won’t touch them.
6. Perhaps most importantly, retail is not an either-or proposition. Shoppers don’t shop either in brick & mortar or online- they do both – and nearly all manufacturers should also sell across channels.  I regularly preach to my portfolio companies that “DTC brands can be great, but if your goal is to maximize the opportunity for your business, it is a mistake to avoid brick and mortar stores.”

And as always, don’t believe the headlines hype.  Instead, look at the actual data.

(Postscript: To my friends and former colleagues at Target, I feel for all of those that were personally affected by the recent job cuts.  Others have written beautiful posts on LinkedIn (such as John Hilbelink’s) conveying that there is indeed life after Target, and providing encouragement in ways that are more articulate than I ever could.  Recent weeks have been tough- and these decisions were not a reflection of your abilities nor your future potential.)