The Deipnosophist

Where the science of investing becomes an art of living

My Photo
Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

23 March 2012

Fascinating interview with Marc Andreessen

Marc Andreessen (he of Netscape fame) has lived the 'quiet' life since, as commentator on all topics technology and as venture capitalist.

In this interview, Andreessen pairs both passions into a unified whole...
"I think 2012 is the year that retail - retail stores - really starts to feel the pressure. And I don't say that because I don't like retail stores. I loved going to Borders. I thought it was a great consumer experience. And I was a huge fan of Tower Records. But the economic pressure is huge as e-commerce gets more and more viable and as these category killers emerge in the superverticals. If I own mall real estate or retail stores in cities, or if I own chains like electronics chains, I'd be concerned... I think electronics and clothes are going to be a real pressure point. Home furnishing is going to come under pressure. It's going to get harder and harder to justify the retail store model. The model has this fundamental problem where every store has to have its own inventory and every store is also a warehouse. The economic deadweight of that entire inventory in each store--that's what took down Borders..."

I agree with Andreessen's main and general points - that the increasing viability to purchase anything and everything online leads to the inevitable destruction of brick and mortar retailers' profit margins. This notion harkens back to Bill Gates's comment about friction and the Internet. It also contributes to the phenomenon of showrooming.

And yet I disagree re his specific remarks that 'explain' the case study that is Borders. Borders had its own problems; inventory issues only hastened its demise. If you understand the publishers' distribution model, then you also understand that inventory serves as both curse (inventory = money) and blessing (inventory = money). Borders used this odd model to stave off its ultimate demise several times during its final years. Borders, in the end, finally cried "Uncle!"

So, too, will other companies. The interview with Andreessen brings into stark relief some conceptual winners and losers. Or, for investors, longs and shorts.
-- David M Gordon / The Deipnosophist

Labels: ,

who's online