Is Online Shopping Killing Brick-And-Mortar?
Imagine one evening after a tiring day at work, you flop down for a quick nap but end up pulling a Rumplestiltskin, falling into a deep sleep that lasts years. When you finally wake up, it's the year 2025 and you're just in time for the holidays. You dash out of the house, searching frantically for places to do your shopping … but there aren't any. You can't find a single retail store among the supermarkets, gas stations, restaurants, car dealers and other businesses you're used to seeing. (Find out the best plays for taking advantage of the expected rise in mobile payments and money transfers. See Mobile Payments Predicted To Skyrocket.)
Then the memories come flooding back. You recall that in the Summer of 2011, when your long nap began, online shopping had already begun to wreak some pretty serious havoc with traditional bookstores and movie rental places. People were increasingly getting books and movies online. Now, nearly 15 years later, brick-and-mortar retail businesses of all types are pretty much extinct.
This is probably quite an exaggeration of things to come. But unless you've been soundly slumbering like Rumplestiltskin, you're well aware of how the Internet has begun to change retail. Here's the current situation for four brick-and-mortar retail chains that have suffered financially, or dramatically altered their businesses, because of the rise in online shopping.
Currently the second-largest bookstore chain in the nation, Borders is the latest casualty of online shopping. On July 18, the company announced it will be going out of business, closing hundreds of stores, and laying off nearly 11,000 employees. The inability to compete with online bookseller Amazon.com is a major reason for Borders' demise, experts say. Books-A-Million, the nation's third-largest bookstore chain, is in talks to acquire a small number of Borders stores, so perhaps at least some of those being laid off will be able to keep their jobs as Books-A-Million employees.
There aren't any reports of serious financial trouble at this huge bookstore chain, which is essentially the "Barnes & Noble of Canada." But online shopping has certainly prompted major changes in its business model. The company now does a lot more of its book sales online and has introduced a wide variety of non-book products at its physical stores. Customers will still find a Starbucks cafe at most Chapters locations, though the number of seating areas has typically been reduced. (Shopping from the comfort of your couch has major benefits - and some unpleasant side effects. Check out Shopping Online: Convenience, Bargains And A Few Scams.)
Barnes & Noble
Like Chapters, Barnes & Noble is trying to adapt to stiff online competition from Amazon.com and others. The company's biggest move recently was to introduce NOOK, an Android-based e-bookstore, and it plans to invest heavily in online retail going forward. In the short-term, Barnes & Noble's brick-and-mortar operations will probably remain reasonably solid because of their broad book selections and high-quality amenities like Starbucks cafes, comfortable reading areas, and literary events. However, only time will tell if the company can survive mainly on book superstores in the long-term as online competition intensifies.
Once the undisputed king of the video rental industry, with more than 4,000 locations and about 60,000 employees, Blockbuster succumbed to competition from Netflix and other online DVD rental services. The company filed for bankruptcy nearly a year ago and was acquired in April by Dallas-based Dish Network. By then, nearly 1,000 Blockbuster stores had been closed. Blockbuster is now attempting to compete directly with Netflix through its Total Access service that enables subscribers to rent DVDs online.
The Bottom Line
These are just four examples of brick-and-mortal retail operations that have felt the effects of online shopping to various degrees, from having to change the way they do business to going flat broke. Not surprisingly, competition from e-commerce is only expected to increase. In the past decade, online retail sales have grown by more than 20% annually compared with only 2.9% for retail sales overall. Still, brick-and-mortar businesses are unlikely to disappear completely. Instead, many experts see retail evolving to a point where retailers more often have online and traditional outlets that complement each other. But in the meantime, there'll probably be more casualties like Borders and Blockbuster. (For further reading, see What We Can Learn From 2011 Tech Leaders.)