business news in context, analysis with attitude

The New York Times has a story about how some bricks and mortar retailers have stabilized their declining fortunes, their victories - such as they are - "may be short-lived because retailers are caught up in a seemingly never-ending race against Amazon. The more they spend to compete, the more their profits are sapped. And even when they succeed in attracting customers, Amazon responds with new ways of delivering inexpensive items as quickly and conveniently as possible."

The thing is, the Times writes, competing with Amazon has never been a fair fight. For decades, the online giant has appealed to investors by growing quickly, even as it lost money on shipping, building out its warehouses and developing gadgets like the voice-activated Echo with Alexa. Amazon also runs a cloud computing business, Amazon Web Services, that can increase the company’s overall profits. In its most recent quarter, Amazon said, profit fell 28 percent as it invested in one-day shipping initiatives."

And, the Times points out, it isn't just Amazon: "Dozens of start-ups, backed by private investors not concerned with immediate profits, have been chipping away at department store offerings, section by section. The costs are weighing on many retailers, even in a relatively strong economy when consumers are expected to spend heartily during the holiday shopping season, which begins in earnest this week."

If Walmart and Target have done better than most under these circumstances, the story says, it is largely because they "have evolved from big box stores into retailers that have succeeded at offering the same conveniences as Amazon like one-day delivery.

"They have managed to thrive because they are helped by a wide range of products like food and household staples that customers have to buy on a regular basis. Their sheer size also allows them to pressure their suppliers to lower the cost of their goods, which frees up money to invest in e-commerce."
KC's View:
To me, the ability of retailers to compete with Amazon has more to do with which how much they are willing to subvert their own business models, disrupt the marketplace's perception of what bricks-and-mortar retailer is, and innovate in ways that Amazon cannot or will not.

Not easy, I know. But that's what Amazon is going to have to do when someone comes along with a concept or model that threatens to upset its apple cart.