Remember Borders? What about Circuit City, Tower Records, or Musicland? Those stores were all big chains back in 1995, when Amazon debuted. Now they’re all gone, due in part to pressure from the online retailer that’s upended the American retail landscape.
Jeff Bezos’ company has been blamed for killing off once-stalwart retail chains, forever changing the way we read and shop for books, and squashing small businesses. And to hear some tell it, the path to total Amazon domination is just beginning.
With all the talk of the death of brick-and-mortar retailers, it’s easy to forget that online purchases at stores like Amazon make up just 8% of total retail sales in the United States. For many products, including groceries, clothing, health and beauty products, and appliances, people still prefer to buy in store rather than online, according to a 2016 survey by PricewaterhouseCoopers.
That’s not to say that the convenience and low prices offered by outlets like Amazon aren’t a threat to traditional stores. And it’s true that Amazon did help to put companies like Borders or Circuit City out of business, though competition from the online retailer certainly wasn’t the only reason they tanked.
“No business goes out of business due to one competitor. It’s usually due to a combination of factors,” Larry Chiagouris, a professor of marketing at Pace University in New York, told the San Francisco Chronicle. “But the Amazon factor became a major factor in those businesses gradually going out of business, from bookstores to record stores to electronics stores. They are a category killer.”
If these 10 businesses can’t figure out a solution, fast, they might be the next stores destroyed by Amazon.
Could things get worse at Macy’s? Sales are down at the mall chain, and the retailer is shuttering stores and laying people off across the country. Amazon will over take the department store chain as the biggest online apparel retailer in the country sometime in 2017. Pressure from the online behemoth is partly to blame for the store’s struggles, according to analysts, though some of the chain’s problems are of its own making. Other department stores, such as Kohl’s and Nordstrom, aren’t faring well either.
“The most exposed to e-commerce are the department stores: They’re carrying the same merchandise, and the in-store experience isn’t spectacular. So they’re losing foot traffic, and they’re discounting heavily,” Bridget Weishaar, an analyst at Morningstar Investment Service, told Bloomberg.
Are you ready to get office supplies or food from Amazon …
2. Office Depot
When Staples and Office Depot announced a planned merger in 2015, one reason they gave for joining forces was to fight off competition from Amazon, especially when it came to supplying big businesses with office supplies. But a federal judge said the merger would actually reduce choice for companies looking to buy printer toner, paper, and pens because Amazon Business has barely gotten off the ground. The fact that the courts didn’t see Amazon as a big threat to the B2B office supply business could spell trouble for Office Depot, albeit indirectly. Now that the merger has fallen through, Staples might focus on eliminating its smaller brick-and-mortar rival, TheStreet reported. Inefficient delivery and a less-streamlined shopping experience are also hurting the chain, some have argued.
The way you buy food is changing …
3. Grocery stores
Amazon may only control 1% of the grocery business in the U.S., but it’s poised to take a much bigger piece of the pie, threatening both small and large supermarket chains in the process. Amazon is already No. 1 online grocery retailer in the country, Investor’s Business Daily reported, and it’s starting to expand its Amazon Fresh offering to more cities. The company’s offered grocery delivery for years, but it seems newly committed to making the service work, even though it presents logistical challenges. If enough people get on board with buying their canned goods, fresh produce, and meat online, it could spell big trouble for traditional supermarkets. Amazon also recently announced its grocery store format called Amazon Go, which aims to eliminate waiting in line to checkout, though the grand opening of the first store in Seattle has been delayed because of technical glitches.
Even the biggest titans are struggling …
4. Best Buy
Amazon is the second-largest consumer electronics retailer in the country after Best Buy, and it’s gunning for the top spot, according to Quartz. In June 2016, Amazon surpassed Wal-Mart in electronics sales, putting it in second place. At the same time, Best Buy’s market share is shrinking. Sales of TVs, headphones, laptops, and other electronic gadgets at Amazon grew 28% in 2015, compared to single-digit growth at Apple and Best Buy. But the brick-and-mortar electronics store is trying to fend off its biggest competitor by improving its e-commerce offerings, and it seems to be having some success, so the end may not be nigh for this chain.
Best Buy might be able to fight off the Amazon assault, but other retailers haven’t been so lucky. Indianapolis-based HHGregg is the latest casualty. In early April 2017, the electronics and appliances chain announced it was shutting down completely after more than six decades in business. An unsuccessful attempt at a national expansion after the company went public in 2007 was a big reason for the HHGregg’s failure, but competition from Amazon was also a factor, the Indianapolis Business Journal reported.
“We didn’t adapt to that change fast enough,” CEO Bob Riesbeck told the paper earlier in 2017. “And now we are playing catch-up.” Apparently, the last-ditch attempts at a turnaround failed.
6. Victoria’s Secret
Unflattering fitting room lights, awkward interactions with saleswomen, and high prices all come together to make bra shopping an unpleasant experience for many women. Amazon is betting it can turn that dissatisfaction into big business as it attempts to lure women away from stores like Victoria’s Secret by offering bargain-priced $10 bras. As it did in other areas, Amazon is likely sacrificing profit in an effort to convince women to shop online, Marketwatch reported. The online retailers might also be trying to cut in on Target and Wal-Mart’s business, which already sell low-priced lingerie.
Selling intimate apparel online is a challenge because it’s hard to get fit right. But the time might be right for Amazon to take on Victoria’s Secret, which is responsible for two-thirds of all lingerie sold in the U.S. Sales are down, and a trend toward a more natural look means fewer women are aspiring to look like one of the chain’s famous Angels. Plus, refusing to sell larger-size bras means many women can’t shop at the store, and they might already be turning to Amazon to find the garments they want.
7. Barnes & Noble
The bookstore industry was the first to feel the effects of the Amazon revolution, as big chains like Borders fell once people realized they could buy the same titles online for less. Barnes & Noble was one of the few big national bookstore chains that managed to hang on, but its days might be numbered.
Holiday sales in 2016 were disappointing, in part because the adult coloring book craze faded, but also due to ongoing pressure from Amazon. Things aren’t totally dire because the chain has a decent amount of cash and little debt, as Barron’s reported. But with Amazon opening up physical bookstores around the country (including on Barnes & Noble’s home turf of New York), the situation could sour quickly.
Discount shoe store Payless filed for bankruptcy in April 2017. Decreased foot traffic at America’s malls, caused in part by a growing preference for online shopping, is to blame, CNN Money reported. Four hundred U.S. stores will close. Low prices aside, stores like Payless are losing business to online retailers that offer a better array of products and don’t require an annoying trip to the mall.
“The model of online retailers is winning out. They are more competitive on pricing, they have better selection, and their convenience level is quite high,” Christian Magoon, CEO of Amplify ETFs, which has a fund tracking online-focused retailers, told CNN Money.
Need a quirky handmade item for your best friend’s birthday? One of the thousands of artisans selling on Etsy would be happy to supply it for you. The craft marketplace, which was founded in 2005, has managed to marry the convenience of online shopping with the desire to buy unique goods and support small businesses.
Naturally, Amazon decided to get in on the action. It launched Amazon Handmade in 2015, and though the selection isn’t nearly as broad as what you’ll find on Etsy, it can get items to shoppers faster, Fortune explained. But the creative types who sell on Etsy haven’t jumped ship to Amazon just yet, suggesting that Amazon is going to find it difficult to eclipse its rival.
Department stores aren’t the only mall chains struggling with weak sales. GameStop is also having trouble getting buyers to visit its locations. The company plans to close roughly 150 stores because of a drop in global sales, which fell 13.6% from 2016 to 2017. Competition from Best Buy, Wal-Mart, and — you guessed it — Amazon is to blame, according to USA Today. The fact that people are also buying fewer physical games doesn’t help either.
“Not only are they getting hammered by the online retailers and big box that have an inherent cost advantage through no retail real estate footprint or a much larger footprint that they can leverage with other products, but the movement to mobile-based games is creeping up mightily,” Larry Perkins, CEO and founder of SierraConstellation Partners, told USA Today.