Amazon is KILLING These Retailers
The Internet continues to evolve and change our daily lives. The total Internet population worldwide spent more than 2 trillion minutes online and viewed a whopping 3.5 trillion pages in March. While rising Internet usage has been a boom for some companies, it is quickly killing business models of others.
According to a new report by comScore Inc. (NASDAQ:SCOR), a leader in measuring several aspects of the digital world, overall e-commerce dollar sales have posted double-digit gains in every quarter since late 2010. In fact, sales are now ahead of levels seen before the Great Recession. In the first-quarter of 2012, e-commerce sales totaled $44.3 billion, representing a 42 percent surge from the same quarter in 2008. However, the rise of Internet retailers is magnifying problems at brick and mortar companies.
Over the past three years, Amazon.com Inc. (NASDAQ:AMZN) has been nothing short of a success story. Shares of the company have gained more than 170 percent and it currently holds the title of the world’s largest online retailer with nearly $50 billion in annual sales last year. Meanwhile, stores such as Best Buy Co. (NYSE:BBY) and RadioShack Corp. (NYSE:RSH) have faded into the background as more consumers use a strategy called “showrooming.”
The technique is when customers come into a store to see and test a product in person, but end up purchasing it from an online retailer at a cheaper price. ComScore’s report found that only 16 percent of respondents had aided awareness of the term “showrooming.” However, once the verb was explained, 35 percent of those polled claimed to have engaged in “showrooming.” The majority of consumers intended to purchase the product in the store, but changed their mind while there and instead bought it online. One-third said they went to the store always intending to purchase online.
With unemployment remaining near record highs, consumers are focusing more on price tags than ever before. Among those who participated in showrooming, 72 percent said the price was simply better online. Forty-five percent said they planned to buy online but wanted to see the item in person before ordering. Interestingly, comScore’s report showed that 24 percent did showrooming because the item was out of stock at the brick-and-mortar store, and 18 percent did so because they would rather have the item shipped to their home. So not only are better prices to be had online, but better customer service as well.
Big box retailers like Best Buy are hit especially hard, because consumer electronics is the number one category for showrooming. Clothing apparel and books are a distant second and third, respectively. In the first-quarter of 2012, unique visitors at Amazon sites increased 29 percent, compared to a year earlier. Apple Inc. (NASDAQ:AAPL) and Wal-Mart Inc. (NYSE:WMT) sites also witnessed impressive growth rates of 25 percent and 18 percent, respectively.
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