So, why does Amazon create a $2 billion advertising agency dedicated to selling you stuff? After all, isn’t a retailer – whether it be online or off – known primarily for its low prices and low prices? In fact, retail specialists point out that when Amazon.com first launched, it created a trend to allow vendors to sell their products directly to consumers online. Target, for example, found a successful online channel and quickly opened a number of stores (the current chain now has more than 1,000 locations).
But for all the growth Amazon has found in retail, there is something about Brick-and-Mortar Retail that it still does not quite understand. And that is why retailers like Wal-Mart (Walmart) and Best Buy (BBY) have decided to launch online-only sites – their $59 billion in combined yearly revenue dwarfs Amazon’s $138 billion haul.
The truth is, according to David Gelles, Senior Director of Retail Insights at eMarketer, brick-and-mortar retailers are going to keep expanding their digital businesses in order to maximize brand exposure, not to make profits. “A retailer like Best Buy just wants to keep people thinking about them,” he says. “I think there are big growth opportunities for brick-and-mortar retailers in-store.”
By launching their own websites, Gelles says, “retailers hope to out-Amazon Amazon”. Best Buy said on Friday that it aims to reach more than 100 million US consumers by 2015.
With competition from Amazon not going away, the idea of Brick-and-Mortar Retail in the Age of Covid, is an interesting one – although it is a “long-winded name for a much simpler thing”, according to Ronda Potter, Director of Government Relations at the American Retail Federation (ARF). Potter argues that in trying to find an e-commerce path that allows retailers to offer a full line of products, online companies are unintentionally turning traditional retailers into showrooms.
A former group marketing manager for online retailer Spencer Gifts, Potter notes that Spencer Gifts offers “buy online, pick up in store” on its website. However, when customers arrive at their local store, “we don’t buy,” she says. Instead, the offer is there for customers who want to try it on, or a survey for an employee of the customer’s choice. “We’re in the business of selling, not serving,” she says.
In addition, as retailers forge their online strategies, they run the risk of alienating their brick-and-mortar customers. Jeffery Boggs, President of Fenway Partners, which specializes in sports and entertainment marketing and licensing, says that Amazon has a knack for doing this. “Amazon has great retail channels,” he says. “They’re good at what they do – they create great competitive pressures.”
For this reason, Boggs doesn’t expect traditional retailers to let this go. “Retailers are doing a complete about-face,” he says. “In a couple of years you’ll be seeing a lot of physical stores.”