One of my favourite writers, Megan McArdle, writes about how shopping has changed with the emergence of ‘showrooming’. Showrooming is where one visits a big-box store only to see the physical product. They do not, however, buy from the big-box store. Instead, the shopper scans the item’s barcode with their smartphone, an app immediately searches online for which seller offers the lowest price (this is usually an online seller – such as Amazon.com – who is not burdened by the costs associated with operating a large retail store), and the consumer then makes his or her purchase online. So these big box stores are basically acting as free showrooms for online vendors. It doesn’t take an MBA to know that this can’t work for too long. The questions here are how do these large retail stores adapt and respond to this phenomenon, and will they adapt before coming insolvent. A good read for sure.
Excerpt from the article:
Five years ago, in December 2007, a share of Best Buy was worth more than $50; today the company is trading just under $13. This may be some sort of record—from profit powerhouse to basket case in under five years. Best Buy used to be the king of the “category killers”—the big-box stores like Blockbuster, Borders, and Toys “R” Us that dominated their market segments, driving out thousands of smaller retailers who simply couldn’t compete with each chain’s reach and buying power. But as that list suggests, it’s no longer a very safe kingdom to rule. The category killers are getting slaughtered by the competitive forces they themselves unleashed; the wave of relentless bargain hunters who once flooded their stores has now flowed onto the Internet, and especially to Amazon, where nearly anything can be purchased at bargain prices and delivered to your home in days. You might call them the “new window shoppers”: whenever they want something, from a flat-screen television to a 36-pack of toilet paper, they just open a new window in their Web browser. Their disappearance from stores has left mass retailers like Best Buy with a lot of expensive real estate that sales can no longer support. ………..
…………. How long can brick-and-mortar retailers afford to operate stores that serve as display cases for someone else? More importantly, will that be long enough to transform themselves into something less vulnerable to Internet competition?