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Retailers aren’t all lumbering behemoths being driven into extinction by online merchants. Many have figured out that they are actually running showrooms and ch

Retailers aren’t all lumbering behemoths being driven into extinction by online merchants. Many have figured out that they are actually running showrooms and charge the manufacturers rent for displaying their wares. Supermarkets have been playing this game for years, renting shelf space by the foot to people like Coca-Cola. Meanwhile, people like WalMart make a business out of logistics, they only carry stuff where they have a strong financial advantage. It’s not impossible, but it’s hard to beat their prices when you factor in shipping. It will be interesting to see how Amazon and WalMart match up against each other over the next decade. I wouldn’t be surprised if WalMart start displaying higher online prices right beside their merchandise in the store.

nitrogen 15y ago
I wouldn’t be surprised if WalMart start displaying higher online prices right beside their merchandise in the store. WalMart will compete if they are threatened. A new bargain supermarket moved into the area that puts price comparisons between them, WalMart, and the other local chains in its weekly flyers. In response, the local WalMart started putting signs up in the store showing their price and the competitor's price (and name) for items where WalMart is cheaper.
jader201 15y ago
Maybe not WalMart, but this is exactly what Best Buy has become for me. I love going into Best Buy, just to be surrounded by all the high tech goodness, but I never buy anything there. I go to check stuff out, then go home and jump online and order the same thing for 20% or more less from Amazon or Newegg.
- Jun8 15y ago
  I've got to say: This is the rational, homo economicus way that textbooks say buyers should behave and, to me, it's just terrible! You may find it pedantic, but I think that if BB provides a utility for you you should reward them. The same thing is happened to large bookstores, music stores, etc., people checked out the wares and then bought it online.
  - jader201 15y ago
    Part of me agrees with what you're saying, and in some cases, I do acknowledge this and try to give business to those that truly provide a valuable service to me. However, in the case of BB, I'm less inclined to reward them, as I feel they -- in a lot of cases -- take advantage of uneducated customers, and gouge them with certain lines of products. Cables (Monster cables are the worst) being a prime example of this, where they sell cables at a cost sometimes 25-50 times that you can get almost anywhere online (selling a $3 cable for $100). I don't want this to turn into a discussion about specific stores or products, just using that as an example of why some retailers have lost the respect of some of the more educated consumers. Business is one thing, but taking advantage of the uneducated is another. But again, I do agree with you about the general notion of giving business to those that provide a valuable service to you.
    - potatolicious 15y ago
      This seems like a rationalization for me. I too dislike BB's tactics, but instead of using them as a free showroom, I just avoid them. I will give nothing to them, but neither will I take anything from them.
    - luser001 15y ago
      I had a very pleasant experience the two times I went to best buy: once to get a phone plan (the guy at the counter saved us good money by suggesting a nice text plan I hadn't come across during my research). The next time I bought three big appliances: knowledgeable saleslady who smartly realized that I'd done my homework. Didn't waste my time; didn't try to upsell, gave honest opinions on diffs between brands. I'd go there again. And oh, I order lots of stuff from Amazon Prime too.
    - lawnchair_larry 15y ago
      Yeah, I stopped shopping at Best Buy for this reason. All they sell for accessories now is their two in-house brands and Monster, all of which are stupidly marked up.
    - kevinwmerritt 15y ago
tomkarlo 15y ago
What shipping? Amazon ships for free on any decent-sized ($25+) order. I'm skeptical that Walmart can really beat Amazon via logistics. They're both top-notch operators in that realm, but Amazon's product pipeline is a huge advantage - they don't have to manage nearly as many locations, nor do they have to hold as much inventory relative to sales volumes because they have fewer fulfillment centers. And their Subscribe and Save program (which offers a 15% discount on common household products) is aimed directly at Walmart and the price clubs. (http://www.amazon.com/gp/subscribe-and-save/details/index.html http://www.amazon.com/gp/subscribe-and-save/details/index.ht...)
- JeffL 15y ago
  You have to pay for shipping one way or another -- whether it's explicitly, or in the form of higher prices. It's not really free.
  - tomkarlo 15y ago
    By that measure, you pay for shipping at Walmart, too. The goods don't magically arrive at the store.
    - freehunter 15y ago
      But Wal Mart's shipping can be much cheaper due to their predetermined, set routes. A truck is going to that store every night regardless of what is on it. They often offer free shipping to the store because the marginal cost to them for putting one more box on a truck is negligible.
      - tomkarlo 15y ago
        Amazon's shipping has fewer nodes in its graph. And the truck they use goes to your house every day: it just has UPS on the side. Transport is just one part of shipping costs. Handling, inventory time and other operations overhead are also a factor.
      - GregBuchholz 15y ago
neuroelectronic 15y ago
IMHO, Amazon's killer advantage is their long-tail inventory. I don't care what item your making a profit on and I know most of what Wal-Mart stocks is overpriced disposable junk. I want something that lasts and I want what I want. The last thing I want to do is drive to a location and not find what I'm looking for, or even worse, finding a cheap alternative made in china then I have a anxiety attack thinking about my role in our consumer/disposable/oil society and whether to settle for what they are carrying. Wal-Mart has their own highly intelligent logistics and will continue to be a major force, but they are a victim of their own success/algorithm. Amazon is also trying to reduce their inventory of non-profitable items, but this is being replaced by 3rd-party sellers. Hopefully this will be a good alternative for their long-tail inventory.
larrys 15y ago
"people like WalMart make a business out of logistics, they only carry stuff where they have a strong financial advantage. It’s not impossible, but it’s hard to beat their prices when you factor in shipping." Exactly and true except for long tail items. In theory if you take an item and stock, arbitrarily 500 of it in a Walmart you only have the cost to ship 500 in bulk to the Walmart. The customer costs zero to come and pick it up (and they don't factor their time into the equation either). Intuitively that has to be much cheaper than using UPS or Fedex to have a driver stop off at 500 different places. Just like it would be cheaper to have everyone pick up their mail at the post office. Walmart is in essence an efficient warehouse. And it doesn't matter who pays either it's a cost that someone has to bear. One way or another someone is paying for the delivery to the end user if the item isn't being picked up.
xm1994 15y ago
I hope you're right and they find better revenue models. I would hate for all these "showrooms" we have to go extinct. Could the day come where you pay an entrance fee to browse the latest gadgets at your nearest BestBuy "showroom"?
- ghaff 15y ago
  I doubt if they'll go extinct. As others have noted, they're already getting various coop marketing and placement dollars from manufacturers. And the fact is that they make a lot better margin on accessories and largely bogus warranties than on the big electronics purchases in any case. Add impulse purchases like games and it's hard to see them all going away although they'll doubtless continue to evolve. Apple notwithstanding, it's generally way too expensive for manufacturers to setup their own showrooms. So they pretty much need some sort of shared space. (On the other hand, just because it's in individual manufacturers' interests to have a widespread Best Buy sort of store, doesn't guarantee that they'll continue to exist.)
  - swalkergibson 15y ago
    True enough, Best Buy will probably not go extinct. However, this type of thing is so unbelievably damaging to mom-and-pop retail operations who do not have the buying power/leverage with manufacturers that a giant like Best Buy has. If I owned a mom-and-pop place like my parents, I would immediately investigate how I could jam cell signal in my shop. There is no way in hell I would let a customer in to just try some jeans on, watch them scan the price tag, and walk out the door with five extra bucks from Amazon without buying my product.
callmeed 15y ago
Also, I think Costco has an advantage because they get custom packaging/bundles for a lot of their products. It's the one place I often can't scan the barcode with Amazon's app.
swalkergibson 15y ago
That is all fine and dandy, but what about locally owned retail operations that simply do not have the reach/power/leverage of a place like Wal-Mart? Do you think that LG would pay "Billy Bob's TV and Appliance" to display its televisions in his store?
- grannyg00se 15y ago
  Probably not, but why would I even go to Billy Bob's when I can go to Best Buy? And if there are only Billy Bob type stores around, then maybe LG would pay Billy Bob if he had the most traffic in the area.
  - swalkergibson 15y ago
    Perhaps you had a better experience at the local place. Maybe they had a more knowledgeable sales staff that was able to articulate well the benefits of one piece of equipment versus another. There are as many reasons that you would have a good experience there as there are reasons you had a good experience at Best Buy. My point was that because Best Buy has such enormous power with their suppliers, they are in a significantly better position to bargain with those suppliers than a local shop. I would presume it would be pretty difficult for any local shop owner to convince a distributor of name-brand merchandise to pay them to stock those products on their shelves, simply because the buying power of a local shop is not that of Best Buy. Really, the local operations are getting hit from all angles - online, big box, etc. To me, as the offspring of local business owners, that is disheartening. Like I keep saying throughout this comment thread, it is just a sad thing to watch all of the great little places in your area get driven out of business because of such vicious competition. I am not advocating any kind of corporate welfare here, but when you shop locally, more of your money stays in your area. I invite you to check this out: http://www.localfirstaz.com/local/index.php http://www.localfirstaz.com/local/index.php

nitrogen 15y ago

I wouldn’t be surprised if WalMart start displaying higher online prices right beside their merchandise in the store. WalMart will compete if they are threatened. A new bargain supermarket moved into the area that puts price comparisons between them, WalMart, and the other local chains in its weekly flyers. In response, the local WalMart started putting signs up in the store showing their price and the competitor's price (and name) for items where WalMart is cheaper.

jader201 15y ago

Maybe not WalMart, but this is exactly what Best Buy has become for me. I love going into Best Buy, just to be surrounded by all the high tech goodness, but I never buy anything there. I go to check stuff out, then go home and jump online and order the same thing for 20% or more less from Amazon or Newegg.

Jun8 15y ago
I've got to say: This is the rational, homo economicus way that textbooks say buyers should behave and, to me, it's just terrible! You may find it pedantic, but I think that if BB provides a utility for you you should reward them. The same thing is happened to large bookstores, music stores, etc., people checked out the wares and then bought it online.
- jader201 15y ago
  Part of me agrees with what you're saying, and in some cases, I do acknowledge this and try to give business to those that truly provide a valuable service to me. However, in the case of BB, I'm less inclined to reward them, as I feel they -- in a lot of cases -- take advantage of uneducated customers, and gouge them with certain lines of products. Cables (Monster cables are the worst) being a prime example of this, where they sell cables at a cost sometimes 25-50 times that you can get almost anywhere online (selling a $3 cable for $100). I don't want this to turn into a discussion about specific stores or products, just using that as an example of why some retailers have lost the respect of some of the more educated consumers. Business is one thing, but taking advantage of the uneducated is another. But again, I do agree with you about the general notion of giving business to those that provide a valuable service to you.
  - potatolicious 15y ago
    This seems like a rationalization for me. I too dislike BB's tactics, but instead of using them as a free showroom, I just avoid them. I will give nothing to them, but neither will I take anything from them.
  - luser001 15y ago
    I had a very pleasant experience the two times I went to best buy: once to get a phone plan (the guy at the counter saved us good money by suggesting a nice text plan I hadn't come across during my research). The next time I bought three big appliances: knowledgeable saleslady who smartly realized that I'd done my homework. Didn't waste my time; didn't try to upsell, gave honest opinions on diffs between brands. I'd go there again. And oh, I order lots of stuff from Amazon Prime too.
  - lawnchair_larry 15y ago
    Yeah, I stopped shopping at Best Buy for this reason. All they sell for accessories now is their two in-house brands and Monster, all of which are stupidly marked up.
  - kevinwmerritt 15y ago

tomkarlo 15y ago

What shipping? Amazon ships for free on any decent-sized ($25+) order. I'm skeptical that Walmart can really beat Amazon via logistics. They're both top-notch operators in that realm, but Amazon's product pipeline is a huge advantage - they don't have to manage nearly as many locations, nor do they have to hold as much inventory relative to sales volumes because they have fewer fulfillment centers. And their Subscribe and Save program (which offers a 15% discount on common household products) is aimed directly at Walmart and the price clubs. (http://www.amazon.com/gp/subscribe-and-save/details/index.html http://www.amazon.com/gp/subscribe-and-save/details/index.ht...)

JeffL 15y ago
You have to pay for shipping one way or another -- whether it's explicitly, or in the form of higher prices. It's not really free.
- tomkarlo 15y ago
  By that measure, you pay for shipping at Walmart, too. The goods don't magically arrive at the store.
  - freehunter 15y ago
    But Wal Mart's shipping can be much cheaper due to their predetermined, set routes. A truck is going to that store every night regardless of what is on it. They often offer free shipping to the store because the marginal cost to them for putting one more box on a truck is negligible.
    - tomkarlo 15y ago
      Amazon's shipping has fewer nodes in its graph. And the truck they use goes to your house every day: it just has UPS on the side. Transport is just one part of shipping costs. Handling, inventory time and other operations overhead are also a factor.
    - GregBuchholz 15y ago

neuroelectronic 15y ago

IMHO, Amazon's killer advantage is their long-tail inventory. I don't care what item your making a profit on and I know most of what Wal-Mart stocks is overpriced disposable junk. I want something that lasts and I want what I want. The last thing I want to do is drive to a location and not find what I'm looking for, or even worse, finding a cheap alternative made in china then I have a anxiety attack thinking about my role in our consumer/disposable/oil society and whether to settle for what they are carrying. Wal-Mart has their own highly intelligent logistics and will continue to be a major force, but they are a victim of their own success/algorithm. Amazon is also trying to reduce their inventory of non-profitable items, but this is being replaced by 3rd-party sellers. Hopefully this will be a good alternative for their long-tail inventory.

larrys 15y ago

"people like WalMart make a business out of logistics, they only carry stuff where they have a strong financial advantage. It’s not impossible, but it’s hard to beat their prices when you factor in shipping." Exactly and true except for long tail items. In theory if you take an item and stock, arbitrarily 500 of it in a Walmart you only have the cost to ship 500 in bulk to the Walmart. The customer costs zero to come and pick it up (and they don't factor their time into the equation either). Intuitively that has to be much cheaper than using UPS or Fedex to have a driver stop off at 500 different places. Just like it would be cheaper to have everyone pick up their mail at the post office. Walmart is in essence an efficient warehouse. And it doesn't matter who pays either it's a cost that someone has to bear. One way or another someone is paying for the delivery to the end user if the item isn't being picked up.

xm1994 15y ago

I hope you're right and they find better revenue models. I would hate for all these "showrooms" we have to go extinct. Could the day come where you pay an entrance fee to browse the latest gadgets at your nearest BestBuy "showroom"?

ghaff 15y ago
I doubt if they'll go extinct. As others have noted, they're already getting various coop marketing and placement dollars from manufacturers. And the fact is that they make a lot better margin on accessories and largely bogus warranties than on the big electronics purchases in any case. Add impulse purchases like games and it's hard to see them all going away although they'll doubtless continue to evolve. Apple notwithstanding, it's generally way too expensive for manufacturers to setup their own showrooms. So they pretty much need some sort of shared space. (On the other hand, just because it's in individual manufacturers' interests to have a widespread Best Buy sort of store, doesn't guarantee that they'll continue to exist.)
- swalkergibson 15y ago
  True enough, Best Buy will probably not go extinct. However, this type of thing is so unbelievably damaging to mom-and-pop retail operations who do not have the buying power/leverage with manufacturers that a giant like Best Buy has. If I owned a mom-and-pop place like my parents, I would immediately investigate how I could jam cell signal in my shop. There is no way in hell I would let a customer in to just try some jeans on, watch them scan the price tag, and walk out the door with five extra bucks from Amazon without buying my product.

callmeed 15y ago

Also, I think Costco has an advantage because they get custom packaging/bundles for a lot of their products. It's the one place I often can't scan the barcode with Amazon's app.

swalkergibson 15y ago

That is all fine and dandy, but what about locally owned retail operations that simply do not have the reach/power/leverage of a place like Wal-Mart? Do you think that LG would pay "Billy Bob's TV and Appliance" to display its televisions in his store?

grannyg00se 15y ago
Probably not, but why would I even go to Billy Bob's when I can go to Best Buy? And if there are only Billy Bob type stores around, then maybe LG would pay Billy Bob if he had the most traffic in the area.
- swalkergibson 15y ago
  Perhaps you had a better experience at the local place. Maybe they had a more knowledgeable sales staff that was able to articulate well the benefits of one piece of equipment versus another. There are as many reasons that you would have a good experience there as there are reasons you had a good experience at Best Buy. My point was that because Best Buy has such enormous power with their suppliers, they are in a significantly better position to bargain with those suppliers than a local shop. I would presume it would be pretty difficult for any local shop owner to convince a distributor of name-brand merchandise to pay them to stock those products on their shelves, simply because the buying power of a local shop is not that of Best Buy. Really, the local operations are getting hit from all angles - online, big box, etc. To me, as the offspring of local business owners, that is disheartening. Like I keep saying throughout this comment thread, it is just a sad thing to watch all of the great little places in your area get driven out of business because of such vicious competition. I am not advocating any kind of corporate welfare here, but when you shop locally, more of your money stays in your area. I invite you to check this out: http://www.localfirstaz.com/local/index.php http://www.localfirstaz.com/local/index.php