“The future ain’t what it used to be.”- Yogi Berra
It has always been difficult for the retail industry to keep its customer base because of constantly changing consumer preferences, rapid commoditization and low barriers to entry.
Traditionally, retailers lost customers to other brick-and-mortar competitors. The many examples of this include Montgomery Ward and E.J. Korvette, which disappeared because new competitors such as Target and Walmart provided a superior shopping experience.
But we are now witnessing the monumental shift in retailing called e-commerce.
E-commerce, with its power to buy and sell products or services worldwide, delivering them to a shopper’s home, and without the larger expenses of maintaining a physical storefront and clerks, has been a true game-changer. Among other things, it has:
Produced a long-term change in shopper habits.
Reduced store traffic.
Shifted pricing power away from big-box retailers.
Spoiled consumers with convenience and quick and sometimes free or low-cost shipping.
Avoided paying sales taxes in many states.
Because of the Internet, today’s buyer also has significantly more information than ever before. With products such as consumer electronics or office supplies that have easily quantifiable features, buyers can make relatively easy price comparisons online. If buying decisions are based on personal tastes or fit, as in apparel, it is harder for e-commerce firms to compete.
And shoppers know how to game the system. They figure out what they want and then buy at the best price, whether it is from physical stores or online.
The demise of the Borders Group bookseller and the financial challenges facing Barnes & Noble exemplify the life-and-death struggle against e-commerce titans such as Amazon.
Traditional retailers have adopted more aggressive price-matching efforts and other promotions to remain competitive. Some have allocated space within their stores to fulfillment centers to expedite online orders to them. Macy’s has converted more than half its 840 physical stores to be able to fulfill online orders.
Best Buy took similar steps. It enlarged its ship-to-store program to more than 400 locations and invited shoppers to “showroom” electronics, co-opting the practice of people trying out products in stores and then buying them for less online. Even so, Best Buy’s 2014 holiday sales fell 2.6 percent compared with the previous year. After announcing disappointing holiday sales, its stock dropped 29 percent in one day.
ShopperTrak, which uses a network of 60,000 shopper-counting devices to track visits to malls and large retailers across the country, reported that:
Shoppers visited an average five stores per mall trip in 2007; today, they only visit three.
Retailers got only about half the holiday traffic in 2013 that they did just three years earlier.
And CoStar Group Inc., a real estate research firm, said that only 44 million square feet of retail space opened in the 54 largest U.S. markets last year, down 87 percent from 325 million in 2006.
IBM Digital Analytics reported that online sales in the final weekend before Christmas were up 37 percent over the prior year. This surge in online sales caught UPS and Fed Ex unprepared, with many packages failing to arrive by the promised date, angering shoppers.
Consumers have not abandoned shopping at physical stores. People like the social aspect of shopping and seeing new offerings in person. Instead of giving it up entirely, they are supplementing their traditional shopping with online shopping.
An example of finding the right mix is Apple Inc., which followed another famous bit of Yogi Berra wisdom: When it came to a fork in the road, it took it.
Apple sells its products though a state-of-the art website, through iTunes and the App Store but also invested heavily in making its Apple physical stores great shopping experiences.
The salesmen in its bricks-and-mortar stores make Apple’s products resonate because of their personal attention, advice and valuable services.
Originally published in the Sarasota Herald-Tribune
