Amazon’s Effect on the Retail World

For years, consumers would head to a brick-and-mortar store to buy their clothing, groceries, electronics, and more. But as the age of online shopping slowly crept in, the idea of leaving your home to buy your goods slowly crept out. Now, there’s one major online retailer that people turn to for nearly anything they need – Amazon.

While Amazon began as a simple online bookstore back in 1994, it has since been steadily adding more and more categories to its repertoire, and each time it adds more products, more and more retail stores see their share of sales declines, bankruptcy, or even closed doors. Granted, the downturn of retail isn’t just because of Amazon – some businesses were already on a slippery slope before it got as big as it is. However, there are many businesses that simply can’t handle the competition.

Also known as “the Amazon effect,” there is a continuing evolution and disruption of the retail market and it’s not just happening to brick-and-mortar stores – it’s also happening to online stores. These days, more and more consumers are choosing Amazon over any other business. In fact, according to this study by Bloomberg, more than 50% of online shoppers turn to Amazon first in order to find a product.

“The Millennial Mindset”

In today’s world, consumers want their shopping experiences to be effortless and immediate and no group of consumers wants this experience more than millennials. In a recent study, Millennial Marketing found that millennials place a high value on six areas of brand performance: social circle, self, innovation, trust, purpose, and accessibility. When the organization applied these areas to major brands like Amazon, Netflix, Apple, Tom’s Shoes, and Uber, Amazon came out on top, proving the online giant to be at the “forefront of marketing innovation.”

By the Numbers

Right now, e-commerce represents 10% of all U.S. retail and while 10% doesn’t seem like much, it has had a big impact on retailers who rely on physical storefront sales. In the first six months of this year, more than 5,000 stores closed their doors – setting the record for the most store closings in a six-month period.

In fact, this year is slated to be the worst year for retailers to date and the effect has already been felt by a wide variety of industries; more than 345 retailers have filed for Chapter 11 bankruptcy in 2017, including:

  • RadioShack
  • Payless Shoes
  • rue21
  • Gymboree
  • The Limited
  • hhgregg
  • Wet Seal
  • Gordmans Shoes

More than 10 percent of U.S. retail space, or nearly 1 billion square feet, may need to be closed, converted to other uses, or renegotiated for lower rent in the next few years.

Only time will tell the fate of the retail world, but as of right now, the Amazon effect is pretty real.