Thursday, December 15, 2011

Déjà Vu, Retail Edition

Amazon.com’s promotion last weekend suggesting customers walk into brick and mortar stores to price goods with a smartphone app and then buy them from Amazon with a 5% discount up to $5 has engendered an intense war of words, casting the online behemoth as anti-Main Street and a pox on the small business, national economy.

Naturally, Amazon rebuts the charges, but the brouhaha is just the latest iteration of a century-old battle between entrenched retail operations and newer, evolving, more efficient modes of consumer goods distribution. In this battle, only the most nimble, well-financed retailers survive, yet they, too, may be challenged by future concepts that convey products at less cost to the retailer and consumer.

One of my mentors, the late David Q. Mahler, used to say all revolutions in retailing reflected fundamental shifts in distribution practices. The department store concept that began in the mid-1800s aggregated diverse products under one roof. Five-and-dime stores brought products to the masses at affordable prices. The mail-order houses of Montgomery Ward and Sears, Roebuck and Co. extended the purchasing options of rural America. Supermarkets transformed the way households bought staples and necessities even as they initiated the self-service revolution by placing products within reach of each patron. Aided by the interstate highway system and the resultant migration of families to the suburbs, the regional mall shifted the nexus of shopping away from urban centers. Specialty stores thrived in the malls, while off-the-mall discount stores and category killers democratized distribution of name brands. As chain stores grew ever stronger, retailers grabbed power from manufacturers. Over the last 10 years power has changed hands once again—the Internet has placed it into the hands of every consumer.

Back in July 2008 I wrote in an editorial for Chain Store Age that QR Codes, coupled with the ubiquitous camera-equipped cell phone, may well change the way retailing is conducted in the future. Well, the future has arrived, with Amazon being one of the first to exploit its potential. Being a big advocate of in-store retailing, I don’t like what Amazon did, but holding back the tide of innovation is not a viable long-term strategy for store-based retailers.

This week I heard some merchants are considering charging consultation fees (good towards a purchase) should a customer mine them for information and then turn around and not buy a product. It might work for big ticket items such as electronics, housewares or furniture, but it’s hardly a prescription for extending a welcome to the public.

Coping with the next retail revolution segregates winners from losers. Traditional, full-price retailers such as Gimbels, Sage Allen and Herman’s Sporting Goods ranted against the discounts extended by the likes of E.J. Korvette, Caldor and Ames. Eventually, they folded, as did those very discounters that didn’t adapt to the fiercer competition from Wal-Mart and Target.

The next retail revolution has arrived. No amount of pouting at Amazon will reverse the sweep of change.

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