Amazon vs. Bricks and Mortar

Cyber Monday came and went this week in America—and it was the biggest shopping day of the year. More people logged onto their computers to make purchases than went out on Black Friday, the traditional day for shop-til-you-drop purchasing. The torch was passed: online retailer Amazon’s stock soared, as reported by Durden at ZeroHedge, with the report that the online retailer had trounced its bricks and mortar competition. Bricks and mortar store traffic fell by 1% from the previous year. Online purchasing rose by 17% (Durden).

If anyone had any doubts about it, bricks and mortar retail is on the ropes and the online giant Amazon is perched to defeat its competition with a stunning KO. The specific problems plaguing traditional bricks and mortar stores are that it is simply easier for consumers to log on and check out with the click of a button. Amazon Prime has enabled consumers the option of taking delivery quickly—anywhere from 2 days to 1 hour, depending on the item purchased.

Consumers are willing to pay a premium because there are other incentives to being a Prime member as well: access to films, shows, music that can all be streamed online. Plus, Amazon delivers more than just products like movies, TVs, computers, and books: it is also in the grocery-delivering business. With the online giant’s recent purchase of Whole Foods, the go-to place for online shopping just expanded into the grocery store industry as well.

Thus, there is less incentive to go out and shop: one has to face traffic, crowds, the possibility of what is wanted not being on the shelves, the hassle of leaving the house, finding a parking space, braving the weather, and so on. In the digital age where everything can be shopped for online and delivered straight to your door, there is less and less reason for anyone to choose the bricks and mortar retailers. The online retailers offer consumes much more ease of access when it comes to shopping.

As Freedman points out, bricks and mortar stores have to rethink the way they appeal to consumers. Since online retailers offer products with greater convenience to consumers, retailers have to offer something that online retailers like Amazon cannot offer: Freedman calls it “the experience.” For bricks and mortar retailers to renew interest among consumers they have to sell not just a product but an experience—a reason to compel the shopper to get up and leave the house.

Whether this is by putting a coffee or bourbon bar in the store or by having live music or by treating the consumer like royalty whenever he or she enters in, the bricks and mortar retailers have to be unique in their approach to shoppers because simply offering a product that can more easily be purchased online is no longer enough to drive traffic through the doors. Consumers want to be wined and dined.

As online retailers like Amazon continue to make waves and revolutionize the retail industry, adjustments are going to have to be made. Amazon may lose money on its transactions, but what it is losing on retail sales, it is gaining in market share. Its stock price continues to climb as investors fall head over heels in love with the stock, seeing Amazon as the future. The convenience it offers to consumers cannot be matched: it is literally the one-stop shop for all almost all of one’s consumer needs.

The trend for bricks and mortar retailers is bleak by comparison. Shopping malls are shuttering and looking more and more like ghost towns as traditional retailers close up, fold or declare bankruptcy.

Toys ‘R’ Us is one of the latest victims of Amazon’s total dominance of retail: the mainstay of the last generation’s youth, where toys were always overflowing and where kids were reminded that they should never want to grow up but be a Toys ‘R’ Us kid for life, closed its doors this year amid dwindling sales and unserviceable debt.

Could a store like Toys ‘R’ Us have survived had it looked ahead and seen what was coming? Could it have turned its massive stores into total experiences the way IKEA has with its stadium-sized warehouses where furniture shoppers come to spend the day, look at and shop for furniture, enjoy a beverage and watch their kids play in the play area? The answer is almost certainly yes.

As Freedman has shown, bricks and mortar retailers have to adapt or die: they must differentiate themselves from the old models, which are now insufficient and cannot be sustained. The new model for bricks and mortars is based on providing the consumer an experience—an interaction, a moment, a feeling, a place that cannot be duplicated by an online retailer. The trend is all in the favor of Amazon—but it does not mean that this is the end for bricks and mortar retailers.

They may be resurrected like the Phoenix.