For the past few years, many people have been predicting the end of brick-and-mortar retail stores. After Amazon briefly hit the $1 trillion market value last month, it would seem they might be right.
Things may not appear to be going well for traditional retailers, but there is evidence that these difficulties are a sign of transformation rather than an end. Despite the popular assumption that they are disappearing, brick-and-mortar stores will continue to be competitive with online retailers by offering customers convenience and low prices.
Online and traditional retailers are competing on every possible front. Take the world’s largest online retailer, Amazon, and compare it with one of the world’s largest brick-and-mortar retailers, Walmart. Amazon’s value is impressive — $921.66 billion, while Walmart pales in comparison at $273.28 billion.
But this doesn’t tell the whole story. Despite the higher market cap, sales for Amazon were about $177.87 billion worldwide in 2017, according to Amazon’s 2017 annual report. Meanwhile Walmart made about $500.3 billion in revenue over their fiscal year 2018, according to their annual report.
The reports also show that Walmart serves about 270 million customers each week and Amazon just hit over 100 million Prime users this year.
The advantage of grocery stores, convenience stores, big-box retailers and discount dollar stores is the sense of immediacy they offer compared to online shopping. If someone runs out of milk at home, the person doesn’t buy milk online and wait for a delivery. The individual may instead make their way to a local shop to purchase milk. People also value the ability to see what they are purchasing, so sentiment is on the side of brick-and-mortar shops.
Walmart became the big-box retailer it is today by selling goods at its several locations with huge discounts. It can afford to offer these discounts because it constantly pushes suppliers to cut prices. It also has a very efficient grocery business, which Amazon only recently entered into when it bought Whole Foods.
In that regard, Amazon actually seems to be in the process of turning itself into a more traditional brick-and-mortar retailer. It has a physical retail presence in 23 districts in the United States. The company also fully owns Whole Foods, which gives Amazon access to Whole Foods’ distributors. Amazon also plans to launch 3,000 cashier-less, cashless Amazon Go grocery stores by 2021. Obviously Amazon sees physical locations as part of it’s long-term retail strategy.
Brick-and-mortar stores adapt to become more competitive and consumers benefit from it. For example, many stores will price match to online prices. Even the Titan Bookstore will price match textbooks so students can get their books at a low price and at the last minute.
Online retail is growing quickly, and has been outperforming traditional stores. However, online stores have shown that they are not going to replace traditional retailers anytime soon and Amazon’s entry into the brick-and-mortar market guarantees that.