Virtual storefronts vs. brick-and-mortar

Summary:Gone are the days when you had to schlep to the department store to fill your shopping needs. Are things better now than they were before?

Shopping online is pervasive. Chances are, if you are on the internet you likely shop for goods online. It makes good sense; businesses always look for ways to reduce costs and increase their profit margin. Removing the middle man of a physical store can increase savings dramatically.

Prior to the commercial availability of the internet, online services such as CompuServe and America Online had online shopping capabilities. However, these services were limited and were not widely available to the public. You had to be a subsriber to the service.

Probably the most famous of all online stores, Amazon was launched in 1995. Originally it was intended to be an online competitor to the likes of Barnes & Noble and Borders. Later it expanded into nearly everything you could shop for, including groceries.

Amazon should be considered the de facto standard when it comes to online stores. They did everything right. They reinvested the billions of dollars generated from their IPO for expansion into other markets, even providing worldwide cloud services for web, server and storage hosting.

Amazon's example let to countless imitators. The more successful ones appear to be those that served a more narrow niche market, such as technology stores like Buy.com and NewEgg.

These days, brick-and-mortar companies recognize the value of maintaining an online presence. Some of the old school department stores may have taken longer to get their acts together, but they learned their lesson and now you can shop at Macy's and Bloomingdale's from the comfort of your own home.

Going back to Amazon, competing for the book sales market was a new battle. Until that point, everyone simply went to their local Barnes & Noble or Border's or Waldenbooks and browsed the stacks for the latest releases of books and periodicals. When Amazon came along, B&N recognized the potential right away, and built an online presence quickly before they were pushed aside by the Amazon juggernaut.

Borders was not so lucky. Their name brand was weaker in the consumers' minds, and they were late to the table when it came time to translating their physical presence to an online one. Recently, Borders filed for bankruptcy and it doesn't look like they will remain in business much longer. Still, they tried--which is much better than what other companies have done in similar situations.

In 1998, Netflix launched their online DVD rental service. They floundered in the beginning, and shopped the service around to the big players in video rentals such as Blockbuster. The Blockbuster site is currently down, and with good reason.

In 2000, Blockbuster had the opportunity to buy Netflix for a paltry $50 million. With considerable lack of foresight, they instead chose to ink a deal with Enron. I think we all know what happened to Enron, and anyone that did business with them.

The Netflix model of a subscription fee rather than individual rental, along with no late fees, resulted in a widespread shift from the storefront video rental to home video rental. You could queue up a whole bunch of movies, and when you sent a movie back, a new one would arrive within 2 days. Blockbuster scoffed at this, and chose to do business as usual.

When Blockbuster declared bankruptcy it came as no great surprise to anyone. They struggled to keep afloat while the video rental business changed around them. People could video streaming directly from Netflix over the internet immediately. Amazon is now providing a similar service to its customers.

Hubris.

These days, shopping online is nearly universal. We buy goods and services from around the globe, with considerably less trouble and effort. There is still a place for the physical store, though. Items like clothes, fresh produce, automobiles; these need to be seen and tried out before buying.

Then there's technology. Unless there's a device that I am already familiar with, I would prefer to try it out in a store first before buying blindly. It might look good in a picture on Amazon, but what happens when your package arrives and it turns out to be cheap plastic crap and the reviews were all fakes posted by the manufacturer?

Caveat emptor: "Let the buyer beware." Do your research first, try stuff out, then go ahead and buy online. You'll get a better price and probably save money.

Update:

It appears that the outage on the Blockbuster website was temporary and it is now back online.

Topics: Banking, Amazon, Browser, Enterprise Software, Legal

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