The urban landscape is changing due to the growth of e-commerce.
In the past, the arrival of Big box stores in cities and regions,
particularly Wal-Mart, meant the demise of many local businesses. They could not compete with
the prices or the variety of goods offered by big box stores. Even further back, we witnessed the virtual
elimination of the local grocery stores being overtaken by large retail
supermarkets and convenience stores.
Looming now on stage right is the specter of e-commerce ,
which I assert will lead to the collapse of many Big Box stores as mentioned in
my earlier blog entry (http://mcadamsfatih1.blogspot.com/2012/08/collapse-of-big-boxdepartment-stores.html .) It
has the potential to also further add to the decline of
local business.
We can all bemoan the demise of local business or their favorite Big Box or department
store (i.e., Circuit City, Montgomery
Ward). The reality is that e-commerce
is changing the local landscape and its influence will not decline, but grow.
It not mere speculation to anticipate that there will be the
vacant spaces where Big Box stores once stood and isolated local business
locations which could not compete with e-commerce will vacate their locations This is also set in the background of an economy
where wages are stagnant or declining.
The fact is that no physical store can compete on price
basis with the Internet. Internet ‘stores’
do not have the need for local employees, buildings or onsite inventories to
serve their customers. They need only a website, warehouses and employees to
facilitate the movement of goods from the warehouse to the customer. Amazon.com is the best example of an Internet
store that has prospered in this new environment.
Should it be a surprise that Big Box and department stores
will soon be history in cities? No.
In the midst of the competition from other stores, the
growing e-commerce and more efficient communication/transportation, Big Box
stores started a decade or more to cut costs by only hiring part-time (who were often unknowledgeable
about the store’s products) and relying only on the variety of merchandise and
prices ignored that they were becoming increasingly vulnerable to a entities that
could offer lower costs and the same variety of goods—the Internet. By
eliminating service, they have lost the last element that would make them
locally competitive.
Who will survive and what will be the opportunities?
Similar to other economic shifts, some remnants will survive
and new entities emerge. For example,
there are still blacksmiths, but only for those that are recreational horse
owners and who own horses for racing.
The litmus test for those big box/department stores that will survive and the element of new local retail establishments? Service!
Service has become the hallmark of many national big box
stores and surviving local business This
is apparent in Lowes, Home Depot, Office Depot and others. These entities will survive, but those that
do not focus on service will not.
For local entrepreneurs, this means opening up businesses
that straddle both the world of e-commerce and their local connection.
What goods do people want service to help them make purchase decisions? Cameras, clothing, computers, washing
machines, refrigerators, automobiles, home improvement, tires etc. . Customers have shown in the past that they value stores which have employees with expertise to
help them make decisions in these purchases.
Local independent business which are not attached to a
product line could interact with customers directly or indirectly through the Internet or mobile
devices to ascertain their needs. They could search for
the best prices, deliver the good and offer service in the future on a local
basis. The key is a local personal assistant in purchasing.
In a future blog entry, I will address what local
governments can do to mitigate the aftermath of the exit of big box stores and
their role in facilitating local entrepreneurs.
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