From retail to cord-cutting, online shopping and entertainment continues to radically change the economic landscape. Big-box retailers are cutting back with some major old school players like Sears Holdings Corp. (SHLD) barely clinging to life and others struggling mightily. Traditional TV ratings continue to fall as more and more viewers turn to Netflix Inc. (NFLX, Financial) and other cord-cutting services, putting traditional ratings companies like Nielsen Holdings (NLSN, Financial) in a bind about what to do next. Meaning price discovery in media is now much more difficult, potentially leading to a serious misallocation of resources for both Nielsen and its media clients.
There is hope for retail yet though, and TV as well. First, retail. As of Wednesday, October 18th, Kohl’s Corp. (KSS, Financial) has gone live with its “Amazon Experience.” It will now sell Amazon.com Inc. (AMZN, Financial) devices in 10 of its stores, and accept Amazon returns as well.
There are two advantages to this strategy. First, it will bring in Amazon foot traffic, leveraging what strength Kohl’s does have over Amazon – the ability of Kohl’s shoppers to actually see and feel what they are about to buy. Once in the store, Kohl’s can obviously offer more to this new traffic, though they may have to change their offerings a bit to accommodate more impulse buys. Second, it enables Kohl’s to cut back on its expenses and let Amazon run the show on its territory in their stores. Call it a tactical retreat rather than a messy, disorganized rout equivalent to closing entire locations.
The second advantage has the potential to change the kind of retailer that Kohl’s is, from a big box retailer to a more strategic, pinpoint one. If the Amazon strategy works, Kohl’s may begin to open smaller stores in more locations and use the new partnership to both its own and Amazon’s benefit, using new initiatives like a private label Amazon fashion line to draw more shoppers in that see something they like online but want to try it on at Kohl’s to finalize the purchase.
As for Nielsen, it is teaming up with Netflix, at least initially, in pioneering segmented ratings reports for streaming services. The importance of accurate segmented ratings reports for cord-cutting services is extremely important for the media industry, as it enables accurate pricing. Without an idea of who is being reached, it is nearly impossible to accurately gauge how much a show is worth to any given service or its advertisers. This in turn disrupts the production of content and puts producers and audiences out of synch. This is another step in shifting the economics of entertainment content off traditional television and onto a new online platform, and hopefully a more efficient one.
What these two developments indicate is that while economic shifts for entire industries – in this case retail and media – can be disruptive and scary for those whose livelihoods are involved, these shifts can also be exciting and present new opportunities for producers and consumers alike. Economic shifts, as long as they are free-market based, in the long run, tend to benefit more people than they harm.
Disclosure: No positions.
