Thursday, July 12, 2012

How Amazon will destroy local retail

Disturbing news for retailers. Amazon is going to destroy you with next-day or even same-day delivery, says Slate. The internet retailer has given up trying to avoid state sales taxes, and is instead building massive warehouses right next to major cities.

It’s hard to overstate how thoroughly this move will shake up the retail industry. Same-day delivery has long been the holy grail of Internet retailers, something that dozens of startups have tried and failed to accomplish. (Remember But Amazon is investing billions to make next-day delivery standard, and same-day delivery an option for lots of customers. If it can pull that off, the company will permanently alter how we shop. To put it more bluntly: Physical retailers will be hosed.
Main Street retail employs millions of lower-skilled salespeople, so this could have a serious impact on employment more generally. As with most of these things, however, it will not be immediate, but cumulate over a period of years.

The process of retail consolidation has been going on for forty years, through Wal-Mart and big box stores. This could be a new leap in efficiency, though. We saw Amazon has invested in new technology to dramatically improve the efficiency of its warehouses too. It is safe to say an Amazon-dominated retail industry will employ a lot less people.

On the bright side, it may be a good thing if downtown retail rents fall, so that the retail that remains becomes quirky and individual and creative, rather than a soulless chain store scrambling to pay rents to some pension fund a thousand miles away.

Or maybe we'll get even more of the plague of banks opening storefronts and hollowed out city centers. There needs to be a deeper rethink of the health of cities.



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