Can Brick and Mortar Stores Compete with Amazon?
Amazon has become the poster-child of the e-commerce growth story across the world. For many years, retail executives across the globe have been nervously watching Amazon capture a bigger share of the pie each year. Doomsday scenarios are often predicted in media and by political pundits. However, the reality is that the situation is not likely to change very much in the near future. Retain analysts estimate that about 80% of all sales are still likely to take place via brick and mortar stores till 2025.
Amazon is becoming more aggressive with its sales strategy. Amazon recently acquires Whole Foods co. which means that the company is indeed interested in having an offline presence. Also, Amazon is launching several programs which are aimed at pulling users away from online stores. Amazon already knows that it has won the e-commerce race. It is now competing with brick and mortar stores.
However, the point is whether brick and mortar stores have the wherewithal required to put up a fight. In this article, we will have a closer look at some of the strategies which can be used by brick and mortar retailers to compete with Amazon.
In-Store Service: Retail stores cannot beat Amazon on price. Amazon has some of the most efficient supply chains in the world. This means that Amazon has the ability to consistently price its products 5% to 10% lower than the brick and mortar stores.
It is essential that the stores realise that they need to outflank Amazon and create a new battlefield. In order to do so, they need to understand consumer needs better. For instance, more than 86% of customers believe that they need better customer service. At the same time, less than 1% believe that either brick and mortar stores or Amazon are likely to provide this service in the near future.
This is where the brick and mortar stores need to capitalize. Brick and mortar stores are where consumers are physically present. Hence, it is easier to gauge their moods, needs and shopping preferences and provide them with the best possible service. Customers are looking for good products which match their needs at a price comparable to online shopping. They wouldnt mind paying 5% to 10% premium as long as they get better service.
Unique and Customizable Merchandise: Retail stores cannot possibly compete with Amazon as far as providing options to their customers is concerned. Amazon provides over 320 million options to its shoppers. Also, since these products do not have to be stocked in the real world, it doesnt cost Amazon anything to add more options. No brick and mortar store can compete with that kind of collection. However, the reality is that no brick and mortar store needs to. Very few of these products are actually relevant to any given customer. Hence adding more and more options could actually be counterproductive.
Brick and mortar stores can compete by providing products which are not provided online. A lot of times, this could mean setting up different supply chains for their stores. It could also mean creating captive brands which meet a specific customer need but cannot be found online.
Speed and Convenience: Up until now, stores used to claim that Amazon cannot compete with them since they allow customers to experience the product before buying it. However, this may be about to change as Amazon has introduced Prime Wardrobe. As a part of this service, Amazon will ship three pieces of wardrobe to the customer, which they can try. Amazon is obviously trying to take away the in-store experience.
However, it needs to be understood that speed is a very important element in this regard. Anyone who has ever been shopping knows that three options are not enough. People usually try 10 to 15 different outfits before they choose one. Trying 10 to 15 outfits via Amazon would take about 5 iterations and close to 15 days. This is where brick and mortar stores can capitalize. They need to advertise on the fact that they are the fastest way to try and then buy a product.
Personalized Offers: Brick and mortar stores tend to have a small customer base. However, they can use it to their advantage. Since they have a smaller customer base, they tend to know more about their customers' likes and preferences. This means that they can provide customized shopping offers. For instance, if a store knows that a particular person tends to shop more in a given month, they can be given offers and discounts in order to incentivize them to continue shopping with the store.
Online stores are also trying to implement this strategy using big data. However, humans feel special when other humans take care of their needs. At the same time, humans find it creepy when machines try to record their data and spy on them. Hence, brick and mortar stores have a definite advantage over Amazon when it comes to providing personalized offers.
Community Events: Lastly, it is important that online stores make shopping a community event. Many malls have recently realized that people want to interact with others and have fun while shopping. This is why organizing events like food festivals and talent shows for children tend to increase the number of footfalls and also the dollar value of items sold.
The bottom line is that brick and mortar stores can still survive. However, they have to take very specific steps and stick to a niche.
|❮❮ Previous||Next ❯❯|
Authorship/Referencing - About the Author(s)
The article is Written By Prachi Juneja and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.
- Corporate Finance - Introduction
- Nominal and Real Value of Money
- Fundamental Rules of Corporate Finance
- Present and Future Value of Money
- Net Present Value Calculations
- Compounding Intervals and Interest Rate
- What Are Negative Interest Rates ?
- The Consequences of Negative Interest Rates
- Opportunity Cost of Capital
- Valuing Cash Flows in Different Periods
- What is Perpetuity ?
- Growing Perpetuity
- What is Annuity ?
- Ordinary Annuity vs. Annuity Due
- Types of Annuity Calculations
- What is Bond Valuation ?
- Bond Market Conventions
- How Interest Rates Affect Bonds ?
- Stock Valuation Models
- Discounted Cash Flow Approach
- Assumptions During Stock Valuation
- What is Cost of Equity ?
- What is Payback Period ?
- What is Internal Rate of Return (IRR) ?
- Problems With Using IRR
- Capital Rationing & Profitability Index
- Types of Capital Rationing
- Capital Controls: Meaning, Types, Benefits and Downside
- Estimating Project Cash Flows: Part 1
- Estimating Project Cash Flows: Part 2
- Estimating Project Cash Flows: Part 3
- Capital Budgeting and Inflation
- Capital Budgeting and Depreciation
- Equivalent Annual Costs
- Investing and Financing Decisions
- Getting Creative with Capital Budgeting
- The Fallacy of Creative Destruction
- Companys Risk vs. Project Risk
- How Governments around the World are Bankrupting Future Generations for Present Consumption
- Role of Credit Rating Agencies in Determining Attractiveness of Companies and Countries
- Federal Reserve Announcement to Taper Quantitative Easing
- How Do Funds Transfer Systems Work
- The Importance of KYC (Know Your Customer) Norms and Procedures in Banking
- Difference between Corporate, Retail, Investment Banking, and Private Banking
- Impact of Geography on Banking and its Functions
- Functions of a Central Bank in Modern Economies
- Lease Rental Discounting
- Lending Against Intangible Assets
- Real Reasons behind FDI in Retail in India
- Microfinance: A Cure for Poverty
- Microfinance: Indebting the Poorest in the World
- Behind the Scenes of an Initial Public Offer (IPO)
- Pros and Cons of Going Public
- Snapchat IPO: Is this the New Tech Bubble ?
- Benefits of Delaying Profitability
- Why Do Corporations Get Away With Tax Avoidance ?
- After Effects of the Nirav Modi Scam
- The Panaya Acquisition
- The Flipkart and Wal-Mart Alliance
- The Worlds Largest IPO
- Initial Coin Offerings: A Primer
- The Aftermath of the Qualcomm Deal
- What are Demergers: Its Pros and Cons
- Benefits of a Holding Company
- The Economics of Lawsuits
- Protectionist Sentiment over Flipkart Takeover
- The Impact of Tariffs on the Energy Sector
- Venture Debt A Primer
- Interest Rates and Automobile Sales
- How Should Companies Communicate With Wall Street?
- How an Interest Rate Hike Will Affect the Government of USA
- Is Tesla Close to Bankruptcy?
- Myths Surrounding Toys R Us Bankruptcy
- The Economics of 'Soda Taxes'
- Why Elon Musk's Tesla Should Go Private and Why It Won't?
- Why the Xiaomi IPO Failed?
- How A Whatsapp Message Nearly Took Down A Company
- The Case for Index Funds
- The Sears Bankruptcy
- The Socialization of Losses
- The Sudden Downfall of IL&FS
- Why Healthy Corporate-Regulator Tussle is Good for Free Market Capitalist Economies
- What Happens When Businesses Go Bankrupt? Insolvency, Aftermath, and Recovery
- Alibabas Singles Day
- Ubers New Businesses
- Goldman Sachs and the 1MDB Scandal
- The Amazon Divorce
- Are Index Funds Not A Good Investment In India?
- Can Brick And Mortar Stores Compete With Amazon?
- Why is the Fed Still Raising Interest Rates?
- Problems Related to Facebook, WhatsApp, and Instagram Mega Merger
- The Whatsapp-Facebook-Instagram Merger
- What Is The DHFL Scam?
- Financial Troubles In the Fracking Industry
- Flipkart Circumvents Indias FDI Norms
- Subprime Automobile Loans in America
- The Jaguar Land Rover Debacle
- The Kraft - Heinz Fallout
- Why Uber Should Be Regulated?
- Is Regulation of the Tech Sector Long Overdue with the Tech Giants being Too Big
- The Fall of An Ambani Scion
- Litigation Funding: A Primer
- The Finance behind the Plastic Problem
- The MasterCard Visa Duopoly
- Is the Lyft IPO Overpriced?
- The Alliance between Car Companies and Ride Hailing Apps
- The Amazon Divorce Deal
- The Lawsuit Between Spotify and Apple Corporation
- The Story Behind the L&T- Mindtree Takeover Bid
- Do IPOs Affect Competitive Firms?
- Can Cost Cutting Turn Out To Be Expensive?
- The Economic Impact of Facebook Outage
- The Apple-Qualcomm Legal Battle
- Cross Border Credit Reporting
- The Sudden Deluge of Unicorn IPOs
- The Wow Airline Debacle
- The WeWork Business Model
- Problem with Private Securities Offerings
- The Amazon FedEx Breakup
- The Decline of the Big Corporation
- The Gap-Old Navy Breakup
- Apples Acquisition of Intels Modem Business
- Mergers and Acquisitions: A New Perspective
- The CBS-Viacom Merger
- Why are Sprint Wireless and T-Mobile Funding their own Competition?
- Why are Corporations Hoarding Trillions in Cash?