Friday, July 13, 2012

Local

I read a fascinating piece in Slate today which was about Amazon's push to offer same-day delivery. Essentially, it examined the strategic shift from fighting local sales tax to settling with municipalities. The reasoning for the change seems to be that the shift on taxes is that Amazon has determined that same-day service will open a vast market opportunity. They are prepared to open a vast network of warehouses to support this effort.

This will have a seismic negative effect on local retail if Amazon (and its leading affiliates), via its low cost model, with savings shared with customers, can pull this off. For consumers, it's a huge win, especially if Amazon extends its Prime bundle offering free shipping to members. Local main street retailing seems to be heading towards three shopping categories:

  • Experiential- Where the shopping experience is really special (e.g. Nike or Apple stores)
  • Just in Time- Need a band-aid and need it now
  • Personal services- your nails look lovely dahling
This move should also strike fear into the big box retailers such as Walmart, Target and Costco. Which, if history is a guide, will pour billions of dollars into trying to blunt the effect on their stores, without cannibalizing them. I wish them well as they walk the sword of Damocles

Promotional services, such as Groupon, will help mask the shift. But for how long can businesses who don't have budget pay for 'helpers'?


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