“What online-only company is really profitable? Basically none of them. That’s the dirty secret”

It wasn’t a retail dinosaur who said that, and the quote isn’t from the last millennium, when sceptics questioned whether online retail would ever take off.

The words were Everlane founder Michael Preysman’s, spoken just this month in a CNBC interview.

He was explaining why Everlane, the ethical fashion specialist founded less than 10 years ago, which has made ‘radical transparency’ its operating ethos, has been opening shops.

Preysman is not the only one who has found that the supposed certainties the rise of ecommerce appeared to herald have fallen at many of the same stumbling blocks as more traditional retail. 

New and old companies alike face challenges in creating sustainable, profitable business models.

For instance, investors have given so-called disruptor WeWork the cold shoulder as it seeks a public listing, and mattress-in-a-box specialist Eve Sleep’s shareholders have had no reward but insomnia since the etailer’s float in 2017.

The travails faced by many of the new generation of ecommerce businesses provide no comfort for the old, established names.

But trouble for newer players does not mean life is any easier for more-established operators – just look at B&Q owner Kingfisher, where a transformation effort has come to naught and another business review is on the cards.

As River Island chief executive Ben Lewis told Retail Week this week: “Quite simply, it is more expensive to maintain our level of service to our customers and we have to work harder just to stand still.”

River Island is investing in everything from stores to personalisation and AI, and that is hitting profitability. Earnings have fallen for two consecutive years as investment took priority.

At John Lewis Partnership, which this month reported the first half-year loss in its history, investment has also taken a toll alongside subdued trading at its eponymous department store business.

Despite short-term pain, River Island, John Lewis and other retailers are right to invest. They have to, in order to maintain their appeal into the future and execute in contemporary ways the characteristics that made them great in the first place.

The trouble with many investments is that the costs can end up outweighing the benefits, and sometimes those benefits prove to be as insubstantial as a mirage.

The cash that many new businesses are burning through provides ample evidence of that.

Much is made of the leeway investors gave Amazon to lose money, as founder Jeff Bezos pursued his globalist agenda. But those new companies that seek to follow in Amazon’s path are in a different league.

For instance, Amazon racked up losses of about $3bn in its first nine financial years. Uber lost $5bn in a single quarter this year.

It’s quite clear that the future of many of today’s headline-hogging, digitally-driven businesses is open to question, however disruptive they may be.

Retailers, particularly those whose finances are under pressure and who therefore can’t invest Fort Knox-style sums, should take their lead from Next and its astute chief executive, Lord Wolfson.

Speaking at this week’s results, he said that Next took an experimental approach to its business – what in the current jargon would be called ‘test-and-learn’ or ‘agility’.

“Most of the things that make a difference today were not discussed in the boardroom,” he said. “Retail isn’t a business where you need to make big decisions. You can take small decisions and trial things.”

Next’s first website, launched in the late 1990s, only cost £7,000. It was pretty much a ‘green screen’ without product images, which took too long to upload. The venture worked though, and has continued to. In the first half of this year, online sales were more than £1bn.

Wolfson made no pretence that Next had not been “fortunate” to have had mail-order expertise and infrastructure, as ecommerce began to take off. Nevertheless, it is one example of how a small, inexpensive experiment led to great things. Perhaps it will now allow even greater things, as the retailer seeks to make the most of international online opportunity.

Wolfson does not pretend life is easy as consumption habits and business models change. Although Next, he said, “can see a way through the woods, we are not on the other side yet” and “it would be a huge mistake to underestimate the scale of the challenge”.

But, through his forensic analysis of – and emphasis on – execution, he has set a great example of how retailers can adjust.

The latter is perhaps the most important point for other retailers, as the industry restructures.

As Wolfson said: “Businesses love to talk of strategy, but they are made or broken by their ability to execute well, particularly when things don’t go exactly to plan – and they never do.”