Future of Retail - Amazon Monopoly?

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BatteryMill
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Future of Retail - Amazon Monopoly?

Post by BatteryMill » March 16th, 2017, 1:23 pm

Welcome. So sorry if this sounds like forum clickbait, however I do have other points I would want to state in this thread that I feel are true.

A flurry of retailers seem to be undergoing troubles as of late, possibly far more than, say, in the 2000s. Even after the recession (not trying to bring in political points in for now), stores like longtime mall stand-bys and random big-box chains have been collapsing left and right. Some examples include The Sports Authority, The Limited (physical), RadioShack, hhgregg, and other stores we discuss here under pressure. The troubles do not stop there, however: even average retailers floating along in the sea of competition have been shedding stores yearly, such as Target, Best Buy (quietly), pharmacy chains, and notably, department stores such as JCPenney and Macy's. Even a store like Walmart has been fractured; since the chain lost several stores a year ago.

The online world, while it is a massive technology upgrade, know that it has not succeeded "brick-and-mortar" retail immediately. Enter the Amazon company, they hardly seem to be faltering. Their massive empire has just never tilted a bit; while they have physical retail stores, they have tried to relate these to the "curbside pickup" format which has tried to hold up these (with their new concept store). Speaking of which, that seems to mostly be the present counter for most physical retailers now, with such being implemented across dozens of chains. However, aside from that, most people seem to be noticing how those stores are frequented for showrooming, and how Amazon (or occasionally the online counterparts to the chains) seem to be doing the rest.

With several disadvantages (and solutions, albeit in the early days such as drones) of online retail in place, why are the rest still succumbing? Has the store closing/bankruptcy amount gotten far worse (rationally as well) since the good old days? Will there be a plethora of retailers to keep Amazon off the throne in the future, and will brick-and-mortar still be strong? You may answer this below.

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Re: Future of Retail - Amazon Monopoly?

Post by jamcool » March 16th, 2017, 7:52 pm

Amazon has not made a profit yet in its existence, you can only go so far without actually making money. And Walmart seems to be learning from its mistakes.

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Re: Future of Retail - Amazon Monopoly?

Post by wnetmacman » March 17th, 2017, 4:24 am

jamcool wrote:Amazon has not made a profit yet in its existence, you can only go so far without actually making money. And Walmart seems to be learning from its mistakes.
You may want to do some fact checking. Amazon does indeed make profits, though small. But they also continuously reinvest in new technology.

Walmart is indeed learning. They are starting to treat employees better and stocking more items again. It's too early to tell if it's working; sales were actually down last year.

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Re: Future of Retail - Amazon Monopoly?

Post by buckguy » March 17th, 2017, 10:03 am

Amazon and Walmart are fundamentally two different animals--Walmart explicitly seeks to limits customer choices--few items in any category. Amazon's the opposite. Amazon is a tech based animal and has exploited that. Walmart's DNA is small town variety stores and not very predisposed toward tech outside of their innovations in supply line efficiency. Both suck as employers, but Walmart has done much more to piss off entire communities, including places that normally developer/retailer friendly.

Both have begun to slacken on pricing, esp. Walmart and people with a decent set of options can go elsewhere. Amazon's ability to feed laziness like automatically sending you paper towels is a big advantage and this sort of thing will always advantage them with people who are a little better off than the core Walmart customer. There will be categories of merchandise where Amazon will always have problems--they will never play a big role in true luxury items and there are only so many people who want to deal with mail order for things like clothing and items that are about personal taste. There also are areas where knowledge matters---this may be part of the appeal of survivors like REI (plus its co-op structure). The commodification of electronics and the widespread availability of product testing have worked against brick and mortar here even though it 'should" be an area where knowledge matters.

In many ways, Walmart is basically where Sears was about 40 years ago. They've reached the limits of their market and their core customers are increasingly disadvantaged economically. People with options go elsewhere. Amazon has innovated within the confines of their model and offer convenience in a way that Walmart hasn't shown a willingness to do. OTOH, Walmart has acquired Jet.com and Jet has acquired other retailers--the question is whether they have the flexibility to accommodate other approaches. This has been their downfall internationally and probably part of their problem with Sam's.

Walmart isn't going anywhere but they could slowly die (like Sears), esp. given the general rigidity of their management and their need to continually increase return on investment. Amazon hasn't quite topped out yet, but they probably do much better in some categories than others and I'd be curious where and if they have reached saturation in some areas. The small return of book stores suggests one point of saturation and that smart independent operators can survive--mostly in larger metro areas, despite Amazon.

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Re: Future of Retail - Amazon Monopoly?

Post by Super S » March 17th, 2017, 11:17 am

Part of why Amazon is so successful is the lack of selection and service in so many stores of all types these days. When you start looking for things considered somewhat common, and stores do not carry said things, it becomes easier to buy online if you know exactly what you are after. While there are certainly exceptions, very few stores seem willing to help when you are trying to track down something specific.

As the big chains such as Macy's and JCPenney are focusing on large markets for their stores, there are still many people who live quite a distance from the larger towns, and do not necessarily want to deal with traveling to a big city and the things that come with it such as unpredictable traffic. In those cases ordering online is far easier. The sad thing is that many of the stores that do have an online presence rarely offer to order things online where you can just pay in-store, and basically tell you to go home and do it yourself. The stores themselves lose a lot of sales this way. And although many offer free in store pickup, do the stores actually get paid for processing and/or storing purchases that they otherwise do not stock?

Although I do prefer seeing certain items in person before buying, I have gradually shifted a lot of my own shopping needs online when I know exactly what I am after already. This is a major factor that drives Amazon's business.

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Re: Future of Retail - Amazon Monopoly?

Post by babs » March 17th, 2017, 3:19 pm

Let's put some of this into perspective.

In 2016, Amazon did $136 billion in sales. $12 billion of that came from their cloud revenue business, so $124 billion in total revenue.
Walmart did about $300 billion in the US, $478 billion for the entire world. Kroger did over $100 billion.

So Amazon is still less than half the size of Walmart. Amazon is taking their chunk of business but the issue runs much deeper.

1. Online is having an impact but it's more than Amazon. Most manufacturers now sell direct to the public. When you combine Amazon will the Nike.com, Columbia.com, addidas.coms of the world, there are many alternative to going into the store. Then then retailers sell online as well. So many are dividing up the pie.
2. Retail operates on thin margins. Drop 5% in sales and all of a sudden, it gets hard to pay your expenses, yes the financials are that tight.
3. USA is overstored. There was so much pressure on retailers to expand that the real estate department opened stores in locations they knew were marginal to begin with. Sales dropped and these locations became a drag on the business. No other country on the planet has as much retail as the US.
4. Discounting rules. People have figured out you can get Dockers cheap at Costco, Designer stuff cheap at Nordstrom Rack, Ross and TJX are booming. Outlet malls are located outside most cities. Fewer and fewer people want to pay full price. Full-price retailers are becoming irrelevant.
5. People are buying less clothing. People are more willing to spend money on vacations, experiences and less on garbage they will only use/wear once.
6. Retail has gotten stale and boring. Staples, Office Depot, Office Max, what's the difference? I remember as a kid seeing cooking demos and smelling the food at the department store. Now the department store is just an overgrown clothing store. Give me a reason to go to your store.
7. Retail has always had turnover with stores disappearing. None of the stores at the mall from 30 years ago exist today. They were all replaced by new stores. These stores will eventually give way to a new crop of stores. That's the cycle of retail. Let's not shed a tear here.
8. Lousy Customer Service. Retail is the home of the working poor. When you hire a bunch of people for minimum wage, treat them like garbage, then you wonder why the service is so poor. Online shopping looks so good in comparison.

Bottom line is that Amazon is having an effect but to blame Amazon for the downfall of retail would be disingenuous.

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Re: Future of Retail - Amazon Monopoly?

Post by Super S » March 18th, 2017, 7:36 am

babs wrote: 7. Retail has always had turnover with stores disappearing. None of the stores at the mall from 30 years ago exist today. They were all replaced by new stores. These stores will eventually give way to a new crop of stores. That's the cycle of retail. Let's not shed a tear here.
However, 30 years ago the internet wasn't a factor and people still shopped at malls. Stores actually were replaced with new ones. Now there are many malls where stores simply are not being replaced. Part of it has to do with mismanagement of some malls, but I do not remember a time when there were so many malls that were on the edge.

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Re: Future of Retail - Amazon Monopoly?

Post by mbz321 » March 18th, 2017, 6:15 pm

babs wrote:Let's put some of this into perspective.

In 2016, Amazon did $136 billion in sales. $12 billion of that came from their cloud revenue business, so $124 billion in total revenue.
Walmart did about $300 billion in the US, $478 billion for the entire world. Kroger did over $100 billion.

So Amazon is still less than half the size of Walmart. Amazon is taking their chunk of business but the issue runs much deeper.

1. Online is having an impact but it's more than Amazon. Most manufacturers now sell direct to the public. When you combine Amazon will the Nike.com, Columbia.com, addidas.coms of the world, there are many alternative to going into the store. Then then retailers sell online as well. So many are dividing up the pie.
2. Retail operates on thin margins. Drop 5% in sales and all of a sudden, it gets hard to pay your expenses, yes the financials are that tight.
3. USA is overstored. There was so much pressure on retailers to expand that the real estate department opened stores in locations they knew were marginal to begin with. Sales dropped and these locations became a drag on the business. No other country on the planet has as much retail as the US.
4. Discounting rules. People have figured out you can get Dockers cheap at Costco, Designer stuff cheap at Nordstrom Rack, Ross and TJX are booming. Outlet malls are located outside most cities. Fewer and fewer people want to pay full price. Full-price retailers are becoming irrelevant.
5. People are buying less clothing. People are more willing to spend money on vacations, experiences and less on garbage they will only use/wear once.
6. Retail has gotten stale and boring. Staples, Office Depot, Office Max, what's the difference? I remember as a kid seeing cooking demos and smelling the food at the department store. Now the department store is just an overgrown clothing store. Give me a reason to go to your store.
7. Retail has always had turnover with stores disappearing. None of the stores at the mall from 30 years ago exist today. They were all replaced by new stores. These stores will eventually give way to a new crop of stores. That's the cycle of retail. Let's not shed a tear here.
8. Lousy Customer Service. Retail is the home of the working poor. When you hire a bunch of people for minimum wage, treat them like garbage, then you wonder why the service is so poor. Online shopping looks so good in comparison.

Bottom line is that Amazon is having an effect but to blame Amazon for the downfall of retail would be disingenuous.
I thought I'd might add that younger consumers generally have less income than their parents might have had during their 20's. I am in my late 20's and many people my age have no qualms about shopping at secondhand stores like Goodwill or Savers for clothing and other household stuff (not to mention hand-me-downs from relatives which are 'good enough' for most people), which is great for saving money as well as the environment, (as well as more exciting than the sterile environment of a Kohl's or Penney's) but not so good for clothing stores. Along with that, places like Dollar General and Ollie's and such are booming as just about everyone is trying to stretch a dollar. And those that are buying clothing in stores aren't going to department stores, they're going to places like H&M or Primark where they can get something inexpensive and fashionable, without worrying about sales or wandering around a 150,000 sq. foot box. Think of all the devices that have been replaced by just a computer or smartphone too...music, movies, games, etc. As you have said, the Internet in general has killed retail, but I wouldn't necessarily place the blame on Amazon. I order tons of merchandise online and very little of it comes from Amazon.

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Re: Future of Retail - Amazon Monopoly?

Post by pseudo3d » July 2nd, 2017, 12:30 pm

Amazon.com and other Internet sites are really in some ways a regression, returning us to the days of mail order catalogs. That's why department stores and specialty stores were so great, to see, to touch, to feel. Maybe it is because the economy isn't great as it once was and ever will be, but part of it depended on department stores making a wrong move by focusing on clothing, and all segments trying to maximize profit by replacing skilled salespeople with paid-by-the-hour grunts who hate their jobs and consequently hate you. In many cases, it became a "why shop at X since there's no service anyway, I can order off Y because it's cheaper". That's why I love things like Micro Center, because it is brick and mortar retail as it should be. The prices aren't as low as Amazon but they are competitive, especially factoring in shipping (thus coming out ahead). You can look at products physically before you buy them. The staff are professional salesmen that dress and act professionally. And you can walk out with your product that same day. Unfortunately, things like Micro Center are only the size of a medium-sized supermarket and serve an entire large metropolitan area. You cannot have one in smaller markets.

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Re: Future of Retail - Amazon Monopoly?

Post by wnetmacman » July 2nd, 2017, 3:04 pm

pseudo3d wrote:Amazon.com and other Internet sites are really in some ways a regression, returning us to the days of mail order catalogs. That's why department stores and specialty stores were so great, to see, to touch, to feel. Maybe it is because the economy isn't great as it once was and ever will be, but part of it depended on department stores making a wrong move by focusing on clothing, and all segments trying to maximize profit by replacing skilled salespeople with paid-by-the-hour grunts who hate their jobs and consequently hate you. In many cases, it became a "why shop at X since there's no service anyway, I can order off Y because it's cheaper".


This, exactly.

pseudo3d wrote: That's why I love things like Micro Center, because it is brick and mortar retail as it should be. The prices aren't as low as Amazon but they are competitive, especially factoring in shipping (thus coming out ahead). You can look at products physically before you buy them. The staff are professional salesmen that dress and act professionally. And you can walk out with your product that same day. Unfortunately, things like Micro Center are only the size of a medium-sized supermarket and serve an entire large metropolitan area. You cannot have one in smaller markets.


Micro Center is probably the best example. The only problem is that they only have 25 stores in a small handful of metro areas like Dallas and Houston. They have only built one new store in the last few years, a replacement for the Houston store that was on some valuable real estate on the West Loop. They indeed are competitive and in some cases actually beat online pricing. Also, unlike the big box stores, they only hire knowledgable staff who know their stuff.

That is where the other stores lose out.

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