The Store Isn't Dead—but the Merchant Model Is
Retail markdowns are symptoms of a structural flaw in the "merchant model," where retailers commit to inventory before demand is known and absorb all the risk — the fix is shifting toward platform-like models that redistribute inventory risk to brands and suppliers rather than declaring physical retail obsolete.
Summary
Zhang and Robertson argue that retail's crisis is the traditional ‘merchant model’ — retailers forecasting demand, owning inventory, and absorbing all the risk of being wrong — not a decline in stores themselves; markdowns are ‘confessions’ of that structural flaw, not tactical missteps. They propose retailers shift toward platform, store-in-store, and agency models (as at Harrods, Sephora-at-Kohl's, Target's various brand partnerships, and online marketplaces like Amazon and Alibaba), moving inventory, merchandising, and pricing decisions to brands while retailers focus on curating experience, governing the ecosystem, and driving traffic. A key implication: when a brand runs its own space across multiple retailer ‘platforms,’ it stops undercutting itself on price between stores but competes harder against rival brands everywhere — dampening inter-store price wars while sharpening inter-brand competition. The authors argue AI shopping agents will accelerate this shift by making demand more transparent, price-sensitive, and volatile, raising the cost of the merchant model's forecasting bet.
Editor's opinion
The sharpest point here is competitive, not operational: a brand running its own space across multiple retailer platforms stops undercutting itself between stores but competes harder against rivals everywhere — a genuinely non-obvious second-order effect, not just ‘brands manage their own shelves now.’ The AI framing gives a clear reason this is happening now rather than being timeless retail advice: shopping agents making demand more transparent and volatile raises the cost of the merchant model's forecasting bet. Real examples (Harrods, Sephora-at-Kohl's, Amazon marketplace) show it's already underway — just further along in Europe and Asia than the US.
Key concepts
Merchant model · inventory risk · platform retailing