Is it the end of the road for brick and mortar stores?

Imagine walking into your favorite clothing store with nothing in particular in mind but knowing you’ll find something. You start to browse the different racks of clothes when an army green dress catches your eye. It’s precisely what you’ve been looking for! When you try it on, the navy blue scarf that sits on top of it compliments your skin tone perfectly. 


Advantages People Enjoy

This is what most people imagine when they hear the phrase “in-store shopping.” However, most Americans are turning away from this kind of shopping and towards online shopping instead. The world’s largest retailer, Amazon, capitalizes on this shift by developing physical stores meant only for Amazon products. Amazon Go was launched on January 22nd in Seattle with no checkout lines or cash registers. Amazon Go stores allow customers to enter using their Amazon accounts, pick up whatever they want, and go. Amazon has already expanded Amazon Go-type stores to two universities in the United States.

Another advantage of online shopping is that you can get your purchases shipped to you straight from the warehouse instead of having to walk around with them all day. A downside is that it can take days for packages to arrive once they are purchased, depending on where they are being delivered from.

Amazon isn’t the only company reaping benefits from this change in consumer behavior. Third party sellers like Chewy sell products cheaper than retail chains like PetSmart or Petco because they operate online only and don’t have physical storefronts with rent to pay. Amazon sales account for more than 45% of products sold online in the United States, and $1 out of every $2 spent online is done through Amazon.

Shift to Online Shopping

The shift towards online shopping began in 2005 when the US Census Bureau found that only 8 percent of American’s bought clothes exclusively from brick-and-mortar stores compared to 40 percent who bought clothes both in-store and online. However, after the shift away from traditional stores started, clothing buyers are now equally split between purchasing clothes in-store or online, with 41% purchasing their clothes through brick-and-mortar shops because they offer a greater variety of styles than what can be found on Amazon or any other eCommerce site. Many shoppers cite price as a reason why they prefer to pick up their clothes in person.

Retailers have had to adjust by creating shopping experiences that don’t revolve around brick-and-mortar locations. Brands like Hot Topic and American Apparel started opening stores with the focus of having fashion shows and other events rather than selling clothes. Another option is for retailers to use apps like Spring or Shopkick, which allow users to search for nearby items and receive discounts on those products depending on how far you are from them.

This shift has also created jobs in new industries such as delivery companies like Cargo who will deliver your products straight from a retail store or warehouse right into your home. For consumers, it’s an exciting time because we never know what’s going to become popular next in the fashion world.

Brick and Mortar Stores 

Brick-and-mortar stores are struggling to compete against online retailers that can offer selection, convenience, price transparency, and fast delivery to customers’ doorsteps. Consumers today have many choices of where they want to shop, thanks to the Internet. And as shoppers become more comfortable buying online, retail is having a tough time keeping up with them on both ends of the market – the demand for high quality goods at competitive prices on one side; on the other side, buyers want lower costs for their product shipments without sacrificing service levels. 

Retailers are feeling this online pressure through higher prices and stiffer competition. Amazon appears to be taking the lead as the market leader in retail, as it has established itself as a household name with excellent brand recognition. Amazon is quickly diversifying its revenue streams into services such as Amazon Web Services (AWS). Check for more. 

As online retailers find success and brick-and-mortar stores struggle to keep up, everyone needs to ask: how long do we think that pureplay eCommerce companies like Amazon can continue growing? Should they become more alike rather than different? And should traditional retailers and pureplays enter into joint ventures or mergers? Some analysts say that if brick-and-mortar shops want to survive, they will need to compete aggressively on price and invest in technology and supply chain improvements to improve their delivery capabilities and customer service.

This question has raised many red flags for retail stock investors: among the 20 biggest retailers listed on S&P, 13 stocks have lost more than 50% of their value over the last year. The list includes GameStop (GME), Staples (SPLS), and Office Depot (ODP). Even Amazon is not immune – its stock price fell by almost 40% since peaking at $408 in December 2013. Some analysts believe that the shift from traditional shopping to online will continue as consumers become accustomed to buying everything they need with just a few clicks of a button rather than spending hours searching for items and standing in lines during weekends. However, we are not quite there yet.

The experts are divided on the best strategic approach for brick-and-mortar stores to take, whether adapting their business models to compete with online retailers or partnering up with them. Brick-and-mortar retailers are expanding their digital capabilities by ramping up eCommerce operations and improving in-store and mobile shopping experiences. But if they don’t adapt quickly enough, they could become extinct as pureplay eCommerce firms continue growing rapidly. Many analysts agree that despite some advantages of pureplays, offline stores have an opportunity to win back the market share because it is more convenient for consumers to buy goods in-person than through clicks on a computer. And eventually, some say that all of this will come full circle as the two converge. According to a Forbes report, if traditional retail and pureplay eCommerce models combine their strengths – each doing what they do best – the sum of both will be greater than either could accomplish on its own.”