The Pink Tax

I was purchasing T-Shirts for a team celebration recently and was intrigued to find that female T-shirts cost $10 or 25% more than a male T-shirt at $8. The reason I was given by our vendor (something about volumes usually purchased) wasn’t convincing . I realized I was seeing the “Pink Tax” in action.

I recently came across a fascinating 2015 paper by the New York City Department of Consumer Affairs about the cost of being a female consumer. In the 397 retail products compared, women paid more 42% of the time while men only did so 18% of the time.

For example, girls’ toys cost more 55% of the time versus 8% of the time for boys. Girl’s clothing costs more 26% of the time versus 7% for boys. Women’s personal care products cost more 56% of the time versus 13% for men. And so on. This is nuts.

These costs add up over time and have powerful implications on women’s ability to save for retirement – to the tune of a million dollars over the course of a lifetime. Thanks to taxes, a penny saved is worth a lot more than a penny earned.

So, while it is great to see all the efforts going into achieving pay gap equality, we’ll need to pay as much attention to the pink tax. Improving the top line without paying attention to the bottom line is the definition of counter productive.

Amazon experience

We went down to a physical retail store to buy stuff for the home the other day. Right then, I realized how much we missed the Amazon experience. We missed two aspects in particular.

1. Reviews. I felt lost as I looked at products in the aisle. Were these the ones that came highly recommended? On what basis were they on the aisle?

2. Unlimited selection. We were looking for a specific product we’d seen online. But, it was “out of stock.” Out of stock? What is that? :-)

Three reflections –

First, reviews and unlimited selection make the Amazon experience vastly much superior to most physical retail stores. I could immediately see a future application for augmented reality. I would imagine us wearing AR glasses to see reviews superposed on top off products in physical retail stores. We’d be able to instantly compare attributes and prices across retailers as well. Pushing this further, I’d imagine retailers would already know what I intend to buy by having their staff wear AR glasses of their own. After all, I was probably logged into their website when I was searching. They’d be able to help me as soon as they saw me walk in.

Second, hybrid approaches often tend to be powerful. Maybe retailers could do better with having computers onsite that would help us browse their online inventory. At least, they could convert our intent to a sale by helping us make a purchase and have it delivered to our homes rather than have us go back and order it on Amazon. On the other hand, Amazon retail stores would be very helpful. They could just have all their best selling merchandise in one place.

Finally, it is impossible to roll technology back. Such experiences repeatedly underline how naive discussions around bringing jobs back to “x country” are. The Amazon experience is better for customers with far lesser people employed per dollar of revenue. Even the folks who are employed in their warehouses are slowly being replaced by robots with a few human supervisors. Technology innovation is going to keep moving forward.

It is up to us to keep pace with it.

Amazon pop up stores and retail

I saw this at a mall close by last weekend. I’d read about Amazon opening up pop up stores in a couple of locations but I hadn’t seen one myself.

Amazon Pop up

The question in the mind of anyone who is interested in Amazon is – is this a sign of Amazon’s commitment to physical retail? My hunch is that it isn’t clear anyone, including Jeff Bezos, knows for sure. Amazon’s growth has been nothing short of stunning. However, of late, that growth, especially in retail, has slowed. And, it is clear that the retail behemoth is looking for ways to continue accelerating the growth. However, online retail as a percentage of physical retail has been hovering at the 10% mark for a couple of years now – this means 9/10 retail purchases are still made offline. And, Amazon definitely wants in. Or, does it?

The downside for Amazon is that it’ll lose a significant part of its cost efficiency if it takes the plunge into retail. But, on the other hand, it might help Amazon make its 1 hour delivery ambitions real. It all depends on how retail shakes out.

Retail, in the past, was pretty much physical. Aside from a few niche services that allowed you to call and order, you had to show up at a store and buy things. Thanks to the internet, we saw players like Amazon run e-commerce stores that did not have a retail presence. Over time, 10% of shopping in North America has shifted to e-commerce. This proportion will undoubtedly increase, but, it isn’t clear by how much. There are, after all, many who actually enjoy the physical shopping experience. In the last few years, Europe, and more recently the US, has experienced a rise of the hybrid experience – order online and pick up at store. If retail stores still stock a reasonable selection, this has a best-of-both-worlds effect as it enables shoppers to save time on the essentials by having them pre-ordered, packaged and ready and leaves them to enjoy the pleasure of shopping. It also saves money for the retailers as they can enjoy the savings due to scale.

All of this leads to the big question – what does retail look like in the future? I think, in 10 years, we will see –
1. 30% physical/traditional
2. 30% online
3. 40% hybrid

I don’t believe physical retail will ever go away. I just think the experience will need to be differentiated and unique so it caters to those who really enjoy the physical retail experience. It’ll also mean we’ll see physical do well in goods that are unique – e.g. clothes (think Bonobos) – and no longer need to worry about choosing a bottle of vinegar from 73 options. I think online will continue to grow but I think there are too many advantages for the hybrid model not to work.

So, if I were Amazon, I’d double down on the pop up store test. This could be key to whether they’ll thrive as a retailer. (Note: the key word is retailer. I am bullish on Amazon thriving as a company as long as Bezos is leading it)