retail news in context, analysis with attitude

Salon.com has a piece about Amazon.com's business growth, and how it could end up hurting itself in the long run, suggesting that "by defeating its competitors, Amazon is choking off some of its own air supply."

Here's the logic:

"The problem is, by killing off stores, Amazon is making life difficult for the publishers who give them something to sell in the first place, and the retailer’s dominance could pose a threat to the long-term health of the industry. Amazon does deserve credit for reaching far-flung readers and expanding the e-book market. A person who lives a hundred miles from the nearest decent bookstore now has access to nearly any literature published in English, whether as an e-book or by home delivery. Other vendors can now offer this too, but Amazon is the best at it. On the whole, the company is outstanding at what it does — and that’s just the trouble.

"According to survey research by the Codex Group, roughly 60 percent of book sales — print and digital — now occur online. But buyers first discover their books online only about 17 percent of the time. Internet booksellers specifically, including Amazon, account for just 6 percent of discoveries ... The brick and mortar outlets that Amazon is imperiling play a huge role in driving book sales and fostering literary culture. Although beaten by the Internet in unit sales, physical stores outpace virtual ones by 3-to-1 in introducing books to buyers. Bookshelves sell books. In a trend that is driving the owner of your neighborhood independent to drink, customers are engaging in 'showrooming,' browsing in shops and then buying from Amazon to get a discount ... Never mind the ethics of showrooming — it’s self-defeating. You’re killing off a local business you like."
KC's View:
What this means, in a free market economy, is that somehow bricks-and-mortar stores have to find a way to convert interest into sales. And Amazon needs to find ways to create a greater sense of discovery on its site. There's no magic pill that will solve this competitive dilemma ... it is up to savvy business people to figure out to do what they do better. (And, by the way, the dilemma isn't just limited to books ... anyone who sells stuff that Amazon sells needs to take this issue very seriously.)