To preface this article, one must grasp the importance of consumer psychology. At a rudimentary level, the average consumer understands an intractable reality: your desired state of being does not gel with your current state of being. The disparity between these states drives consumer behaviour. This is otherwise known as needs recognition. Over the years, many iconic brand names peppered the scene. The likes of JCPenney, Macy’s, Blockbuster, RadioShack, Yonkers, Pier 1 Imports, Burlington Stores, Sears, and even Modell’s Sporting Goods are universally known and loved for many reasons. Brand awareness has been ingrained into our collective consciousness. Thanks to the ethos of these companies, their commitment to high-quality, and customer service excellence, we are all innately familiar with these brands.
Yet, a paradigm shift has taken place. It has been dubbed the Retail Apocalypse – a horrifying name for a grim new reality. Bricks and mortar retail operations are shutting down en masse, letting go of thousands of employees in the process. The numbers simply don’t add up. Multinational chains are closing their doors worldwide. This began around 10 years ago and has gathered tremendous momentum of late. Estimates indicate that some 9,300+ retail stores were closed in the US alone in 2019. That figure is 59% + higher than the number of store closures in 2018. Economists routinely point to the shift from land-based footfall traffic to eCommerce operations as the reason why the quintessential American icon – the shopping mall – is failing.
The switch from high cost, low profit to low cost, high profit businesses
In terms of dollars and cents, it really makes sense to switch from high-cost operations (premises, merchandise, employees, insurance, vehicles, machinery, equipment, et al) to nimble, cost minimal online operations. Many retail companies blame this on Amazon, eBay, AliBaba, and a veritable smorgasbord of eCommerce operations. But many of these businesses are creating new opportunities to enter the highly competitive arena of eCommerce – Walmart, and Target are cases in point.
Indeed, the shift to eCommerce is well and truly underway. Customers around the world – led by the US – are buying whatever they need and want online. Slow year-on-year growth for land-based retail operations has been overshadowed by double-digit growth in eCommerce activity. Coupled with massive declines in in-person traffic to malls every year, and the over-supply of malls [contrasted against population growth], the inevitable decline in traditional retail commercial activity was all but guaranteed. 2020 proved to be the year where retail operations fell into disrepair owing to the catastrophic effects of the coronavirus pandemic.
The transformation begins
It is against this tectonic shift in the retail landscape that we introduce a pair of investors with the wherewithal, vision, and innovative flair for transformative change. Their names are Tai Lopez and Alex Mehr. What’s interesting about these high-profile entrepreneurs is their diverse backgrounds. Lopez is a social influencer with upwards of 10 million followers on social media, with several hundred acres of farmland in Virginia. His peerless business acumen, and high profile persona act as the perfect foil for his business partner and former NASA scientist Alex Mehr. The latter is also the former co-founder of Zoosk (online dating platform) which he sold for $298 million. Together, the duo launched REV (Retail Ecommerce Ventures) LLC, a Florida-based investment operation.
REV has a substantial portfolio comprising Modell’s Sporting Goods ($538 million 2019 revenue pre-acquisition), Linen N Things ($2.7 billion 2005 revenue pre-acquisition), Pier 1 Imports ($1.5 billion 2019 revenue pre-acquisition), The Franklin Mint (almost $1 billion revenue at peak pre-acquisition) and others. These investors actively seek out distressed retail operations. After intense scrutiny of a bricks and mortar company’s records, their brand power and their customer base, they aggressively pursue the most viable business opportunities. If the numbers are right, REV takes ownership of these companies and secures the right to set up eCommerce platforms of that company’s products and services. The cost savings generated through retail eCommerce operations allow for rapid turnarounds.
Companies like Modell’s Sporting Goods are universally loved, respected, and remembered by a multigenerational customer base. For this reason alone, Lopez and Mehr aggressively pursued this company. According to Mehr, bricks and mortar operations remain important, but not 80/20; it’s more like 20/80 of the revenues generated. Social media erupted after REV announced its acquisition of Modell’s Sporting Goods. The REV cofounders are of the opinion that retail’s future is online. This is supported by current research. By scaling ethical companies in the digital arena, REV has secured a victory for all parties involved. This includes the global economy, investors, and employees. Several examples of their acquisitions are worth mentioning:
- $3.64 million for Modell’s Sporting Goods
- $31 million for Pier 1’s Intellectual Property, Data, & Other Assets for eCommerce operations
Such acquisitions are substantial, but the true test of the purchase is profitability. By taking these household name businesses into the eCommerce arena, and maximizing profitability, it is entirely possible to reverse the bankruptcy state that many businesses find themselves in. The pair don’t limit their interest in acquisitions to specific sectors; they’re also interested in a company known as Blue Apron which is a meal kit service. With plunging profitability and a huge loss of customers, Blue Apron is another example of a bricks and mortar company that has fallen by the wayside.