I can spend literally hours in either a fantastic retail store or a great museum. I take my time and walk the floor slowly, admiring, thinking and assessing all of the interesting things that come into view. Both places exhibit objects of beauty & necessity either on carefully positioned shelves or in elaborate displays. Visitors in both places admire and desire what they see. Even the design of the space and the architecture that holds these treasures, is carefully conceived to show off the best attributes of the collection.
Anyone that has a similar affinity, feels the same way when they walk into a perfectly appointed, favorite retail store or a great museum for the very first time. It's a little exciting to think about the prospect of what you will find, just beyond the doorway.
The biggest difference, is that in the case of a retail store, you have the ability to bring those beautiful, useful, wonderful objects home with you. Unfortunately, most museums frown upon this.
BUT, for anyone that wants to have breakfast at Tiffany's or has the urge to test a new 3D television, the latest iPhone or a new Tesla, walking into a retail space can feel like a little bit of heaven.
The downside to providing this kind of glorious atmosphere to consumers, is a little problem called, "Showrooming," one of the latest thorns in the side of retailers.
For example, you're looking for a TV at Best Buy, you try out everything you see, get a little information from the salesperson, go home, do a search for the best price on the TV you want and then purchase it from an online retailer - not Best Buy. Imagine thousands of people doing this daily and you can see why retailers are concerned.
In essence, Best Buy is paying to provide you with the information/experience you need to make a buying decision and you are giving the sale to an online retailer with the best price or free shipping. It is an expensive proposition for retailers to provide a 'Showroom" when they can't guarantee you'll give them the sale. Many Brick & Mortar retailers are finding their sales numbers impacted because they are now competing with online stores that carry the same items, but have lower overhead, resulting in lower prices/free shipping for consumers.
Amazon seems to be enemy #1 to many traditional retailers, since they offer thousands of products at a lower cost than traditional retail, have expanded delivery options and have partnerships with many other online retailers. It's safe to say that Amazon has benefited from traditional retailers losing sales.
And they aren't done...
Amazon is currently testing same day drop shipping that they will potentially provide for traditional retailers in large cities. This is an interesting and ambitious play that may ultimately make Amazon the godfather of retail - IF they are successful with this massive undertaking. They have 2 or three brick and mortar retailers on board for the testing and I believe I read that Target is one of them.
Basically, a customer would have the ability to go into a physical store, order something and have it delivered to their house a few hours later. This will allow brick and mortar retail shoppers to get a better experience at their local store, getting a shipment faster than they would from an online store.
For instance; a customer could have a large or heavy object delivered to their home immediately, after picking the item out. As any good car salesman knows, you don't let a potential customer "walk off the lot." With a same day shipping model, the store could capture the sale and offer quicker delivery than an online store, instead of being subject to "showrooming." This also plays to the American consumer's desire to have something they purchased, right away.
The benefits to the brick and mortar retailer could be big, at least in the cities that Amazon would potentially offer this service.
Besides allowing retailers to compete against online stores (even Amazon) on delivery. Other benefits include; reducing store warehousing space, cutting out some business from existing product distributors in select markets and they could differentiate themselves from online & other brick & mortar retail competitors without same day service. That said, they could potentially reduce costs and level the playing field to some degree.
Of course, it remains to be seen what they would be paying Amazon for warehousing & shipping product...
If Amazon does offer this service in the future, any Brick & Mortar retailer that doesn't use it, would find themselves at a big disadvantage. Smaller regional retail stores in a city like San Francisco or Los Angeles could only compete by using Amazon's service too, because if larger stores are using it, smaller stores would also succumb to "showrooming" if they had nothing additional to offer customers.
In my opinion, smaller stores & regional retailers could use Amazon's potential service to gain a huge advantage against larger retailers. If smaller stores stepped up their service, product knowledge, store experience & added unique product offerings, in addition to successful commodity products, AND same day shipping, it could prove to be very successful for them. Larger retailers will be focusing on trying to stop the bleeding, but smaller, specialty retailers that are more nimble, could focus on building more revenue and foot traffic.
Ultimately, Amazon would be the biggest winner if they can make this work. Warehousing & shipping in large cities for brick and mortar stores is a NEW revenue stream. What revenue they don't capture through this area, they will continue to make in online purchases at Amazon.com or the retail sites they are the back end for and they will have a part in traditional retail too.
As mentioned above, Amazon offers back end web services for online retailers - basically managing online stores for their partners, while still looking like their partner's website. It's called Check out by Amazon Of course, they get significant revenue for running the the back end of popular sites like Target.com and hundreds, maybe thousands of others - big and small. Which is why Target recently moved away from Amazon's back end services and went on to develop their own Target.com site. I have no idea how much Target.com was paying to Amazon, but I imagine enough to make creating their own expansive, multi-layered site worth it..
Interestingly enough, I believe Target is one of the retailers testing Amazon's new same day shipping service for retail stores, so the brick and mortar side of Target clearly sees an advantage to working with Amazon.
It's not a mystery that Amazon is an amazing retail innovator, but they also realize people will not exclusively buy products online in the future There is still a need for physical retails stores, chains and shops. Amazon is clearly working on ways to get a piece of the pie in the traditional retail arena too and they're smart for doing it.
"Showrooming" doesn't have to be the death of brick and mortar retail, but it will help bring down retailers that don't evolve or have a true plan for the future.
Like the music & movie industries, many retailers, especially in the consumer electronics space, chose to rest on their laurels and be tactical & reactive, instead of strategic, expecting consumers to continue coming in droves no matter what. Many didn't realize or seriously assess the threat that the Internet could could pose to them or for that matter, the benefits it could create for them. Within a 15 year span, consumer electronics retail companies like Circuit City, CompUSA, Good Guys, Tweeter & others went from raking in huge profits to closing up shop. Granted, the recessions throughout that time period didn't help either, but not thinking strategically didn't help either.
Best Buy has hung on, up to this point, but they suffer from ongoing tactical approaches and floundering leadership, which doesn't bode well. They are going to have to really reinvent themselves to ultimately get out of the ditch they find themselves in. I hope they can.
That said, this is an opportunity and a wake up call for remaining brick and mortar retailers to think about their long term future - online and off.
Let's see if they get the message.
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