How Jeff Bezos will kill off brick-and-mortar retail, once and for all

[Credaholic]

Curious what other Mustachian's think of this - here's a link to a quick article if you haven't already read 12 articles today about the launch of the new Fire Phone: http://www.salon.com/2014/06/18/how_jeff_bezos_will_kill_off_brick_and_mortar_retail_once_and_for_all/

Is killing off brick and mortar stores for the cheapest online option Mustachian or anti-Mustachian?

[Shor]

Free Market Theory: You now have the option to take said item to the register, point at your smart phone app and bargain for a better deal. They will either be forced to negotiate or lose out on the entire sale. End result: society becomes more socially literate, using the art of conversation and bartering to deal with conflicts and reach an amenable conclusion.

Okay really now. What's stopping the death of all brick and mortars? About 100 years of social cultural standards of driving out to a shopping area to make a purchase. Shopping malls these days are (still) packed tight with vehicles even though the "brick and mortar killing" smart phones have been out for a large handful of years, and internet shopping really makes most any product widely available for delivery from the comfort of your home.

My opinion: this "new" Amazon phone is not really news; it's not even bringing anything new to the table except more marketing, and more fad hype.
It's like calling Apple products 'easier to use' or calling Samsung phones 'more adaptable'. Just more marketing buzz words for consumers to fall back on.

[Another Reader]

Ummmm....doesn't Jeff have to make a profit at some point?  He hasn't managed to do that yet.  The bricks and mortar folks that aren't making a profit are looking at shutting down and liquidating.  In Jeff's case, it's the old story about whatever we are losing on each sale, we will make up in volume.  You can't raise capital to do that forever.  Eventually some child on Wall Street is going to point out the emperor has no clothes.

[Milspecstache]

Funny to read this as I had this conversation earlier this week, first with my parents and then with my wife.

We all agree that we would rather buy things from Amazon than brick-and-mortar stores:
No lines (5 mins minimum around here)
No gas to drive to the store
Prices are the same or Amazon is cheaper
Additionally we are all growing more and more tired dealing with store clerks and other customers (back to the lines)

I was amazed that this even applies to my retired parents who are not tech-savvy at all.

Really wondering if I need to start short-selling Wal-mart stock and other brick-and-mortar stores.

[AlanStache]

Ummmm....doesn't Jeff have to make a profit at some point?  He hasn't managed to do that yet.  The bricks and mortar folks that aren't making a profit are looking at shutting down and liquidating.  In Jeff's case, it's the old story about whatever we are losing on each sale, we will make up in volume.  You can't raise capital to do that forever.  Eventually some child on Wall Street is going to point out the emperor has no clothes.

Have not checked but I thought that amazon as a strategy putting 100% of 'profits' back into growing and taking more market share at bettering delivery.  while they may have not returned anything to shareholders the method seems to be doing well so far.  Until someone beats them at there own game...

[ch12]

Funny to read this as I had this conversation earlier this week, first with my parents and then with my wife.

We all agree that we would rather buy things from Amazon than brick-and-mortar stores:
No lines (5 mins minimum around here)
No gas to drive to the store
Prices are the same or Amazon is cheaper
Additionally we are all growing more and more tired dealing with store clerks and other customers (back to the lines)

I was amazed that this even applies to my retired parents who are not tech-savvy at all.

Really wondering if I need to start short-selling Wal-mart stock and other brick-and-mortar stores.

I've started buying most things besides groceries via Amazon. It is a good Everything Store, and it makes a huge point about customer happiness.

What I've seen is that goods that are for immediate use will remain expensive and housed in physical stores. For example, my father bought me an HDMI cable because he was only going to be in town for a few hours and wanted to get my electronics set up. He paid $30. I bought the same cable and the little adapter that I needed for my laptop as well. I paid $6. Amazon is incredibly convenient, since things come in 2 days and are simply delivered to my door. I recently bought seaweed for snacks. I didn't have to meander around trying to find a non-sketchy Asian market. I just bought seaweed and was done. I've found other vendors that have cheaper prices than Amazon, but the ability to return free of charge and the improved customer experience brings me back to Amazon time and again.

[arebelspy]

Ummmm....doesn't Jeff have to make a profit at some point?  He hasn't managed to do that yet.  The bricks and mortar folks that aren't making a profit are looking at shutting down and liquidating.  In Jeff's case, it's the old story about whatever we are losing on each sale, we will make up in volume.  You can't raise capital to do that forever.  Eventually some child on Wall Street is going to point out the emperor has no clothes.

I think Amazon is making boatloads of money.  Just not on paper.  :)

http://news.slashdot.org/story/13/10/27/0559251/why-amazon-is-profitless-only-by-choice

[Ian]

I have no particular attachment to brick and mortar stores and I will use online purchasing whenever it's equivalent. Having said that, I think we always need to be concerned about monopolies. Amazon's feud with Hachette has confirmed that they have every intention of exploiting their power to the fullest.

[Another Reader]

A couple of those commenters on the Eugene Wei article Arebelspy indirectly references have a pretty good understanding of retail businesses.  The numbers just don't support substantial profitability.

[Insanity]

Monopolies.
Customer Service.
Actual interaction with humans in a life area.
Local niche shops.
Trust.

Brick and Mortar will never go away.

[George_PA]

yeah I love buying things on Amazon.  I find I actually save money ordering online because in a physical store I am more tempted to buy other things that what I originally came there for.  Plus traffic and crowds are just terrible.

In the future, brick and mortar stores will have to find a way to adapt. 

If I ran a brick and mortar store chain, I would setup a structure where if certain manufacturers agreed in a contract to only sell exclusively in my store then I would push their products the most prominently and give them the best floor space, and feature only their stuff in advertising. 

In contrast, manufacturers would also sold on Amazon would receive downgraded status and their products would be limited to a junk bin in the back corner of the store with no advertising for them.  Thus, that may be what the future is, brick and mortar stores will only or mostly only be featuring unique lines of products that cannot be found anywhere else.

[arebelspy]

A couple of those commenters on the Eugene Wei article Arebelspy indirectly references have a pretty good understanding of retail businesses.  The numbers just don't support substantial profitability.

But if they can scrape by without much profitability and expand like crazy, once they've driven out the competitors, can't they raise prices to achieve profitability?  Or do you think then competitors will spring up again and they're doomed to never be able to be profitable, even if they achieve the market domination they're going for right now?

[Another Reader]

If they raise prices, people will go elsewhere.  Walmart, Target, even Sears, they all run on-line stores.  Amazon may have strong negotiating power with suppliers, but look at Walmart's negotiating power.  Retail history is strewn with the carcasses of behemoths that lost their way trying to corner markets.  Look at Joshua Frantas' comment on the original Eugene Wei piece.  He has some understanding of the retail business model and makes some good points.  In the end, Amazon is a retailer.

I'm also concerned with the opacity of their financial reporting.  Yeah, we don't want the competition to know exactly how we do what we do, but apparently their financial reports are impossible to parse. 

When the BoD decide they have had enough of Jeff's megalomania and decide to reward the shareholders, that's when we will find out what Amazon's business is really worth.

[Albert]

The death of brick and mortar retail is greatly exaggerated to say the least. Maybe for electronics, most other categories of goods people want to see in person before buying.

[warfreak2]

But if they can scrape by without much profitability and expand like crazy, once they've driven out the competitors, can't they raise prices to achieve profitability?

Brick and mortar stores aren't going away, not in our lifetimes - for social and psychological reasons, as well as practical reasons - I wouldn't bet on this happening.

Also, we have laws in place specifically to prevent monopolies forming.

[hybrid]

Amazon is just the latest example of creative destruction at work. If they have indeed built a better mousetrap that can mostly supplant retail (I doubt it) then retail is obsolete like the horse and buggy.

No, I just don't see that happening on a mass scale. Brick and mortar will always have a place, fully admitting some things are in fact bought better online. Those items will move to the cloud, the rest will stay in the stores.

I think the truly disruptive models to traditional retail are Costco and Sam's Club. They are continuing to upset the retail apple cart by eliminating the frills (and expense) of mass advertising, pretty stores, etc. Why would anyone buy a TV at Best Buy when a much better deal is to be had at the nearby Costco?

[Albert]

Electronics is the obvious thing to be sold mostly online. There is no need to see the object, technical parameters, price and customer reviews are sufficient. I haven't bought anything bigger than electricity converter in a regular store in the last 5 years.

On the other hand I don't see clothing stores going anywhere. Who is going to buy anything more than t-shirts or underwear without fitting?

[arebelspy]

Who is going to buy anything more than t-shirts or underwear without fitting?

I absolutely would/have.

Once you know your size, why not order online?

[Albert]

Who is going to buy anything more than t-shirts or underwear without fitting?

I absolutely would/have.

Once you know your size, why not order online?

Do you always want to wear the same thing? I don't buy clothes/shoes often but when I do I wish to see if they fit properly, are of good quality and look good on me.

[arebelspy]

Do you always want to wear the same thing?

God yes.  One of my bucket list items is to get rid of all my clothes save a few copies of the same outfit (think: similar to Steve Jobs - not in what the clothes are, but what he did).

Not to have to decide on what clothes to wear, never to have to shop for clothes (you already know what you'll replace it with when it wears out), to always have something that you know fits well and is comfortable.

Yes, I absolutely do want that.

That aside, even if I don't wear the same clothes (like right now), I still can/do order clothes online, because I know what size I am.  I've never had a problem with not liking the way it fit or "looked" on me.

/shrug

Different strokes.  :)

[warfreak2]

My experience with buying trousers is that brick-and-mortar stores seemingly disagree with each other about how long an inch is. I have two pairs which claim to fit the same waist, but are something like 3-4 inches different. That's what I get for not trying them on. (Fortunately, I know what a belt is.)

[arebelspy]

My experience with buying trousers is that brick-and-mortar stores seemingly disagree with each other about how long an inch is. I have two pairs which claim to fit the same waist, but are something like 3-4 inches different. That's what I get for not trying them on. (Fortunately, I know what a belt is.)

Stupid brick and mortar.  Online you have reviews where people say "it's two inches long" or "fits perfectly" or whatever that you can use to gauge before you buy!  ;)

[iris lily]

Ummmm....doesn't Jeff have to make a profit at some point?  He hasn't managed to do that yet.  The bricks and mortar folks that aren't making a profit are looking at shutting down and liquidating.  In Jeff's case, it's the old story about whatever we are losing on each sale, we will make up in volume.  You can't raise capital to do that forever.  Eventually some child on Wall Street is going to point out the emperor has no clothes.

You mean he STILL isn't making profit? How is he operating?

[iris lily]

fabric. I prefer to feel it before buying. I say "prefer" because any more I buy only cotton and cotton blends, so online selection can theoretically work, but I'm not keen on that purchasing method for clothing. OTOH once I buy something online that I like, I will buy it again in different colors.

I know that this is off topic, but I am still really bummed that JC Penney's strategy of NO SALES ALWAYS LOW PRICES" didn't suit the ignorant masses.

[warfreak2]

Perhaps it's different in the US, but here in the UK, if you go around the charity shops you can usually find normal clothes in good condition for cheaper than the internet, plus of course the money goes to charity.

[sheepstache]

I think consumerism is what will keep brick-and-mortar alive.  Sure, many of us here hate the shopping experience, but for many people browsing and window-shopping, etc., are pleasurable and social recreational activities.

[James]

Stupid brick and mortar.  Online you have reviews where people say "it's two inches long" or "fits perfectly" or whatever that you can use to gauge before you buy!  ;)

Even without the reviews and knowledge about what has fit me well in the past, I would much rather have a package arrive, try it on in my house, and return it if it doesn't fit. Going to an actual store, dealing with the lack of my size, marketing, sales staff, lack of quality, etc is just annoying as hell to me. If you don't want to pay return shipping just use zappos or other places that have free returns. But once you know what you like, you rarely need to return anything.


And I agree about the Jobs idea of keeping it simple. I don't want to think about my clothes any more than I have to, both in buying and wearing. I want them to just fade into the background in all ways.


I think there are a lot of good ideas from the comments here talking about the way things might go in the future, but the fact is we can't know, and I don't much care... :D

[iris lily]

Perhaps it's different in the US, but here in the UK, if you go around the charity shops you can usually find normal clothes in good condition for cheaper than the internet, plus of course the money goes to charity.

Yes, absolutely, and in fact our thrift stores here are much less expensive than in the U.K. At least, that's my impression after pawing through clothing items in England and Scotland. Plus of course I can feel the fabric and yes, I do shop mostly thrift stores.

[iris lily]

Who is going to buy anything more than t-shirts or underwear without fitting?

I absolutely would/have.

Once you know your size, why not order online?

Shocking but true: a customer service guy at JC Penney's warned DH recently that the pair of 34" pants really may not be 34"--he should try them on. (!) Men's clothing, the one damn thing you could count on being sized true, is no longer that way. It's the creeping crap form China syndrome.

[arebelspy]

fabric. I prefer to feel it before buying.

I agree, and I would add that If you know what the fabric is, you don't have to feel it.

For example, I buy a lot of 100% merino wool stuff nowadays (SmartWool, for example).  I don't need to feel it, I know what it feels like (and I'm buying it partially because of that feel).

[Albert]

Perhaps I'm in minority here, but I don't particularly hate shopping. I don't do it recreationally for obvious reasons, but when something is needed I want to see it in person and choose from more than one option. Besides when buying online I still have to go to post office to retrieve the purchase. Theoretically they deliver, but practically it's at unpredictable times in the middle of the day when no one is home.

[sheepstache]

Perhaps I'm in minority here, but I don't particularly hate shopping. I don't do it recreationally for obvious reasons, but when something is needed I want to see it in person and choose from more than one option. Besides when buying online I still have to go to post office to retrieve the purchase. Theoretically they deliver, but practically it's at unpredictable times in the middle of the day when no one is home.

Haha, no, I was thinking along the same lines for myself too.  Particularly when CH12 mentioned seaweed.  It's cheaper for me to skip the shipping charges the bike to Queens for it, plus, whether the Asian store is sketchy or not, it's an interesting experience.  I would be surprised if we didn't have more and more stores deliberately creating "an experience" or gimmick to compete with online.  Think of Cabelah's with its huge displays.

And lord save us, yes, the post office.  My god.  It's like the fifth circle of hell.

[AlanStache]

Only way I can get pants is to try on a bunch in a specific store find the length/circumference and style I like then order online as all three of these criteria will not be available on the brick and motor shelves (am tall & thin).  I am sure many of the clothing retailers are aware of people doing this, they even take returns at the store so you can order a bunch and return what you dont like w/o shipping.

As cuts and styles change and I only buy pants every few years I dont expect I will ever just order my size from amazon, I would have zero expectation of them fitting.

[Jamesqf]

My experience with buying trousers is that brick-and-mortar stores seemingly disagree with each other about how long an inch is. I have two pairs which claim to fit the same waist, but are something like 3-4 inches different. That's what I get for not trying them on. (Fortunately, I know what a belt is.)

Stupid brick and mortar.  Online you have reviews where people say "it's two inches long" or "fits perfectly" or whatever that you can use to gauge before you buy!  ;)

That'd work if you knew the people posting the reviews were exactly the same size as you.  Otherwise...  Well, it fit THEM perfectly :-)

As someone with a body that's a couple of sigmas off the norms that clothing manufacturers design their sizes by, I keep hoping that before too long pre-sized clothing will be obsolete.  Put your measurements into a computer (maybe you need a scanning booth for this), then order whatever you like, custom-tailored.

(Not an original idea: I think I remember something of the sort in a Heinlein story from the '50s or so.)

[dragoncar]

For people who don't want to buy a new phone, just get the Redlaser app for online comparison shopping

[Albert]

That'd work if you knew the people posting the reviews were exactly the same size as you.  Otherwise...  Well, it fit THEM perfectly :-)

As someone with a body that's a couple of sigmas off the norms that clothing manufacturers design their sizes by, I keep hoping that before too long pre-sized clothing will be obsolete.  Put your measurements into a computer (maybe you need a scanning booth for this), then order whatever you like, custom-tailored.

(Not an original idea: I think I remember something of the sort in a Heinlein story from the '50s or so.)

Clothing used to be custom made by a tailor for everyone not that long ago (150 years?). It worked fine, but costs were an order of magnitude higher than today.

[Jamesqf]

Clothing used to be custom made by a tailor for everyone not that long ago (150 years?). It worked fine, but costs were an order of magnitude higher than today.

Sure, but the cost difference was from being machine made, usring much less human labor, and that relatively unskilled.  Nowadays it's perfectly possible for the machines to do everything, starting from a bolt of fabric and ending by boxing up the finished product and loading it on the FedEx or UPS truck.

[AlanStache]

Sure, but the cost difference was from being machine made, usring much less human labor, and that relatively unskilled.  Nowadays it's perfectly possible for the machines to do everything, starting from a bolt of fabric and ending by boxing up the finished product and loading it on the FedEx or UPS truck.

...that gets shipped to an Amazon warehouse, currently a human might walk it to the storage shelf where it sits for a week before someone else picks it and puts it into a box for the end user. 

http://online.wsj.com/news/articles/SB10001424052702304724404577291903244796214

So here we are living in the future where a pair of jeans can be created and delivered to the end user and the only human involvement was with driving the delivery trucks; and that will be automated away soon.

Any wonder we are having a jobless recovery?

http://forum.mrmoneymustache.com/welcome-to-the-forum/robots-and-their-impact-on-the-future/

[smalllife]

The internet is a wonderful thing - I can find products like seamly.co, Etsy handmade items that I don't have the time or skill to complete, or bulk beeswax at the click of the button delivered to my door.  At the local level, retail space is slowly opening up for smaller shops with homegrown roots (the guy I buy soap from makes it in the back, and fixes up discarded materials for sale as well).   People can research and find both products and companies, then figure out where to buy it.  For things that will likely never be local in my lifetime - like electronics - Amazon and Ebay have their place. 

[Thedudeabides]

Ummmm....doesn't Jeff have to make a profit at some point?  He hasn't managed to do that yet.  The bricks and mortar folks that aren't making a profit are looking at shutting down and liquidating.  In Jeff's case, it's the old story about whatever we are losing on each sale, we will make up in volume.  You can't raise capital to do that forever.  Eventually some child on Wall Street is going to point out the emperor has no clothes.

Have not checked but I thought that amazon as a strategy putting 100% of 'profits' back into growing and taking more market share at bettering delivery.  while they may have not returned anything to shareholders the method seems to be doing well so far.  Until someone beats them at there own game...

Yes and in so doing, they are building something that is massively defensible. Their fulfillment center tech from what I've heard is  insane. It's in it's fifth generation. I would also venture to guess that their AWS division is making money hand over fist. This is something that many people may forget. Amazon is not only attempting to eat brick and mortar. It is attempting to eat server collocation centers as well, and it is doing so successfully. Many online businesses do not even think about colo anymore. They just go to AWS. Netflix runs nearly all of their infrastructure in AWS as an example.

[hexdexorex]

How do you think AWS will affect Oracle and IBM? They both have cloud offerings now (granted they have started slow but they are billion+ businesses). I have always heard companies want private clouds and will trust old blue chips for this more...but then you get stories like this..

http://www.theregister.co.uk/2013/06/15/cia_amazon/

[Thedudeabides]

How do you think AWS will affect Oracle and IBM? They both have cloud offerings now (granted they have started slow but they are billion+ businesses). I have always heard companies want private clouds and will trust old blue chips for this more...but then you get stories like this..

http://www.theregister.co.uk/2013/06/15/cia_amazon/

I don't have much of a view into IBM or Oracle's offerings but I can say that I don't know anyone using them.

Amazon's offerings are very advanced and they are rapidly innovating. There is so much industry and open source support for their offerings. Search Github for "AWS" and you'll see over 5,000 results. You will not see 5k results for Oracle or IBM's cloud solutions.

[Luck better Skill]

  Brick and mortar Retail is changing.  The mega stores, Wal-mart, Bass Pro, Costco will continue.  They are destination stores and have stuff in stock.  Small niche shops will survive.  Locally produced has a market.
  The Best Buy business model is obsolete.  It either adapts or fails.  They have departments inside the company competing with each other.  Once you have a customer inspect a product let them purchase it online in the store if they want, why let them go home to buy it.  Stop pushing high profit crap customers do not want, like Best Buy internet cable service.  Spend some money on employees who know your products.
  The USA has way to much store retail space.  We are working through the restructuring of retail sales.   
 

[ProfWinkie]

Only thing in life that is constant is change. Every business must change and adapt