My neighbor is one of the most intense shoppers I know. He researches and compares his options before making almost any purchase. It doesn’t matter what he’s buying, he’ll visit multiple retailers. He has no problem going to JC Penney, Sears or any other major retailer to touch and feel the product
he’s looking for. He chats with sales people. He haggles and negotiates when he can. Then he heads home and scours the Internet for a better price. And he usually finds one.
Today it’s hard to find a strip mall or retail center without empty space. * CompUSA, Circuit Cit
y, Hollywood Video and Border’s Books have vanished. The list gets longer every day. Some may argue this is due to the floundering economy. I can buy that (pun intended) to a certain point, but let’s look at some examples of how, in my opinion, Internet shopping is bringing down the big-box stores.
Why am I saying this is specifically affecting box stores? Small retailers are failing, too. For one thing, small retailers are much more at the mercy of the economy. A couple of bad months can spell doom, whereas larger national chains can typically weather a few bad months before throwing in the towel. Even poor management takes time to kill a big-box store. But the growing popularity of online shopping could be a giant-killer.
Let’s look at one obvious casualty: the video store. It is incredibly easy to play movies, TV shows and other video content on your television using your computer, game console or iPod. You pay a small monthly subscription, there’s never a late fee and you can watch all you can handle. Even if Internet streaming isn’t your thing, you can have discs mailed to you — complete with postage-paid return envelopes. If I can watch my favorite movie on my iPad at the local coffee shop or on my comfy couch, why drive to the video store to pick up and drop off a disc?
Bookstores face similar issues. Internet retailers like Amazon.com offer an amazingly broad selection of books for sale, often with substantial discounts and free shipping. Add to that the surge in electronic book readers with the ability to download books and store hundreds of titles on a single device. While there will always be people who enjoy browsing a bookstore’s stacks, I don’t see the major chains surviving for long as physical retailers. Like Barnes & Noble, they need to embrace the Internet or go the way of the record store.
Large electronics store also seem vulnerable. CompUSA and Circuit City are long gone from Snohomish County. Earnings for Best Buy have fallen significantly this year. Even venerable Radio Shack is showing a decline in revenues despite a new marketing direction. This trend is what brings us closer to understanding the problems facing large retail chains. These chains have (or had) large stores, high volumes of inventory and a large workforce. In other words, lots of overhead. Yet more and more people are doing what my friend does. They’ll visit the store, look at the products and ask questions of the sales staff. But then the consumer goes home and starts searching the Internet for better deals. Online vendors can often offer better prices since they have much lower overhead. As long as you don’t mind waiting a few days for the item to be shipped, you can usually save by purchasing online.
Other major retailers like Sears and JC Penney (among others) are in the same boat. Their diverse product selection probably helps keep things moving through the checkout lines. Commodity items like tools, some clothing and branded products are things that keep customers loyal. But these retail giants offer online shopping now. How long will it be before the need for instant gratification is superseded by the ease of purchasing over the Internet? How long before the cost of a 100,000-square-foot retail space becomes too much?
These large retailers will need to learn from successful small businesses in order to survive. Offering incentives to purchase in the store and outstanding customer service, for example. But it may not be enough to turn the tide.
Sven Mogelgaard is president and CEO of Byte Slaves Inc. Contact him at 425-482-9529 or 877-972-7767 or go to www.byteslaves.com.
* This column originally included an incorrect reference to Sears leaving the Everett Mall.
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