Triple Threat To Retailers

I haven’t been in a shopping mall for over a year (except for last November when my wife was overdue and we walked in circles inside the mall in hopes that it would induce labor (it didn’t work, she was two weeks late)). So, I’m not big on shopping but I have to believe that traditional retailers should be worried about the disruption of retail due to the internet. There are three killing pressures that threaten stores:

1. Transparency of pricing which takes away any leverage the retailer had as a result of the customer not knowing there was a cheaper price down the street.

2. The efficiency online competitors gain by consolidating merchandise in a few locations, which saves operating costs and capital and real estate.

3. Consolidating data about merchandise, prices and service. This is the one that I think most stores at least equipped to compete with. Online you see your friend buy something new, you read customers reviews of it, watch a demo video on YouTube, Google it to find the best price, and the internet gets it to you. Store? Who cares what store it comes from, let alone what the salesperson at the store has to say? Most people walk into a store having already decided what they want thanks to research online. Retailers once were the middleman between the brand/manufacturers and the customer but with 84% of all purchases being researched online prior to purchase, who needs a middle man? Your friends can now be your curators and merchandisers. You need not care who fulfills the order.

Retailers are not going away anytime soon, many have huge reserves of trust with their customers, and shopping is still considered a fun activity (for some) but as we grow up online retailers are going to have to figure out how to add value to the path to purchase because right now I don’t see one.

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