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Brick-and-mortar retail nightmare: A study from research firm GroupM Next indicates that 45% of...

Brick-and-mortar retail nightmare: A study from research firm GroupM Next indicates that 45% of shoppers at a physical store will walk out and complete their purchase online if they can find price savings of 2.5% or more. At 5% savings, the number jumps to 60% of shoppers. The Amazon (AMZN) Effect continues to rev up as the numbers of shoppers who check product pricing on-the-fly with their mobile devices now stands at a whopping 44%. Pass the aspirin: SPLS, OMX, ODP, RSH, HGG, CONN, DKS, TGT, WMT, GPS.
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Comments (26)
  • Paulo Santos
    , contributor
    Comments (20640) | Send Message
     
    Thing is, AMZN doesn't necessarily have a 5% cost advantage over bricks and mortar once it collects sales taxes. Indeed, it doesn't necessarily have a cost advantage at all. Sure, it can price lower, but no one is going to win a price war without having a cost advantage to begin with.
    21 Aug 2012, 01:58 PM Reply Like
  • chopchop0
    , contributor
    Comments (3541) | Send Message
     
    yup. The sales tax issue will get resolved one way or the other. Plus AMZN will still need to develop their "same-day" or "instant" service. Sometimes, you just need food, toilet paper and other staples immediately. I don't see this hurting stores like TGT or WMT as much as I see it hurting SPLS/OMX/BBY/RSH/HGG or DKS/GPS. If you sell a product where people can shop it online and wait for it for a few days, you're in much bigger trouble.
    21 Aug 2012, 02:01 PM Reply Like
  • dieuwer
    , contributor
    Comments (2421) | Send Message
     
    AMZN has to pay for shipping to the customer (in case of "SuperSavers"). Brick 'n mortar stores do not.
    21 Aug 2012, 02:07 PM Reply Like
  • Cwaggy1
    , contributor
    Comments (17) | Send Message
     
    My cost advantage is time on the road dealing with Massachusetts drivers and the cost of gas used in getting to the mall. If I need a $39 FM/USB device for my boat, by the time I travel to and from (2 hours out of my day, can't bill the time) and add in the costs, it is now a $50 radio. Click once and three days later it is at my doorstep. Priceless.
    21 Aug 2012, 02:03 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (20640) | Send Message
     
    Sure, many people will make that equation - but notice how the equations turns more favorable for low-priced items. Now, imagine in what items AMZN has more trouble being competitive and making a profit...
    21 Aug 2012, 02:08 PM Reply Like
  • Donadog0
    , contributor
    Comments (35) | Send Message
     
    If I hear this one more time I'm gonna puke. Yep, I'm having huge or breakable items shipped so I can save a few bucks. Time is money. I want to see what I'm getting, then get it over with. I can't tell you the amount of times I've got items different than what I thought I was getting online.
    21 Aug 2012, 02:20 PM Reply Like
  • 215304
    , contributor
    Comments (652) | Send Message
     
    Given the huge cost advantage that it would seem Amazon has over brick and mortar stores, why is it that WMT, TGT, and especially COST all have significantly higher earnings and net margins than Amazon? Amazon does not appear to be putting them out of business. In fact, they are all making handsome profits, something Amazon hasn't figured out how to do yet, and they are all paying dividends to their share holders, something Amazon will probably never do. Amazon has announced they will probably lose money this quarter and their earnings have declined year over year 6 quarters in a row.
    21 Aug 2012, 02:20 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (20640) | Send Message
     
    215304, the answer is that AMZN does NOT have a cost advantage, certainly not over WMT or COST.
    21 Aug 2012, 02:23 PM Reply Like
  • chopchop0
    , contributor
    Comments (3541) | Send Message
     
    It's the opposite in fact. WMT dominates AMZN when it comes to having a cost advantage

     

    http://huff.to/RdEofU
    21 Aug 2012, 02:46 PM Reply Like
  • 215304
    , contributor
    Comments (652) | Send Message
     
    Paulo and chopchop0, that's the point I was trying to make. The author describes a "brick and mortar retail nightmare", yet brick and mortar competitors of Amazon like WMT, TGT, and COST seem to be doing quite well thank you. They're clearly performing much better than Amazon in the bottom line department. It's hardly a nightmare they are facing, more like a wet dream. The notion that Amazon has a cost advantage over brick and mortar is objectively bogus, yet it keeps getting repeated by Amazon groupies and is believed by many.
    21 Aug 2012, 06:03 PM Reply Like
  • BHL
    , contributor
    Comments (42) | Send Message
     
    If and when AMZN has to show more operating profit leverage and thus more EPS, what will AMZN do? Will they have to increase prices? That is one way to quickly improve profits, but it will erode their competitive positioning on price relative to bricks and mortar stores.

     

    AMZN has been amazing, but I worry about that...are they taking share because they can sell products more cheaply than bricks and mortar stores, but at the cost of profitability and returns on assets and capital invested?

     

    Maybe the goal is to put a bunch of traditional retailers out of business, and then when there are fewer options for customers, AMZN will raise prices on the stuff they sell. But that seems too cute.
    21 Aug 2012, 02:37 PM Reply Like
  • krk
    , contributor
    Comments (827) | Send Message
     
    ".. numbers of shoppers who check product pricing on-the-fly with their mobile devices now stands at a whopping 44%.."

     

    Take it with a grain of salt.
    Pew published a similar fluff report a couple of months ago:
    52% Use Mobile While Shopping
    http://bit.ly/RAdykp

     

    Do the researchers know what 52% or 44% means? ! Like just about 1 out of 2 shoppers!

     

    Now you tell me, when was the last time you saw a fellow shopper anywhere, Wal-Mart, Target, Macy’s and even at Amazon’s showroom- Best Buy, whip out their smart phone, shine the laser or the bar code or squint to type in the product info? The few rare times it has happened in my experience, the person happened to be just me! And me alone!

     

    I know it happens, I have done it myself a few times but have found the process too tedious and strange and have stopped doing it. But NOT by 44% of shoppers.

     

    There are lies, damn lies and market research numbers. Don’t you just love it when they just don’t round-up the number to say, 40% or 50%… 52% or 44% sounds oh! so, precise and gives the illusion as if it is based on some sort of rigorous and thorough measurement and observation.
    21 Aug 2012, 03:53 PM Reply Like
  • krk
    , contributor
    Comments (827) | Send Message
     
    A little color to my post above:

     

    The Number One Smartphone Use? Checking The Weather
    http://huff.to/NZubkg

     

    Q: Which of the following things do you do regularly (at least once per week) on your mobile phone?

     

    Weather: 47%
    Video: 31%
    Local news: 29%
    National News: 24%
    Sports: 21%
    etc. etc.

     

    Interestingly, "Comparison Shopping" is not even listed among the 12 activities listed.
    21 Aug 2012, 08:08 PM Reply Like
  • Spaztastic1
    , contributor
    Comments (4) | Send Message
     
    I comparison shop to Amazon regularly--often before running to the brick and mortar store. If the price is the same (or as is often the case with Amazon a few bucks cheaper) I'll order the product from Amazon unless I need the product that day. Saves considerable time.

     

    I'm somewhat unusual, I think, in that I'm an older adult who does most shopping online, but it is a common behavior among college age individuals. My extended family is also picking up my habit as they see my experience with it.

     

    (I have no AMZN position, but probably should start one)
    22 Aug 2012, 09:29 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (20640) | Send Message
     
    Yes, because there are few other $100 billion companies with earnings declining at a 90% angle that trade as cheaply as AMZN does ... eheh.
    22 Aug 2012, 09:30 AM Reply Like
  • JPWHITE
    , contributor
    Comments (10) | Send Message
     
    I have purchased books and books only from Amazon. I have a pretty good idea what a book is going to look like, feel like, etc. When I am buying other things, I want to seeand feel it/them. The likelihood that I am going to pay more, by seeing it/them is well worth the price. Plus it can be an enormous time-saver -- to get the correct thing without any project of returning it or suchlike. By the way, I have bought three different items from three different sellers on e-bay and etsy. Two items were not as described -- bone and not ivory, and one item had a manufacturing defect. Good apparel brand but a noteworthy error in construction. I am going to be more confident in my investments in brick and mortar stores. I have sold my AMZN stock. I am cool towards buying anything else on line. I suspect that others may gravitate this way also, over time.
    21 Aug 2012, 04:38 PM Reply Like
  • positivethoughts
    , contributor
    Comments (1933) | Send Message
     
    Amazon wins on selection - that is why I shop it.
    21 Aug 2012, 05:31 PM Reply Like
  • Colin Doyle
    , contributor
    Comments (725) | Send Message
     
    I don't buy the study that GroupM carried out (excuse the pun).

     

    Normal people don't want to wait for things. They want to go down to a store, purchase an item, bring it home, and be done with the affair. Time is money.

     

    Granted, there's always been a subset of society that likes to "shop around" so much that they waste more money in time and gasoline than they actually save on their items, but (hopefully) most people are either more rational or too lazy to partake in that bizarre sort of behavior.
    21 Aug 2012, 09:29 PM Reply Like
  • chopchop0
    , contributor
    Comments (3541) | Send Message
     
    For electronics, people are willing to wait a bit to save money and the hassle of going to a store by purchasing online. That's what's been killing HGG and BBY.
    21 Aug 2012, 09:31 PM Reply Like
  • Colin Doyle
    , contributor
    Comments (725) | Send Message
     
    Yes, shopping around works on more expensive items.
    24 Aug 2012, 05:16 PM Reply Like
  • Sandeep Pandey
    , contributor
    Comments (5) | Send Message
     
    I seriously doubt the findings of this study. May be the author needs to provide complete details to make the study believable. Here's an excerpt from the article.

     

    "If the price difference in-store versus online is more than $5 most customers will leave."

     

    Really? Wouldn't this depend on how $5 savings compares to the overall price. Normally, you would do price check for products that are costly. If I am visiting a store to buy a notebook that is only $5 cheaper on Amazon, I would certainly buy it from the store for an instant gratification, wouldn't you?

     

    Other question is about the sample selection. Did they only include shoppers who have a smartphone. 45% seems quite high, unless this is for an store like BestBuy.
    22 Aug 2012, 02:42 AM Reply Like
  • morning7
    , contributor
    Comments (2) | Send Message
     
    It would actually be more interesting to find out what products this study was based on. 2.5 percent seems like a very low. It would take me a much greater savings to actually complete my transaction in the store. I am there, why wait for it. There could have been other reasons as well, such as selection and availability. Study is a bit flawed. As a online retailer I would love for it to be true.
    22 Aug 2012, 03:55 AM Reply Like
  • DeepValueLover
    , contributor
    Comments (8690) | Send Message
     
    I've been hearing about how Amazon is going to fall apart for 15 years now...
    22 Aug 2012, 10:47 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (20640) | Send Message
     
    DVL, the deteriorating fundamentals are only 1.5-2 years old at most.
    22 Aug 2012, 11:17 PM Reply Like
  • Paul Leibowitz
    , contributor
    Comments (1441) | Send Message
     
    Not all brick and mortar stores are the same. You can download music which contributed to the recent demise of Colony Records, a New York landmark store http://nyti.ms/O9DqhV

     

    Needless to say, online shopping also hurt Barnes & Noble and caused Borders to file for bankruptcy.

     

    Then, there's the Circuit City and Best Buy examples.

     

    A logical and individualized business argument can be made explaining each company's demise.But, one common factor will be the impact of online shopping on each and, perhaps, pontifications on how each company could have rescued itself, survived, and grown. Many might argue that each could have shifted more of its business online and reduced the number of low profit stores.

     

    Or, do business models need to adapt more radically than this?

     

    The latest possible casualty might be Staples. Here, many of its large orders are too bulky and heavy to transport home and shipping will be wanted. The boundaries between stores and online shopping may not be too late for Staples to address because Staples now has many case studies as learning aids.

     

    I also believe that customer service, technical support, and relationship management will be increasingly important in order to hold on to one's best and most profitable customers, meaning the high end customer base.

     

    My own view is that brick and mortar will always be needed no matter the product. Business models need to adapt to include online business. 

     

    Long SPLS.

     

    Yuck.
    24 Aug 2012, 12:45 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (20640) | Send Message
     
    During all that time online retailers were selling without sales tax. It's hard to gauge their impact with sales tax.
    24 Aug 2012, 12:57 PM Reply Like
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