If Retail Were A Game Of Musical Chairs, Here’s Which Retailers Could Be Left Without A Seat

Power rankings provide endless fodder for sports talk shows, online websites, and podcasts. Every week the talking heads that are former ballplayers, broadcast journalists, etc. rank and rerank various subjects until they, quite literally, go red in the face. 

So, it is only fitting, amid what has thus far been an unprecedented and pandemic-filled 2020, to take a page from their books and to debut my first-ever version of a U.S. Retailer Power Rankings.

Before reading any further, please know that this column has been a long time coming, labor of love. Putting a retailer power rankings together is no easy feat. Whom to include or whom to classify as what is not a perfect science. “Retail,” if one is not careful, can take on many different definitions. Any approach to a retailer power rankings exercise, therefore, has to be simple, easy, and stripped down to the bare essentials.

Ultimately, after years of struggling with how to write this piece, a well-known game from everyone’s childhood became my unlock.

That game is musical chairs. 

Yes, a simple game of musical chairs (see the video above for how the game works), against a backdrop of the top 100 retailers by annual sales volume, according to the National Retail Federation’s website, is all one needs as a starting point for this thought provoking exercise. 

All it takes is NRF’s list and one simple question — “Who will most likely still be sitting atop a chair 30 years from now?”

Here is the list of the Top 20 U.S. retailers in ascending order, based on 2019 annual U.S. retail sales for your reference:

Retailer Rank by 2019 Revenue (in billions)

20) Macy’s — $24.44

19) H.E. Butt Grocery — $26.00

18) Dollar General — $27.75

17) Aldi — $31.12

16) TJX Companies — $31.48

15) Publix Super Markets — $38.13

14) Best Buy — $40.04

13) McDonald’s — $40.41

12) Royal Ahold Delhaize USA — $44.81

11) Apple Stores / iTunes — $53.99

10) Albertsons Companies — $62.41

  9) Lowe’s Companies — $65.51

  8) Target — $77.13

  7) CVS Health Corporation — $88.51

  6) The Home Depot — $102.17

  5) Walgreens Boots Alliance — $104.53

  4) Costco — $111.75

  3) The Kroger Co. — $122.28

  2) Amazon.com — $193.64

  1) Walmart — $399.80

All told, six grocers, two drug store chains, two mass merchants, two specialty chains, two home improvement centers, one warehouse club, one dollar store, one off-price chain, one quick-serve restaurant, one department store, and one retailer named Amazon. 

Only one can be left standing at the end. Who will reign supreme in my first-ever retailer power rankings?

Time to find out — cue the music!

Left Seatless After Round 1 — Macy’s 

There should be no surprise here. Macy’s is the most vulnerable retailer on the list. 

Department stores are to 2020 what Borders, Blockbuster Video, and Toys R Us were to yesteryear. They are past their prime ideas that lost their relevance when e-commerce took away their reasons for being and stole their default leadership positions as one of the most convenient ways to shop for apparel. The announcement this past week, for example, that Neiman Marcus is leaving Hudson Yards is a further testament to this fact.

Department stores and Macy’s, specifically, offer no compelling “why,” as in why come to a physical store to shop, anymore. Many of the products Macy’s sells can be found elsewhere, its execution track record has been spotty (see Story), its experience is less inspiring and personalized than social media, and, finally, Macy’s and malls themselves have been woefully behind in serving up the required omnichannel capabilities — like curbside pickup, concierge services, hyperlocal fulfillment, etc. — that foster better economies of scale and deeper customer relationships.

Oh, and then there is the pandemic, too. A percentage of people are still afraid to shop in malls for fear of contracting the virus, while those actually willing to shop may also not have the disposable income to do so. 

It just doesn’t look good for Macy’s in the long-run, and its recent announcement of sizable layoffs is just more kindling for the fire.

Left Seatless After Round 2 — Best Buy

Best Buy has done a masterful job of adapting itself in recent years. It is the retail equivalent of Sylvester Stallone in Rocky, but the battle is far from won. And, remember, even Rocky lost to Apollo Creed in the first movie. However, comebacks are the stuff of Hollywood, not reality.

Best Buy, similar to Macy’s, sells products that so many others sell, so Best Buy’s only real point of differentiation comes down to the in-store sales experience within a Best Buy itself.

The scariest statistic of late? 

Best Buy maintained 70% of its sales volume while its stores were closed during the early stages of the pandemic. This statistic says, one, that consumers can get what they need online when they know what they want or, two, that, even when consumers don’t know what they want, there isn’t all that much ground for online commerce still to make up in the years ahead.

As e-commerce continues to pivot from being a hunt and search experience to more of an assisted-selling interface, the hill will get ever steeper for Best Buy. Don’t think that day is all that far off either — text commerce, conversational AI, voice assistance, etc. are all advancing at a rapid pace. 

If anyone will hold on strong and fight like hell, though, it’s Best Buy. Just a few weeks ago Best Buy said its sales were up 2.5% over the past quarter in spite of the pandemic. But lest one forget, even Rocky made something like seven sequels, spawned an Apollo Creed’s son spinoff, and for some god unknown reason also fought Thunderlips (aka Hulk Hogan) in Rocky III.

Net/net — 30 years is an awfully long time.

Left Seatless After Round 3 — Apple

In what is sure to be one of the more controversial choices on this list, Apple takes the next spot.

Why?

Because as a pure retailer, i.e. someone that sells tangible products (again classifications are tricky), Apple’s retailing legacy is overblown. While people like Scott Galloway claim that Apple opening stores was one of the greatest “gangster moves” of all time, take away the iPhone, perhaps the greatest product invention of the last 100 years, and what is there, really?

Without the iPhone, it is unlikely the industry would hold Apple stores in such a high regard. The stores have had the benefit of the iPhone’s tailwind at their backs and therein lies the rub. 

Maintaining a product leadership position for another 30 years is no easy feat. For example, 30 years ago Commodore 64s were all the rage and look at them now. One could even say the same thing about the Macintosh when it debuted. 

It is just a tough game. 

Take the unbridled success of Apple’s product lineup out of its retail stores and what’s left? Does the physical store itself answer a compelling “why?” Or, is it just another version of the now defunct Microsoft stores with better fixturing?

Left Seatless After Round 4, 5, and 6 — Albertsons, Ahold Delhaize, Kroger

Next up — the non-differentiated grocers. 

Walk into any of the three chains mentioned above — Albertsons, the Ahold Delhaize properties, or Kroger — and it is difficult to know what makes one chain different from another. Ever since Piggly Wiggly introduced the first modern grocery store in 1916, the industry has been stuck in a time warp and regressed to the mean.

Amazon’s acquisition of Whole Foods in 2017 woke the industry up, and now COVID-19 is propelling it to push through a decade’s worth of innovation within a short amount of time, but it may be too late.

Kroger, for example, appears to be doing all it can to keep up, embarking upon everything from moving forward on its Ocado investment, introducing new store formats, to experimenting with autonomous vehicles. Likewise, Albertsons has begun experimenting with hyperlocal microfulfillment and so, too, has Ahold Delhaize even begun piloting its own version of an Amazon Go-style checkout-free convenience store.

Unfortunately, much of this activity, as well-intentioned and smart as it is, may still amount to sound and fury signifying nothing in the end, as Amazon, Walmart, and others will all continue to fight tooth and nail for the ever important piece of the grocery retail pie. The lack of overall differentiation combined with the continued migration of consumers online and Amazon’s own entry into grocery could be these companies’ Achilles heels. 

The mere fact that Kroger last year announced plans to rebrand itself nationally should have been signal enough that it will likely be tough years ahead as e-grocery accelerates.

Left Seatless After Round 7 — McDonald’s

At this point, the challenge becomes daunting — on whom would you most bet to be gone in 30 years? The choices get tough and will likely inspire quite the debate.

Next up — McDonald’s.

McDonald’s, like Apple, is not necessarily a retailer in the same mode as many others on this list, but it, too, still fits into the context of this discussion. McDonald’s, like the companies just mentioned, has done a skillful job rewiring itself amid the industry’s digital reckoning. Its self-ordering kiosks, Digital Yield acquisition, and mobile order pickup innovations are exactly the right moves to stay current with the needs of the modern day consumer.

However, McDonald’s still has two challenges in front of it: 1) Changing consumer preferences regarding healthy eating 2) The growing on-demand availability of so many other options. 

As omnichannel capabilities become the norm long-term, rather than something the industry lauds as innovation in the short-term, the central place McDonald’s occupies in Americans’ lives could come into question because there will just be that many more convenient and healthier options out there, all on-demand. 

What happens to McDonald’s 30 years from now may not be all that different from what befell drive-ins decades ago, and, ironically, it is the changing consumer definitions surrounding convenience that could bring history full circle. 

Only this time, McDonald’s may not be in the driver seat. It may be the road kill.

Left Seatless After Round 8 — TJX

The off-price sector has ridden a wave of unbridled success recently. The treasure hunt experience from which TJX makes its fortune has been relatively difficult to simulate online. But, with a little creativity, the right user experience, and a little VC capital, the off-price treasure hunt has a chance of being reimagined both online and offline sometime soon.

For example, a few weeks ago Tanger Factory Outlets launched a virtual outlet shopping experience, and last month Otrium, an online outlet for end-of-season fashion, raised $26 million in Series B funding. Money goes where the money is, and the off-price space has been a stronghold and could soon be ripe for the taking.

TJX, in contrast, continues to double down on running its business model the way it always has been run. It remains focused on its physical stores across its portfolio, and, according to the Wall Street Journal, T.J. Maxx also counterintuitively “stopped taking online orders during the lockdowns and even now is limiting the number of items for sale on its website,” all while the coronavirus has been going on. 

While TJX’s financial track record is hard to bet against, one does have to wonder if the strategy of burying one’s head in the sand like an ostrich and just doing what one has always done a little bit better each and every year will not come back to bite the company in the rear at some point.

Left Seatless After Rounds 9 and 10 — Walgreens and CVS

If COVID-19 has shown anything, it is that the pharmacy businesses’ flanks are exposed. Doctor visits can be virtual, and prescriptions can be delivered right to one’s door.  

The only thing stopping digital adoption in the pharmacy business is normative behavior, and COVID-19 is great at changing norms. Supply chain complexities and regulations all will get figured out, again as text commerce, conversational AI, and electronic forms of payment and identity verification advance. Consumers will be able to chat with their pharmacists more easily, doctors’ offices will soon be better plugged into facilitating drug delivery at the time of prescription writing, and customers will eventually forgo a trip to the store for routine prescriptions or when they are sick because they will either have better things to do with their time or prefer to sleep off whatever ails them at home and just answer the door when the time comes.

The other thing against both CVS and Walgreens is that neither of them are tech companies. The space is ripe for a tech company (cough, Amazon) to swing in and to figure out how to do it all better than they can. 

The chances of a retailer figuring it out the other way around are slim.

Left Seatless After Round 11 — Aldi

In a similar vein, Aldi is a no frills, low cost way to shop for groceries. Translation — it better be well on the lookout for how computer vision AI-based shopping, aka Amazon Go, could disrupt the hell out of it.

Right now, Amazon Go is only about 30 stores strong, but earlier this year Amazon debuted a 10,000 square foot Amazon Go Grocery store, replete with produce and also not that far off in size from the 17,000 square feet of an average Aldi box. It, therefore, won’t be long before Amazon can approximate an Aldi-sized experience with its tech.

And, when it does, it means Amazon will have the makings of a similarly low priced, low frills shopping experience that probably will run even more efficiently and with less labor than what Aldi can do right now, and the concept will have the support of Amazon’s peerless online delivery platform and Prime Membership behind it as well. 

Aldi, for all its announced store expansion plans of late, if it doesn’t start to experiment soon with computer vision AI shopping, could end up looking back on the next decade with a ton of regrets.

Left Seatless After Round 12 — Target

Now, separating out the last half of the list gets really hard. It is almost like splitting hairs. The remaining retailers, and even many of those just discussed above, could all be around for the next 30 years, but that is not the point of the exercise. 

Where is the fun in that?

So, next up — Target.

Put Target and Walmart side by side and the only real differences between the two are wider aisles, brighter stores, and flashier commercials. From an omnichannel capabilities perspective, the two competitors are neck and neck, and Amazon has also barely breached the hull of physical retailing yet. 

While Target’s one-stop-shop value proposition is compelling today, it could be reimagined as something better. That is what makes the rumors around Amazon looking to buy J.C. Penney or Macy’s so compelling. If Amazon can find an entry point into reimagining one-stop-shop mall experiences, then the bread and butter margin of Target’s design businesses, like apparel and home furnishings, could one day come under siege, especially as Amazon and Walmart also fight hard for a larger share of the online and offline grocery and household essentials pies.

Target has been winning as department stores and specialty retailers have gone the way of the dodo over the last three years, but, at some point, everything will stabilize and a better one-stop-shop, non-grocery experience will emerge than what the industry knows today. Then it will just be a question of how fast the VC industry can throw money at whatever this eventual idea is to make it spread like a wildfire.

If Target were smart, it would be working to get ahead of this possibility and to disrupt itself, just like it did when it was born out of Dayton’s way back in 1962.

Left Seatless After Round 13 — Costco

Costco never fails. Year-over-year it feels like Costco always hits its numbers. But, similar to Target, it, too, is still vulnerable.

Costco could at some point fall prey to a cocktail composed of three key ingredients that both grocers and other warehouse competitors could mix together: 1) scan-and-go mobile shopping 2) conjoined online and offline real-time pricing algorithms and incentives 3) coordinated bulk order fulfillment. 

Think of it this way — a consumer walks into a store, and the entire experience is done via one’s own mobile phone. As the consumer scans products on the shelves, he or she receives price incentives based on whether he or she wants to buy right at shelf versus the option of having the same items shipped to home at a later date in bulk. Finally, at the end of the shopping experience, the consumer just walks out the door and never has to wait in line at a Costco or any other warehouse club again because payments can all be handled electronically and entry and exit into and out of the store are both controlled.

While this idea may seem like the stuff of dreams, Sam’s Club appears headed in this direction already, and there is no reason why other grocers can’t also offer in aisle, bulk purchase incentives via scan-and-go mobile solutions as the years roll on. COVID-19 has already hastened the pace of scan-and-go tech. 

The next decades will just bring to light all the cool things retailers can do with it.

Left Seatless After Rounds 14 and 15 — Lowe’s and Home Depot

Truth be told, neither of these next two retailers are going away anytime soon. 

Two words: flatbed deliveries.

What Home Depot and Lowe’s do is just hard to simulate online for a number of reasons. First, it is expensive to coordinate deliveries of drywall, lumber, and heavy equipment. Second, it is also hard for any upstart, even Amazon, to get in with local contractors to the same degree that Home Depot and Lowe’s have over the years.

The only thing that stands in their collective way is mismanagement.

Left Seatless After Round 16 — Dollar General

Dollar General, the operator of over 16,000 stores (yes, 16,000!) and owner of 30 consecutive years of comp store sales growth (yes, 30 years!), is incredible. If the company were ranked higher on the annual retail sales list, chances are it would be right up there vying for the top spot on these retailer power rankings.

Flashforward 30 years from now, and there could be some serious crow eating going on. 

Dollar General’s business is hard to simulate online, the divide between the haves and the have nots in America continues to grow, and, with over 16,000 stores, both Amazon and Walmart are years away from having the physical locations to approximate what Dollar General can do. 

Give it 10 years and the entire industry could be talking about Dollar General as #1 or #2 on this list. 

It is just too early right now to give Dollar General that nod.

Left Seatless After Rounds 17 and 18 — Publix and H-E-B 

The choices here are symbolic as much as they are a recognition of these next two retailers’ relative strengths and how well they stack up against everyone else. Publix and H-E-B are high up on this list because they are both regional grocers that matter to people. If Hy-Vee, for instance, had made NRF’s Top 20 list, it would have been listed here too.

All these grocers are parts of their local communities. No matter how hard Amazon and Walmart try, there is just no taking that away, and it’s not like Walmart hasn’t tried to do just that over the last 20 or 30 years, either.

The physicality of retail isn’t going anywhere. In fact, the sheer annual sales volume of both H-E-B and Publix should be enough to attest to the idea that there is something unique going on here. Publix is the largest employee-owned company in the United States, operating mostly out of Florida, Georgia, and a handful of other states, while H-E-B generates upwards of $26 billion per year mostly out of Texas alone.

The biggest testament to their staying power? 

Look at H-E-B and how it has stood out amongst the crowd amid the coronavirus outbreak. 

H-E-B was ready for the outbreak before it hit. According to Texas Monthly, early on H-E-B began “limiting the amounts of certain products customers were able to purchase in early March; extended its sick leave policy and implemented social distancing measures quickly; limited its hours to keep up with the needs of its stockers; added a coronavirus hotline for employees in need of assistance or information; and gave employees a $2 an hour raise on March 16.”

H-E-B was ready and there for its communities and employees in a way other retailers are still trying to figure out and that alone should be convincing enough that these grocers do not just capture a share of their customers’ wallets but a share of their hearts too.

Left Standing After Round 19 — Amazon

It is likely hard to believe but Amazon comes in second place. Amazon, for all its glory, still doesn’t have the one thing that Walmart does — 4,753 Walmart stores. 

Amazon has everything else — Amazon Prime, Amazon Prime Video, Amazon Web Services, Twitch, Amazon Alexa, etc. — and they are all great in their own coordinated flywheel rights, but they still cannot do together what Walmart can do — occupy the centermost, physical space in the hearts and minds of the American mass consumer across grocery, apparel, household essentials, home furnishings, automotive, electronics, healthcare, dentistry, banking, and more.

Amazon can try to get there, but Walmart, like it or not, still has a 4,753 store head start and a leadership team right now, under Doug McMillion, that gets the punchline to the joke surrounding long-term differentiation. From an omnichannel retailing perspective, Walmart has stepped forward to answer the “why” — as in “why” come to a place to shop — better than everyone.

Walmart’s grocery online pickup and delivery is humming, Sam’s Club is blazing new trails in digital innovation, Shopify and ThredUP are now partners within the fold, health hubs are expanding at a rapid clip, and Walmart has also unveiled plans to offer its own Prime-like subscription, Walmart+, at only $98 per year (Amazon’s is $119) in a way that says, “Put that in your pipe and smoke it Amazon.”  

And, if that isn’t enough, here is is a complete rundown of everything Walmart has done over the past six months that Amazon cannot touch:

Amazon’s flywheel has always run on price, selection, and convenience. The first two are imitable, provided you are Walmart and are willing to make the investments to get your digital house in order (which it finally has). While the last one, convenience, isn’t just about how fast and how quickly consumers can get something. It is also about how and when you matter as a retailer within the flow of consumers’ lives. 

Retail isn’t just about getting what one wants from a phone while sitting on a couch, from a desktop computer at work, or by way of a voice-activated device on the counter. It is also about meaning something to your end consumer and facilitating convenience and value across all the moments in time that matter to people. Whether it be a $30 medical visit, combined with an online prescription and grocery pickup, all within the same physical radius, or an online relationship by way of a subscription service that offers the perk of watching a free movie at a drive-in, they all are a stark reminder that “places” still matter.

Will Amazon try to get there? Heck, yes.

But, Walmart’s 4,753 store advantage is one hell of a capital investment for Amazon to simulate, while friction-free online delivery, subscription rewards, and the like are much easier for all retail to copy because the roadmap has now been out there for almost 30 years.

All of which is why Walmart, not Amazon, comes out #1 in this year’s Retailer Power Rankings.