This website loves to riff on shopping. It writes frequently about the ways in which brick-and-mortar companies are either downright clinging to their premise of physical-world retailing (think: chains) or having inoperative or missing aspects (showrooming). For Amazon, by contrast, it’s a business model that no longer feels lonely. In fact, it seems to be working in its favor.
To refresh your memory, let’s review the basics of Amazon.com: In the 1990s, Amazon was a fledgling retailer serving some of the country’s poorest communities. In 1999, it moved into bookselling via the purchase of The Book Trader. Four years later, the New York Times reported that Amazon is the “fairest,” “most reliable” and “fairest” purchase of books ever to come along. In 2005, a University of Michigan study titled “Internet Sales of Books” found that Amazon is “the best organized, most productive, most targeted way to purchase a book online.”
Ten years later, a study titled “Wal-Mart on the Web” sought to assess Walmart.com’s effectiveness relative to Amazon. The study authors’ findings, outlined in a Bloomberg article at the time, were fairly stunning: “People seek out physical bookstores more than online bookstores because of the human touch,” Sam Ben-Ofer, a professor at the New York University Stern School of Business, told Bloomberg. “Online bookshops are less reliable than paper or even TV bookstores.”
Fast forward to Amazon in 2018: The company is the second-largest e-commerce company in the world and its shares have been rising steadily in recent years. In a recent annual shareholder report, Amazon boasted that “while it is just nine years old, we are already providing $100 billion in annual net sales globally to our customers.”
And the company is growing faster than any other e-commerce platform on the planet. According to eMarketer, Amazon accounted for 22.8 percent of all e-commerce sales in 2017, up from 20.3 percent in 2016. Between 2017 and 2018, Amazon is expected to grow its share even more, according to a recently released forecast.
This means that brick-and-mortar retailers have been fighting a losing battle — consumers aren’t buying their products, they’re buying online.
But why does this?
Perhaps because, to echo the Tinkertoyism of the nudge books themselves, “hardware stores, long a cornerstone of our economy, have lost some of their real-world charm.” In Fortune, Danny Schechter recently remarked that consumers need not merely a “good price for a good product, but a good experience, too.” And retailing is anything but experiential. Like a car dealership, what you can buy with $300 is so hard to describe that it gets jumbled into myriad configurations (model, capacity, is it “stock-keeping unit?”). It’s where you’re supposed to hand over cash for physical goods and leave before that store smells like rotting peppermints.
Can’t online shopping simply do better? Yes, it can. But doesn’t physical retailing, physical shopping and physical store environments tie all those sales-units together? How can Amazon, with some $135 billion in annual sales, potentially serve more customers than Albertsons, Costco, or Best Buy? Let’s be clear: The latter are all superstores (nail salons, schools, veterinarians, and other typically not-Amazon stores), and there are no signs of this fragmentation happening on Amazon’s horizon.
The fact is, it’s not the retailer that people are buying; it’s the marketing support (online and in-store) and the customer service. And that, I think, is why what’s in store for Amazon’s brick-and-mortar competitors should be most worrisome.
Lack of customer experience. No great sense of place (like a Borders). Lack of employee courtesy (or at least the lack of looking people in the eye). Lack of any semblance of physical display or “showroom.” Lack of any real investment in the store or fulfillment facilities necessary to keep making the customers happy. All the things we want in a physical store — except for the…
That just may be the warning of the bricks-and-mortar experience’s demise.
I’ll be writing more of this often. We’ll bring you readers updates as we learn more.