July 25, 2015
It wasn’t that long ago that big box stores were the ones shaking up local economies. Low prices and a wide selection made it hard for smaller stores to compete. Downtowns in some small communities practically died out.
Even bigger department stores are struggling as the middle class shrinks and looks for better deals to maintain its standard of living.
But now Walmart, the 900-pound gorilla of big boxes, is the one looking over its shoulder as Amazon — after years of building — is finally coming into its own. Last week, investors voted with their money for the online merchant and pushed its market value above that of Walmart for the first time.
Amazon’s revenue is still nowhere near Walmart’s, but annual sales growth has easily been outpacing it. Ironically, Amazon is beating Walmart at its own game with lower prices and a wider selection of products. On top of that, they offer fast service and convenience.
CEO Jeff Bezos has been patient since Amazon was born back in 1999, ploughing revenues and profits back into the company to ensure it continued to grow. In the future, Walmart may be left behind with the real competition coming from other e-commerce outlets such as Alibaba — a big name in Asia that is making inroads here in North America.
There’s no doubt that Amazon, Alibaba and others are making it harder for bricks-and-mortar stores — even giants like Walmart — to compete. There has been a spate of retailers announcing store closures lately. And Amazon long ago made it impossible for all but the largest bookstores to stay open.
This of course has a wider impact on local economies. As stores shut down or cut wages and jobs to stay afloat, the employees who are left have less to spend and increasingly turn to the Internet to save money. The downward spiral continues.
There are some stores that should always be viable. It’s hard to imagine people buying a lot of food online, for example. Appliances and furniture are awkward to purchase on the Internet, but it’s not unheard of.
If you can afford it, you might want to think about shopping at local stores that offer good service even if it comes at a higher price. Those places are owned by people who have a stake in the community. For Jeff Bezos, the place where you live is just a dot on the map.
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I hate to be a downer, so here’s a video explaining how Amazon really became a bigger company that Walmart.
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Update: Looks like I was wrong about food stores being safe. Amazon has plans to allow you to order groceries online, then pick them up at drive-up stores. Aside form convenience, the groceries will no doubt be cheap.
Amazon is going to have to muster all the innovation it can find: another competitor, promising even lower prices, has opened in the U.S. Jet.com asks for a yearly membership fee, like Costco, but promises to find the lowest price on whatever you want, and even tells you how much cheaper it is than what you would get at Amazon.