Thursday, June 21, 2012

Is Amazon Killing Mom & Pop?

It's hard to take on the big boys

Is the internet killing retail? This has been a huge question that continues to run around marketing and business circles. Even the President is asking this question. The common theory goes something like this; people come to retail establishments to browse and look at the product but go home and cruise the internet to find the best price. The consumer subsequently orders on-line thereby finding the best prices and potentially avoiding sales tax. Many on-line sellers have free shipping with minimum orders, so the shipping cost becomes moot.

Best Buy has announced the closing of 50 of their stores and we all know about the slow and painful death of Circuit City. The electronics gadget industry is a prime example of finding what you want in a store and then buying it on-line. But is buying something from one guy based solely on price a good idea? I’m not knocking on-line retailers, but I’m never sure if the best price is really the best deal. Besides, if Best Buy disappears where will you go to look at electronics?

 Are they too old fashioned to earn your business?

Buying something based solely on price shifts all the business to the company that can offer the lowest price. The real question becomes, how can they offer a price that is substantially lower than their competitors? This company must be purchasing from a wholesalers at substantially lower prices in order to offer their bargains. They maybe purchasing large quantities and receiving discounts. This is good for the company as they can corner the market on supply while offering lower prices to consumers. But what if they are cutting a corner somewhere else? If their price from the wholesaler is good but not that good, the company in question can be reducing their customer service or quality control in order to be the lowest price on the market. How many times have you received a product in the mail that didn’t work? Even once is too much.

Just as there are “Mom & Pop” retail stores on Main Street, there are “Mom & Pop” stores on the internet. These small internet retailers get good pricing through their wholesalers but they don’t buy in massive quantities so it’s probably not as good as the big boys. What “Mom & Pop” stores offer is customer service. They personally check the merchandise before it goes out. They handle each sale and follow it through. If you have a question, usually one person answers it and helps you with your decision. If retail becomes based solely on price, soon we will only have one choice. The guy with the lowest price becomes your only choice, because he will shove everyone else out of the market, kind of like what the internet did to Circuit City.

1 comment:

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