One could look at Apple and it’s retail stores of the exact phenomenon that is making retail stores important again with the caveat of the stores must significantly differentiate itself on some basis relative to competitors
Stratechery has a great write up in this (albeit a few years old, it’s still largely applicable)
It’s that last example that resonates when talking about retail especially. To buy a designer bag is an event: you’re greeted at the door, given a drink, have an attendant on hand at all times (who will model the bag for you, if need be); if you purchase it’s almost like a ceremony, complete with special packaging, congratulations (for them taking your money!), and perhaps a follow-up call a day or two later. Obviously given its scale an Apple Store isn’t quite the same, but it’s in the ballpark, especially relative to the buying experience for most electronics. Moreover, it’s the after-sale experience that is arguably the best part: you’re given help setting up your new device, transferring files, invited to classes to learn how to use your purchase, and assured that a genius is ready-and-waiting to take care of any problems that arise
The Apple Store is nothing like that. You go in to buy, but the person that says hello can't sell you anything. Instead you must wait 5+ minutes for someone to come by and allow you to purchase. No drinks are provided.
This person is not that knowledgeable about the product. And can't answer any detailed questions. If you want a Mac mini you'll have to insist that it does in fact exist.
Also your product will not be bespoke. For that you must order online. Only plane vanilla is allowed to be sold at the stores - so no extra RAM or disk space for you.
If you would like someone to help you learn your new machine you can come back next week for an "appointment". This appointment is used in the doctor sense where it's actually expected you'll wait another 10-15 minutes until you see someone who can help.
Every time I go it's an excercise in frustration. But I'm impatient and want it now.
Apple isn’t selling low margin products and while its stores are very profitable, it has never been solely focused on profit and loss. It is almost a marketing tool.
Tim Cook fired one chief of retail store operations within six months after he realized that the guy didn’t get that.
As an aside, that was a startling hire in the first place. Curry’s electronics stores, at the time, were the polar opposite of the Apple Store experience.
"You don’t see many executives trading up from CEO of one company to senior vice president of another. That Browett is from Europe is a pretty good signal that international expansion is a top priority for Apple retail."
He was already hedging his bets a couple of days later, though:
"I'm not implying that Browett was hired to or intends to Dixons-ify the Apple Store experience — just pointing out that it’s a curious hire, also given how rarely Apple hires executives from outside the company."
The first quote wasn’t really complimenting Browett. It was more of a statement that for someone to take a “demotion” from being a CEO to VP says a lot about the Apple store.
The key take away I found is really not about margin but experience. If you lack true differentiation you will die a quick death in retail (this is more true of brick and mortar outlets thanks to internet competition being incredibly fierce)
High or low
Margin is almost irrelevant to the point: if you’re a commodity trying to sell as a non commodity you will fail.
Quick observation: a lot if not most businesses tend to be commodities (e.g. they lack real differentiation from their competitors)
Physical stores also SHOULD have a benefit that Amazon seems to have no will to address.
Quality control.
If you do have an item through a retail store with a physical presence, not only should (common) items be there at any time, they should also be of actual durable quality.
Agreed, Amazon is getting deep into 'Day 2' territory by not policing the inventory controls and seller scams. From counterfeit goods to used goods sold as new, Amazon expanded to the point where the new shoppers it picks up are 'bargain at any cost' who are being served by these marginal sellers, and they are then losing their buyers who want a reliable purchase experience.
Not to mention Amazon's ability to throw your purchases at your door when the disinterested delivery agent is only measured on packages delivered per hour rather than returns due to damage.
I, and by extension my company, refuse to buy (1) anything apple makes on amazon; (2) any electrical item under $200. No chargers, no cables, no nothing.
You all should try bhphoto.com -- good prices, no counterfeit gear.
This is a bit random, but case in point - I just needed some batteries today for a garage door opener. I refuse to order them from Amazon because I've gotten burned multiple times. The ONLY batteries I'd ever order from Amazon are their Amazon basics brand.
Interestingly, “Amazon Basics” has no counterfeitting problem. It is not that Amazon can’t fix counterfeiting, they just don’t care unless it is their own brand.
At some point this crosses the line into anti-trust territory.
I imagine I could make some fake Duracell batteries and list them on Amazon with the Amazon folks (if they cared) thinking this was 'seller #143' also selling the same stuff. However, if I was to make some fake 'genuine Amazon Basics batteries' and then list them on Amazon I might not just blend in so easily. Someone at Amazon or even a customer might think 'where were these sourced as it wasn't through Amazon' for the gig to soon be up.
There are other vectors for counterfeiting own brand products but you would have to be a supplier. In normal retail 'own brand' products can be sourced from many suppliers. If you are selling ready meals then the exterior pack could be provided by the supermarket with that being consistent. Meanwhile the contents could come from one of many industrial units at one of many suppliers. In this way 'co-mingling' is possible. In the UK we had a little problem a few years ago where 'own brand' ready meals were full of horsemeat. The products themselves were 'legit' but the contents were not.
I would say that Amazon Basics are vulnerable to this type of fakery that goes on further up the food chain. This is fully possible with commodity items such as batteries. As per the UK horsemeat problem there is a serious reputation risk if this happens, terrifying the customers this way is a bigger existential threat to the brand than any 'anti trust' laws.
I think the difference is that in that case Amazon controls the entire chain. They have the batteries manufactured and plan stock themselves. For market place items on Amazon (which are now most items) someone else just rents a bin in their warehouse, ships stuff to it and gives Amazon a description to show on their website. Amazon in that case is more like Airbnb for goods or a more automated eBay.
It would be interesting to see counterfeit numbers for items sold by Amazon itself vs by someone else on Amazon. Anecdotally I've never had an issue with stuff sold by Amazon itself and steer away from our vendors if possible.
Never really thought about it that way, but interesting none the less. I have no idea if it's intentional but I definitely lean towards the Amazon branded stuff when it's an option for the fear of counterfeits.
While I wholeheartedly agree that Amazon has a problem with quality and counterfeit/knockoff items, IMO quality control has nothing to do with brick and mortar stores.
If I order something from, say, nordstrom.com, I’m pretty confident that the item will be high quality and exactly the same as if I’d bought it from one of their physical stores.
Or for another example, if I were to order some clothing from mrporter.com, I have similar expectations of quality even though they have no physical stores.
If I buy something from eBay or Craigslist though, I have no expectations that it will be of a certain quality standard.
I've been moving away from Amazon for a while now simply to reduce the risk of getting counterfeit items. At least with other retailers you can feel much more confident that they're not selling you a fake.
Frys is a nice choice for buying electronics: they have in-store same-day pickup, and they'll price match Amazon and Newegg. It's pretty convenient if you have one nearby.
This one surprised me a bit, but Best Buy also has equivalent prices to Amazon on a lot of things. A few days back I was looking for some items and found that they had everything available for the same price and I could go pick it up on the same day.
Amazon do seem to be stepping up their delivery speed, though. This morning I ordered something that wasn't available at other retailers and I was given an option for same-day delivery. A few hours later it arrived.
Even if the shelf price at Best Buy isn't the same, they will match Amazon, Newegg, bhphoto and a few others. I even had to ask them to match their own online price before. It's convenient when you really want something immediately.
I can't follow the point you're trying to make. Are you suggesting that retail employees could inspect the merchandise before giving it to the customer?
That's not the point. Retailers use a known supplier for their products. Amazon uses any one and anyone else (3rd party) can sell on amazon.
Common products that are normally sold at a high mark-up at retailers, are usually always counterfeit if bought from amazon. Case in point are the expensive electric tooth brush replacement heads by Oral-B.
You will pay $5-$8 per head from a physical retailer. Yet on amazon, there are tons of them being sold for much less. If you do buy one from amazon, the product will not be the same as from a physical store even though the packaging is identical. Its a cheap counterfeit.
Another time, I bought a hand cranked can opener. It was supposed to be a heavy duty "Made in America" can opener. Yet once I got it, the construction was nothing at all like the product images showed (was held together by cheap pop rivets instead of solid rivets) even though all the brand markings (including a big print "made in America") were there. It broke quickly. Looking on ebay I discovered an identical item only instead of it have a printed "made in America", it said "China"...
I'm surprised retailers don't explicitly take advantage of this by advertising: "Don't be rooked by comingled inferior knockoffs. Get the genuine quality at BrandX stores!"
The Chinese have gotten much better with the Oral B toothbrush head counterfeits.
I bought some on eBay, advertised as genuine but not. The packaging was near perfect. The only thing that gave them away was the different mouth-feel and two misplaced mold release marks.
Genuine Braun dual-action brushheads have two divits on top of the brushhead. The copies have the two divits on the side.
I sent a note to the seller warning him that some counterfeits might have gotten into his supply. Seller refunded me.
If you get counterfeits from Amazon I am sure the 3rd party seller will refund you.
I’ve bought both the brand name and cheaper knockoff Oral-B electric toothbrush heads. Haven’t been able to distinguish them yet in terms of quality and performance. YMMV.
Banana republic uses multiple suppliers and apparently 32 inches mean different things in different countries. By upwards of half a foot. I bought 3 pairs, three different countries, three different lengths. There is no guarantee from a normal retailer either.
The fashion industry is completely crazy that way. It's not just banana republic. Years ago I worked on a ordering system for a fashion retailer and it was mind-blowing. Orders would be filled on a best-effort basis. You order 1k black M and 1k blue L and you receive 1.5k L white and 500 XXL red for example. So we'd have not only to store the order but also what was received. On top of that the designer might change vendors between orders and now you have different SKUs for what's supposed to be the same product.
Because they’re shipping stuff supplied by random “merchants,” Amazon has no idea whether the products they sell you are authentic or fake.
For a major example of this, Apple sued sellers over knockoff (and potentially hazardous) USB chargers being sold as official Apple chargers. “Shipped and sold by Amazon” and as far as customers can tell, it’s the real thing.
Best Buy’s supply chain doesn’t have this problem.
This is common across all sorts of products. A shoe company (I forget which) stopped selling on Amazon because they couldn’t do anything about being mixed in with all the fakes, and fountain pens bought there (Lamy Safari in particular) have good odds of being Chinese knockoffs of questionable quality.
I ordered new electric toothbrush heads from Amazon about a year ago and ended up receiving a very obvious knockoff product. It might be my fault for not reading the listing carefully but this definitely would not have happened in a brick and mortar where I can pick up the product and see that it isn't some off-brand mimic.
“These are big shifts,” said Craig Johnson, president of Customer Growth Partners, a research and consulting firm. “It is like turning around the Queen Mary. You can turn the rudder, but it takes time to gain a purchase.”
To my mind, most physical stores ought to be like showrooms: innumerable products are hard to judge solely from pictures and text descriptions but easy to judge with ten seconds in person. Let online and off converge.
I recently bought a 4K monitor in a physical store. I was worried about how 4K over USB-C, HiDPI scaling etc were going to be supported with my Mac. At the store I was allowed to plug in my own laptop to their display model and give Xcode a spin to see how the display looked in my regular workflow/text size/etc. The price was the same as Amazon once you discounted their loyalty card earnings.
Okay, but there's the old Amazon's showroom problem.
People go to the store, look at the thing, then, maybe buy it online anyway, for any number of reasons. Net effect, physical locations become showrooms that move very little actual product, and fail to close the expected number of sales.
I've recently started doing the opposite. I'll search Amazon to see what products are recommended and see if I can find those (or something similar) in local stores. This is particularly true when I am buying something that I don't know much about. I basically use Amazon as initial research to discover what properties I should be looking for in an item.
Same here. I was looking for items on the new Amazon Australia, then noticed one of the stores selling on Amazon is just a couple of train stops away from me. It made me realize I should check their own website, and they'll sell it to me for $50 cheaper if I don't go through Amazon ($65 if I include the shipping).
I think that's exactly what parent is suggesting: The physical store should be for letting people try and touch items, before they buy them from your website. Warby Parker, Bonobos, and (in some states) Tesla already do this.
That’s fine if you are selling your own product in the store and online. Apple doesn’t care if you use thier store as a showroom and buy an iPhone from the carrier.
If I’m understanding your comment correctly, you believe the fact that Best Buy has been forced to price match as a way to stop losing business is evidence that they’re not losing business?
Nah, it's that Best Buy doesn't make most of its money on the items they price match. Their big sellers are their mobile department and all the accessories folks like to pick up with their new purchase, which are very often store exclusives and have incredibly high margins. They make a killing on chargers, adapters, phone cases, you name it, but actually make tiny margins on a lot of their "core" items. The big ticket item they price match is often kicked back by the vendor anyway, so the store doesn't lose out when they do it. Their goal is just to get folks in the door, and let the momentum of a good sales interaction close the deal. (Questionable on the "good," they're admittedly not very good at screening / training, but in aggregate this strategy works well for them.)
Best Buy price matches because it gets people in the store. I don't believe for a second that they did it in response to losing business to online storefronts; rather, I think it's far more likely that they did it in response to other retail chains doing the same. Their customers came to expect it, so they obliged, as a marketing tactic to make sure their retail competition didn't have that as an edge. Their price match policy is also pretty strict; they won't match just anything on Amazon, it has to have some degree of verification and be from a trusted seller. (Especially for things like iPads / common fake listings, etc.) Last time I checked it had to be "Sold and shipped by Amazon" but that might have changed, it's been a while.
(Source: I worked at a Best Buy store for about 4 years.)
If you are a brand and sell through Best Buy then you have to pay to be there.
There are many ways of paying:
Products have to be supplied in a fairly 'just in time' way so you are doing the warehousing/distribution that retail chains used to fully take care of.
You have to take back unsold inventory or take back inventory if it under-performs and the range/model/SKU is dropped. So this also means that for the customer there is no 'old model deeply discounted' unless it is a store demo unit.
You have to pay for marketing. For Best Buy to promote your brand you need to pay for that.
You have to pay for what shelf your products are on. This is a bit like concessions in department stores or end of aisle shelves in a supermarket. You only get your products at eye level and prominent if you pay.
You might have to pay for Best Buy specific models. This can involve cosmetic changes to the product that mean more production costs (e.g. moulds for injection moulding, packaging).
You might have to have a team of people do in store training, visiting Best Buy stores and teaching the staff how to demo your products. This is actually really crucial.
Best Buy do provide sales data that helps forecasting demand, this is useful but in the olden days the store would take all the risk of ordering what they thought they could sell.
Despite all of the above Best Buy are great to work with for most brands. However, not all chains are. There are plenty of stories of companies that have worked with Walmart to come apart. This happens as the margin Walmart demands means that one has to nickel and dime the product to make it as cheap as possible. People buy into the brand, take it home and find it is rubbish. They take it back, don't buy the brand ever again and cost you money. Meanwhile the specialist retail channels that the brand did have stop selling the product as Walmart have started selling it for less than what they can sell it for. In this way a brand can quickly die. The trap is that if you don't sell your product at the price they want to sell it at (as a 'loss leader') then they can boot you out of the store and get your rival in instead. It is lose or lose for the brand when the retailer does this.
It works if you make it easy enough to complete the transaction right there and then.
One of my pet peeves is something bookstores should do: have a simple way to buy ebook versions of the in-store books, so you get some of that money. Sure, after finding a nice book in your showroom I could bring up Amazon on my phone, search for the book, then bring up your website, search for the book, compare prices, then go through checkout; or you could give me an app to scan a barcode that will bring up the book and a Buy Now button that triggers Apple Pay. At that point, I simply cannot be arsed to look at Amazon just to save $2, like most people cannot be arsed to pirate music when iTunes and spotify are painless.
That doesn't work if Amazon, et al can charge less than you can charge to "showroom" them for. People don't pay for expertise, etc online, they buy the cheapest.
Chain stores are like car dealerships; you don't actually need them to sell branded products, they're just a middleman that makes it easier if you don't care about that type of stuff.
The rise of Amazon, and the rise of brands that 100% own the physical display of their wares and don't use Amazon (e.g., Warby Parker), are putting the middlemen out of business. Unless you offer some customer service experience that is hard to duplicate (independent bookstores and their curation, Sephora with its makeup gurus, etc.) your middleman store is going to have a rough time.
Sounds like someone needs to Start-Up a showroom for electronics. Im imagining that the model would be to charge flat rate fees to device manufacturers for floor space on the showroom. If you remove the need to drive revenue from end user purchases it wouldn't matte where they actually buy.
They're interesting. The one by me feels like a sharper image with 20 products, but they're fairly high quality/price. They seem to have about 20% turnover of new products every time I drop in which is maybe every two months or so. The products seems somewhat split between things I'd want to see before I bought, some of which made me not want to buy them, and things I wouldn't: I do want to see digital picture frames to see they still haven't gotten the resolution high enough, and I liked being able to try bone-conduction headphones without having to buy them, but I don't need to see wifi routers in person before I buy one.
Sears, despite their bumblings, had a half-baked solution to this. At some of them, you'd pick the product on a showroom floor, grab a ticket (like for a meat counter), then, at a waiting area by the entrance, you'd have your fridge/washer/air conditioner wheeled out to your car.
They buy online because of the difficulty surrounding getting it home - with that problem fixed I imagine the Amazon showroom problem is no longer a problem.
So, one thing I didn't know for a long time was that grocery stores charge the producers of packaged goods for shelf space. Grocery stores buy the produce, around the periphery, but in many cases just rent the shelf space to the manufacturers of the finished products. Presumably this is not always the case, I'm not expert in that sector. But I wonder if the solution to the "Amazon's showroom" problem is to imitate the grocery store model.
I note that Amazon felt compelled to buy a grocery store chain, in order to get a purchase in that sector.
I wonder how much that really matters. In the end a brand has a certain amount of money it can "give" the grocery; They can give this money by buying shelf space, lowering purchase prices, giving marketing money, etc. But it the end the size of the bag of money is still the same.
> Grocery stores buy the produce, around the periphery, but in many cases just rent the shelf space to the manufacturers of the finished products. Presumably this is not always the case
There's an interesting balancing dynamic there. Brands really like to be at or below eye level. On the other hand, if I went to a grocery store and the store didn't carry Oreos, I would have a pretty negative opinion of that store (and I don't even like Oreos, personally). Based on that, I assume famous brands have a good amount of market power relative to stores. But I care very little about what shows up in the toilet paper aisle; I would guess payment-for-placement is more significant over there.
You may not shop there because there are Oreos. But Oreo is not negotiating in a vacuum; they have to fight off the Keeblers and the Chips Ahoy and the Pepperidge people for that same shelf space. You don't want to wind up in a situation where your competitors have better placement than you (e.g., Uber ads being shown above the fold in a search for Lyft).
Empirically, I see Oreos, Keebler cookies of various varieties, Pepperidge Farm cookies, Chips Ahoy, Nutter Butters, all at the same altitude. It's a long aisle.
Also, Oreos vs. Chips Ahoy isn't a fight; those are both Nabisco cookies.
Stratechery has a great write up in this (albeit a few years old, it’s still largely applicable)
It’s that last example that resonates when talking about retail especially. To buy a designer bag is an event: you’re greeted at the door, given a drink, have an attendant on hand at all times (who will model the bag for you, if need be); if you purchase it’s almost like a ceremony, complete with special packaging, congratulations (for them taking your money!), and perhaps a follow-up call a day or two later. Obviously given its scale an Apple Store isn’t quite the same, but it’s in the ballpark, especially relative to the buying experience for most electronics. Moreover, it’s the after-sale experience that is arguably the best part: you’re given help setting up your new device, transferring files, invited to classes to learn how to use your purchase, and assured that a genius is ready-and-waiting to take care of any problems that arise
https://stratechery.com/2014/apple-stores-innovators-dilemma...