Brick-and-mortar retailers still hold plenty of appeal for certain kinds of products. Anyone interested in buying a laptop with the new Microsoft 8 operating system, for example, might want to test out the touch-screen, app-oriented features rather than buying it sight unseen from Amazon. They also might like the idea of working with a salesperson instead of a website - as well as being able to return an item to the store rather than dealing with shipping hassles. The problem is that the superstore business model doesn't work well anymore - just too many "showroomers" who check out products at the stores and then make their purchases online. Profit margins are sharply reduced - much to the chagrin of shareholders - and even then Amazon comes out on top. That's a far different picture than, say, a decade ago when Best Buy and Circuit City were the places that had the biggest selection, the largest amount of selling space, and the most attractive prices. Today, Cicruit City is gone and Best Buy is barely hanging on. Analyst Victor Anthony explains (via Business Insider)
We are reminded of this Charles Darwin quote when thinking about the effect on traditional retailers: "It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change." Traditional retailers are responding to Amazon's threat on their businesses, but we wonder if it is too late. Best Buy is matching Amazon's price, but only if the consumer asks. Wal-mart is testing same-day shipping from their stores but history has proven that to be difficult to implement successfully. Staples recently announced stepped-up investments in online/ mobile. One thing is certain - responding to Amazon will pressure margins at traditional retailers but that may be a necessary pain point they will have to endure.