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Shopping fulfills the needs and wants of everyone. With the creation and constant advancements of the internet, shopping has been taken to the next level. A click of a button grants coveted shoes, jewelry, electronics, or even furniture to buyers, and shipping ensures that parcels arrive in a matter of days. Even groceries can be ordered and delivered to residences. Ultimately, online shopping has made the functionality of our society even more convenient than it already is. But there’s a price to all of this convenience, and traditional retailers may be the ones paying.
The change in consumer shopping habits and our economy can be linked to the rise of online shopping, which did not begin with Amazon, although the megacorporation did take off soon after.
In a Smithsonian article, Marissa Fesseden pointed out that, in 1984, a British woman ordered groceries online over the phone but paid in cash and had them delivered to her door. However, because the customer paid in cash as opposed to online with a debit or credit card, the transaction did not qualify as the first online transaction.
The very first online transaction didn’t occur until a decade later, when Dan Kohn, creator of the website NetMarket, sold a CD (compact disc) to Mr. Brandenberger, the individual who made history. This transaction took place in 1994, when Mr. Brandenberger, a Philadelphia resident, logged into his computer and, using a secret code, sent his credit card information online to buy a Sting CD. This transaction paved the way for online shopping.
After the first successful online transaction, Amazon quickly slid into the picture when its founder, Jeff Bezos, launched the company in 1994 and made it officially available for public use in 1995. Initially, Amazon’s inventory was reserved only for books in a time when Barnes & Noble, WaldenBooks, and Borders were common stores on city streets and in shopping malls.
As part of the website’s beta test, computer scientist John Wainwright ordered the first item, which was Douglas Hofstadter’s Fluid Concepts and Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought. Since then, Amazon has expanded well beyond its humble beginnings, fulfilling Bezos’ promise of “Anything with a capital A,” and it now sells electronics, hair care products, auto parts, and nearly anything else under the sun.
The takeoff of online shopping marked the irreversible change in our economy, particularly for retailers. Retailers, or brick-and-mortar stores, have all been affected by the shift in foot traffic to couch-or-office traffic. This huge change has caused many retailers to scramble to adapt. Unfortunately, with the affordable prices of online shopping and convenience of shipping to home, some retail companies have already gone under or are struggling to survive the change.
Borders was a well-known former bookstore chain in the U.S. that didn’t survive the digital shopping era. Borders Books began in Ann Arbor, Michigan in 1971 and saw tremendous success because of its high-volume inventory and inventory software with an optimization system that was able to accurately predict top-selling titles. However, with the growth of online shopping, Borders was unable to adapt.
Ultimately, Borders’ downfall came from investing more money in CD and DVD inventory instead of investing more in online sales and adapting to the e-commerce shift. Borders also outsourced its online sales to Amazon, basically handing an expanding portion of its online business over to the titanic corporation. In addition, people used the bookstore to browse for books they wanted and subsequently bought them online at reduced prices. In the end, the losses Borders took caused it to cease operations in September of 2011.
Another very recent example is the household name Toys “R” Us, whose CEO, David Brandon, announced the liquidation and closing sales on March 23 of this year. According to the Toys “R” Us Twitter feed, the final day for liquidation sales was Friday, June 29th, after 70 years of fun and sweet childhood memories. In a New York Times article, Michael Corkery remarked that, like many brick-and-mortar stores, the company suffered from not being able to keep up with online sales from competitors.
Toys R Us Closing Sale Final Day of Shopping all remaining US store Locations close closing. #toysrusclosingsale #toysrus #babiesrus #toyrus pic.twitter.com/4xvb2pW5Ep
— ToysRUs (@ToysRUs) June 28, 2018
Additionally, in a Business Insider article, bankruptcy lawyer Corali Lopez Castro says, “Brick-and-mortar stores are just getting bludgeoned to death by e-commerce. I don’t think people will miss Toys “R” Us because everything you can get at Toys “R” Us, you can get online.” This is one of the most important reasons why online shopping is more appealing than brick-and-mortar shopping right now. Whatever is in store is also online and usually for a much lower price.
Sears is also lagging behind in sales, and some of that blame rests on the new era of digital shopping. Sears was hit hard by the e-commerce wave and is facing problems paying its rent and owing more money than it is making. In order to save itself from its growing debt, Sears has pinned its survival on scaling down its storefronts to save costs on rent and utilities.
For example, a location in Virginia was scaled down, allowing a Nordstrom Rack, REI, DSW Shoe store, and Fresh Market to open in the remaining spaces. The company also hopes to save money on inventory by filling a small section of the building with products rather than the entire store. With 300 Sears locations closed across the country last year, and the company racing to save the remaining 1,000 locations from closure, it’s hard to tell if these cost-cutting efforts will be enough to save the business.
Another major retailer, once considered “too big to fail” and Amazon’s greatest competitor, Barnes & Noble is struggling as well. Even its aggressive attempts to adapt to the e-commerce shift, including the launch of its own Nook e-reader and app store in 2009, have done little to help. Now that Amazon has opened a few brick-and-mortar bookstores called AmazonBooks, Barnes & Noble may be in even more trouble because of the rival company.
Barnes & Noble is in a critical place financially, which has resulted in numerous layoffs of cashiers, digital sales leads, booksellers, and even receiving managers in the holiday season of 2017—in fact, 1,800 full-time employees lost their jobs in February of this year because of the decrease in sales. Additionally, Barnes & Noble fired its CEO, Demos Parneros, who is the company’s fourth CEO in five years, this July.
If there is any upside (or downside, depending on how much one dislikes this retailer), Walmart is not down and out for the count. Walmart learned to successfully adapt to the boom in digital sales. As of 2017, the corporation saw a 63% increase in sales on Walmart.com, which is a welcomed payoff for the billions spent to make the website a success, including a $3 billion acquisition of e-commerce startup Jet.com.
Unlike Macy’s, JCPenney, Kohl’s, Ascena Retail Group, and other retailers, Walmart still continues to report success while the others have seen sales and stock prices plummet. In fact, as of February 2018, Walmart has been going toe to toe with Amazon in revenue, and the company made $500 billion in 2017, which was three times the sales of Amazon that year. Now, the two companies are racing to take the lead in retail.
Another positive offshoot of the boom in online sales is the creation of strictly online retailers. For instance, websites like Etsy have benefited significantly from the growth of online shopping. Started 13 years ago by Rob Kalin, Chris Maguire, and Haim Schoppik, Etsy is an online store for people to sell their handcrafted items, which can range from clothing to jewelry.
The shop was created to give artists a platform to sell their wares on their own terms and reach a larger audience than was possible on their own. Two years after its creation, the website made $26 million in sales and had 450,000 sellers registered on the site. Now, 13 years later, its revenue has only been on the rise, reaching over $400 million in sales with more than 50 million registered members.
Online shopping has undoubtedly altered the future of our economy in numerous negative ways—choking out beloved American brands like Toy’s “R” Us, Sears, and Barnes & Noble and changing the landscape of our shopping centers. However, online shopping is also creating consumer-friendly disruption that is focused on cost and convenience.
So, while many stores have been phased out in the wake of the digital commerce era, the remaining companies are striving to take the leading edge through integrated online and traditional retail offerings. Companies like Walmart and Amazon are employing a hybridization of techniques like maintaining a strong online and in-store presence while scaling down their storefronts and improving their inventory. Additionally, internet-only e-commerce companies like Etsy have an opportunity to pop up and fill in the void left behind by companies lost to the relentless inertia of innovation.
The future is murky for traditional retail storefronts as online shopping and e-commerce shows no signs of slowing down. While it’s hard to say how online shopping will continue to the evolve and change our economy, currently, downscaled and online-only stores appear to be the foreseeable future for retail shopping in America.
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