The Great Unbundling Continues

One of the things that has happened in tech firms is unbundling.  It’s possible to create a big company off of one segment of another company.  There are still plenty of businesses that can be unbundled-especially in the B2B space.  Education, Finance and Medicine are prime areas to look for opportunity.  So is manufacturing.  The unbundled company focuses on a slice and blows out the segment.  Think Twitter ($TWTR) and Instagram taking pieces of the Facebook($FB) wall.  Or, just google ($GOOG) companies built off of Craigslist and you will see hundreds.

How do brick and mortar stores unbundle? After all, they are brick and mortar.  They are fixed properties, with fixed leases and overhead.  They hold inventory. They really need to in order to compete.  One of the first things you learn in a reputable marketing class is that you can’t be all things to all people.

Today, Target took one step toward unbundling.   They sold their pharmacy division to CVS ($CVS).  Their competitor, Walmart ($WMT), has had unbundling for awhile now.  They unbundle all kinds of specialty businesses that they are not good at in the front of their stores.  Target ($TGT) probably made a pretty good decision by unbundling pharmacy.  Staples ($SPLS) has experimented with unbundling too, outsourcing shipping to UPS ($UPS).

Traditional corporate America is under a vicious attack.  Tech companies and foreign competition are coming for them.  They are nimble, and through technology are able to create big businesses and take market share quickly from them.   The only way for them to stay lean is to unbundle.

In this case, it’s the rapidly changing regulatory environment in pharmacy and medicine that drove the change.  It was probably impossible for Target to compete at the margin-so outsourcing it made a lot of sense.  It might pay to look at other retailers to see how they can partner in unique ways through unbundling to create better experiences for customers.  Some retailers have tried pop up stores.  I think that works a little if they can spot the trend before anyone else and offer a very unique experience that will bring people in the store.  Unfortunately, that’s a pretty tall order.

If Sears ($SHLD) had thought of unbundling years ago, they might still have a viable business.