I am located in Minneapolis, Minnesota, home of two major big box retailers: Best Buy and Target Corporation. I admit that for the past couple of years, I’ve been watching both retailers battle their most formidable competitor to date–the Internet–and more specifically, ecommerce retailers like Amazon.com.
The Internet has posed a challenge at a number of points over the past decade but none has been as much of a threat to the physical retailers’ existance as today’s Internet–home to a plethora of web-only competitors with low overhead costs. Couple that with customers who are willing to wait for their purchase in exchange for better prices and free shipping and you have a potential retail disaster. Major retailers like Target and Best Buy are taking action to maintain their position in the market and in doing so, must take on web-based competitors head on.
A Long and Challenging History
The Internet first threatened the physical retail store model when it educated the average consumer about purchasing options outside of buying from their local physical retailer. Via the web, consumers could look for alternate vendors selling the same product and possibly locate a better price on an identical product. As ecommerce became the “norm,” those same customers were able to buy the products they wanted at cheaper prices directly via ecommerce.
Most recently, physical retailers have been battling a phenomenon called showrooming. Ecommerce showrooming is where customers visit a local retailer to view products they intend to purchase online so that they can see it in person and touch it before they buy. Another form of showrooming is where a customer finds an item in-store that they wish to purchase but then use a smartphone or a tablet device to comparison price shop online, most often while standing in the physical store. And the statistics are staggering. “In the past two years, Best Buy’s share of the consumer electronics market has decreased from 17 to 15.5 percent, while Amazon’s share has increased from 2 to 4 percent.”
Taking On the Competition
In a recent Minneapolis Star Tribune article on StarTribune.com, it was revealed that both Target and Best Buy plan to take on their web-based competition through price matching policies and to continue a previous initiative of not stocking Amazon’s Kindle tablet device. But are these tactics enough? In the same article, Forrester Research, Inc. Analyst, Sucharita Mupulru is quoted as saying it’s not. And I agree with her. Web-based retailers like Amazon.com have a number of factors in their favor:
- Lower overhead costs, which results in lower sale prices.
- Shoppers’ willingness to wait a few days for an order to arrive when they can save money on their orders.
- Ability to easily reach customers beyond a retailer’s primary location via the web.
In short, physical retailers are going to have to step up their in-store game with premiere customer service (Happy in-store clerk anyone?), match on-line prices in-store–from their own site as well as from competitors, and they can’t wait any longer to take decisive action.
The B2B Ecommerce Take Away
What does all of this have to do with B2B ecommerce you ask? Good question. B2B ecommerce is quickly gaining strength and speed as manufacturers and distributors realize its potential and join in. Like it did within the business-to-consumer market, Amazon is moving into the B2B ecommerce space with AmazonSupply.com. B2B organizations must be ready to defend their territories if they do not want to find themselves in a position similar to that of Best Buy and Target. What’s more, it is essential that today’s distributors and manufacturers recognize the threat that AmazonSupply.com poses and position themselves strategically for growth in the coming years.