On one hand, the COVID-19 pandemic added fuel to the already rapid surge in e-commerce we've seen over the past decade or so. On the other hand, millions of people are ready to get out of their houses and move freely about the United States, which could be a positive catalyst for physical retail.
Which is right? Will physical retail survive in a post-pandemic world? In this Dec. 21, 2020 Fool Live video clip, Fool.com contributor Matt Frankel, CFP, and Industry Focus host Jason Moser ask Shark Tank star Kevin O'Leary how the pandemic will change retail, if at all.
Matt Frankel: A lot of your businesses are retail in nature. You talked about your employees and how they didn't have a lot saved up and things like that. But a lot of your businesses are retail in nature. How do you see retail in a post-pandemic world? Do you see it bouncing back or do you see you having to fundamentally shift your approach to venture capital?
Kevin O'Leary: Well, I've learned a lot since March and I have a lot of clarity on 2021 now. I can give you an interesting snapshot of what's occurred. Most companies, particularly consumer goods and services of which I have exposure to many of them. The ones that survived made the digital pivot. They moved away from selling through retail. When you sell through retail, you make 50 cents on the dollar. When you sell direct to your customer, you make 100 cents on the dollar. What they did is they licensed Shopify (SHOP 5.04%) platforms, they got involved with DocuSign (DOCU 6.72%), they use Zoom (ZM 3.20%), they standardized on wix.com (WIX 3.56%), maybe for whatever they have to do to digitize. Then they took and focused their customers, not new customers just their existing customers, back on buying directly from them. Today, they're now in 80 percent of my portfolio is ahead of a forecast on free cash flow at the end of this year, which really shocked me quite a bit. The other 20 percent are involved in travel and leisure and entertainment and the wedding industry. They're not doing so well and it's unclear what's going to happen to them. But betting 800 is pretty good. But one thing I will say, retail is forever changed. We are not reopening the stores that had mediocre returns. We're never reopening them, we're just going to continue with the direct consumer model. I think the retail landscape is going to change quite a bit. If you have a brand like Lululemon (LULU 2.15%) or something, you can afford to have a retail store because you're selling $1,000 winter coats. But if you're a generic retailer in a generic mall, the outcome is not going to be pretty.
Jason Moser: Yeah. You are, I think, spot on in regard to retail. We were talking about this earlier today on Market Foolery actually, regarding Nike's (NKE 2.70%) most recent quarter, direct sales, just phenomenal, representing almost 40 percent of their business. Now, all of a sudden you look back several years and you can recognize the investments they made in that direct-to-consumer are just paying off so well now. This is the work-from-home environment. This is something we've all been doing this past year. Obviously, given the nature of your job, it demands that you be in a number of different places, sometimes once it seems. Are any of your employees or are you working from home? What do you think about this work from home trend? You feel like retail being forever changed, do you feel like this work-from-home trend is something that's here to stay as well?
O'Leary: Let me give you an anecdotal example from a firm we changed. This a product that I invested in a company called Boost Oxygen. This is a can of commercial oxygen which is 95 percent pure oxygen, five percent air and it's what pilots breathe on aircraft and if the masks come down, what you breathe. The idea of this company was to provide a boost in high altitude cities like Aspen and the high-altitude locations. It's pure oxygen. I use it instead of coffee now. It's much healthier and I use it in the afternoon. Now, this product, as you can imagine, because of the pandemic, has done extremely well, not because of high-altitude, because of people's concerns about health and living at home and wanting to be healthy for respiratory basis. The world's largest retailer, the name I can't give you, but let your imagination wander. Normally, they had it in high altitude locations and said, this thing is selling so well, we'd like to hear a plan to roll it out across the country in over 3,600 locations. Now, normally, when that would happen in the past, the CEO would fly there, the head of sales and her team would fly there, and out of respect because I own a significant position of the company, I would fly there too and support it in that presentation to the buyer, because it's a very, very large order. That's not what happened. We did it on an 18-minute Zoom call with some very high-tech three-dimensional graphics that showed the planogram in terms of how we were going to present the product line. I had a chance to speak to the buyer for a few minutes afterwards. She was a huge Shark Tank fan. We talked a little bit about how her life has changed. She's getting 30 percent more productivity every day because instead of five meetings a day, she's doing 18-minutes Zooms, five-minute break. She's getting more work done from her own home and she's driving the process with the companies. We're not wasting our time. So I called my guy in accounting, how much money did we save collectively by not having to go there? $37,000 straight to the bottom line. Now, that's happening all over America and it means bad news for hotels, bad news for the airlines, great news for the other 80 percent of the economy that's going to accrue the benefit of that huge reduction in business travel and entertainment, and more productivity in terms of getting their products. This is for an online order with that retailer and a planogram for shelf. It's a huge order and we did it all using technology.