The Amazon Effect – 3 Key Ways Amazon is Affecting Our High Street
Since its creation back in 1994, Amazon has grown into the world’s fourth largest company. Its rise has transformed how we shop, how we consume entertainment and how we do business.
Almost every online retailer has been affected by Amazon’s success, and this is only set to grow. But whilst eCommerce retailers consider how they can tackle the monster retailer’s dominance, many forget how it has also affected our high street.
Here are 3 key ways Amazon’s growth has changed our high street:
1. Decline in high street footfall
If you needed to urgently buy yourself a phone charger, it was typically faster to pop out to your local high-street to buy it, rather than order it online and wait a few days at best for it to arrive. However, improvements in delivery have turned this on its head, and it is Amazon who is leading this revolution. Offering same day delivery since 2014, and now even offering 2-hour delivery in certain areas, Amazon is providing consumers with an immediacy that even the high-street can’t beat.
The numbers of customers purchasing in-store is falling fast as a result, compounded by the ease of purchase Amazon facilitates with the likes of online wallets and one-click purchase. Consumers have had a taste of immediacy, and they don’t want to let go of it.
In order to overcome this erosion, bricks and mortar retailers are adapting their business models by upgrading stores and understanding that having an online offering is no longer an option, but a necessity.
Starbucks is a great example of how to change. To survive and thrive, it adopted immersive technologies and converted stores into destinations, offering more than just a physical place of purchase. It also focused on in-store customer service that provides a layer of value that can’t be replicated online. Apple is market leader here.
An example of a sector that has been forced to change is UK fashion. The rise of eCommerce opened up opportunities, with businesses like Manchester-based Boohoo filling the space once filled by physical stores. Behemoths are following, with Primark leading the way. MatchesFashion is an example of an independent retailer that realised its bricks and mortar presence was under threat, so made a hugely successful transition online whilst retaining four ‘destination’ stores.
The success of these businesses – and their willingness to adapt and change – proves that moving online doesn’t have to be daunting, no matter how big or small your business. Rather, it should be an opportunity for growth, opening up cheap, first-class technology available to facilitate a smooth, economical transition online.
2. A burdening of real estate costs
Starbucks CEO Howard Schultz has warned about a retail doomsday. He says that the US is: “over-retailed in lots of categories … It’s the beginning of lots of companies announcing store closures.”
Consumer demand for the ease and immediacy of eCommerce means we’ve reached a tipping point whereby there are more storefronts than needed. The eventual implosion could massively affect the price of commercial real estate and make brick and mortar stores financially untenable for many brands.
Bankruptcies are being seen throughout the US, whilst big players are buying up online retailers in order to diversify away from the mall. Walmart, for example, have been switching away from physical shop fronts, offering online grocery shopping and acquiring eCommerce businesses, such as Jet.com.
In order to avoid being dragged down by this decline, high street retailers must update their approach to selling or they will fall behind in revenue, and the declining value of physical premises will place a massive burden on balance sheets.
3. Job elimination – or evolution?
Amazon is not only changing how we shop. It’s also changing how we work.
In March of this year, MarketWatch estimated that in the next five years, Amazon’s expansion will lead to the destruction of 1.5 million retail jobs. Incorporating its future focus on drone delivery and automated grocery stores, this figure could reportedly exceed 2 million.
However, many argue that Amazon is not destroying jobs, but rather changing them; and this is where the rise of tech, and more specifically automation, come into play. Roles are shifting away from in-store and administrative roles to back office, order management functions with a greater reliance on machines to satisfy customers. As a result of such changes, this year Amazon announced that it “plans to grow its full-time U.S.-based workforce from 180,000 in 2016 to over 280,000 by mid-2018.”
This shift in the job market therefore isn’t necessarily bad news. Throughout history, humans have adapted and moved into more sophisticated roles.
More good news for the UK is that, along with Apple and Google, Amazon is growing its UK presence. Brexit has not put these behemoths off, and Amazon “fulfilment centres” are appearing throughout the UK, needed to satisfy the growing demand of consumers shifting away from the high street and towards the internet.
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The high street is changing. But this isn’t the end of retail. We are merely living through a shift in the way retailers – both large and small – appeal to customers. Like Starbucks and Walmart, smaller high street retailers should look upon the challenges posed by Amazon’s rise as opportunities, with new spending patterns, real estate prospects and job creation creating a fertile time for forward-thinking businesses.
This article was created in association with Divido who provide revolutionary technology that lets customers spread the cost of any purchase over several months while the merchant gets paid in full right away.