What makes all this activity disorienting is that the recent holiday season was excellent – total revenue up by the largest margin in five years. Yet retail analysts say we should expect plenty more store closings this year.

We all know the explanation: e-commerce, loudly hyped since the Internet’s dawn but only now crashing through the ramparts of big traditional retailers. Leaders can draw two broad lessons:

-As friction comes out of an industry, it might just get smaller. Digital technology reduces information costs, transaction costs, and switching costs in every business it touches, and that’s a problem for companies that make money on the friction. In retailing, that includes companies that profited because customers couldn’t easily find a better deal or get to a competitor’s store. Amazon is the world champion at taking friction out; no other company comes close, and Amazon is lengthening its lead. The industry’s overall growth rate could slow even as consumers keep buying more stuff – and get more value as friction comes out.

-Many retail leaders fell into Gates’s trap, and you could too. When e-tailing’s early hype proved unfounded, concluding that online shopping would be just a niche was seductively easy. Many retailers, in line with Gates’s observation, then underestimated what would happen in ten (or 20) years. It’s understandable; pursuing a vision that won’t pay off for a decade or more will be unpopular with investors and the board, and many top executives know they’ll be gone in ten or 20 years. But good excuses don’t prevent industry carnage like we’re watching now.

What’s the next-decade revolution you’re underestimating?

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