Virtual storefronts vs. brick-and-mortar

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?

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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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  • Tech gadgets I'd always buy at a brick and mortar store

    - Medical instruments
    - Frequently counterfeited goods (Swiss made watches)
    - Midnight launches of game consoles (because it's fun)

    Everything else I just order online, after doing some research.
    Tech watcher
    • RE: Virtual storefronts vs. brick-and-mortar

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  • Depends...

    It depends. If you don't want to or can't wait for something to arrive from an online order than actual department stores aren't that bad. You are basically trading waiting time for higher prices. However, if you buy a nonworking item, then it is definitely easier to return it to the actual store than to a website one.
    statuskwo5
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  • RE: Virtual storefronts vs. brick-and-mortar

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  • RE: Virtual storefronts vs. brick-and-mortar

    I'd also point out that perishable items (ie, groceries) are generally best bought from brick & mortar. A good grocery store will generally seek out the closest source for their groceries, so you're usually getting a freshness that can't be matched by online stores.

    I've also found that brick & mortar have a social aspect that online doesn't have. Online checkout is a lonely process - but inside stores, regular customers will often chat with each other and the employees.

    "The Blockbuster site is currently down, and with good reason."

    What? It works here.

    Bankruptcy means you're out of money, not out of business.
    CobraA1
    • RE: Virtual storefronts vs. brick-and-mortar

      @CobraA1 At the time I wrote the article their site had a placeholder message. I will add an update to the article.

      Keep in mind that currently Blockbuster is unable to pay their creditors. The chapter 11 reorganization could easily be converted to a chapter 7 liquidation if their creditors begin suing for their money.

      http://online.wsj.com/article/SB10001424052748704506004576174600539308980.html

      I honestly believe that even if there is a last-minute reprieve and they manage to pay off their debtors, it will still be too late for them. Brick and mortar video rentals are a dinosaur business model, and their online service just doesn't compete with Netflix.
      Scott Raymond
  • Tax exempt shopping

    Surprised you missed this angle when it comes to online purchases. Sometimes that surcharge alone can be the deciding difference between B&M and virtual storefronts, and even between which of the available cyberstores you're going to drop your hard earned marbles on.

    Good example is Newegg. Hard to beat for retail computer parts anywhere, except here in Cali, where the obligatory tax penalty raises its ugly head. Yet the exemption of sales tax is exactly why they do so well everywhere else. Amazon has been moving steadily to fill their earlier pc parts void, and thus do well in places like Cal.

    Of course with online purchases you often have to pay for shipping, so in some ways the tax savings is balanced out. Still, that doesn't mean there isn't a great deal of opposition from B&M retailers and state governments in countless quarters.

    As it is, everyone loves a tax free bargain. Tax exempt shopping has become a prime lure of online retailers. So has the Internet's present (and future) status as a tax-free zone, if state and federal pickpockets have the last say.
    klumper
    • RE: Virtual storefronts vs. brick-and-mortar

      @klumper Good catch. I actually did remember it, and decided not to put it in there. There's a lot of online shopping services that do charge tax regardless of where you live now.
      Scott Raymond
      • Small sin of omission

        @Scott<br><br>You write pretty thorough articles, maybe consider that subject at some point as it affects so many. And you're right, tax related rules and "qualifiers" are constantly changing, and not always for the better. Makes the subject all the more worthy of exploring and attempting to bring up to current speed.<br><br>PS. You might also want to add a few trailer questions to your articles, to generate a little more feedback. Sometimes when your articles end it's like, "OK, now what?" No guarantees, but it couldn't hurt (and you deserve it).<br><br>Hey one other thing -- weren't you, like Jason and John <small>uniworld</small> Carroll, a fellow talkback member <small>><</small> part of the evolving zdnet mob <small>><</small> back when Dignan and Cooper had their own columns, and Farber ran the dials and - presumably - whips? ( he he ) [or was that Grober?]<br><br>[-dont bother replying if you feel I'm putting you on the spot-]
        klumper
      • RE: Virtual storefronts vs. brick-and-mortar

        @klumper Trailer questions are always good for encouraging discussion; I did some on the Sweet Spot article a few weeks ago.

        I'll consider an article about online shopping taxes. The way it looks right now there doesn't seem to be any rhyme or reason to explain why some stores charge tax while others do not. Some years back a rumor that an internet sales tax was forthcoming, and tends to recur every once in a while through chain emails.

        You're probably thinking of Grober. I've been a friend of Jason Perlow for years, but only became a ZDnet regular last year.
        Scott Raymond
    • RE: Virtual storefronts vs. brick-and-mortar

      @Scott<br><i>Trailer questions are always good for encouraging discussion; I did some on the Sweet Spot article a few weeks ago.</i><br><br>Ah ok. I know other bloggers here often use such hooks, at least part of the time. <br><br><i>The way it looks right now there doesn't seem to be any rhyme or reason to explain why some stores charge tax while others do not.</i><br><br>I believe online merchants are required to collect applicable state sales taxes if those merchants (businesses) have a physical presence in the state from which the customer is making the purchase. Thus in Cali I'm obliged to cough up sales tax to Newegg since it's an LA area retailer, yet an Arizonan doesn't, with there being no Newegg retail facility or distribution center in that state. <br><br>Also explains why Amazon is popular in places like California, and why the "destination" states of Kansas, Kentucky, North Dakota, and Washington are subject to tax from them (most likely the physical locations of their distribution centers). All other states TMK are tax exempt from Amazon. The size of the business itself also matters, and I'm sure there's more to this pastel than just that.<br><br><i>I've been a friend of Jason Perlow for years, but only became a ZDnet regular last year.</i><br><br>Right. I wasn't sure if you also dabbled in the talkback threads themselves, not as a blogger or guest columnist, but as part of our lovable gallery of rogues. I could have sworn I saw Jason's moniker years ago, I know Carroll was present pre-MS, and thought your name somehow looked familiar too.<br><br>As for David Grober, nah he carries some sort of taser gun to keep Larry and his minions in line. He's otherwise harmless. < g >
      klumper
  • RE: Virtual storefronts vs. brick-and-mortar

    Um, Blockbuster also offered a subscription service, at least as far back as five years ago. For a while they even had what I thought was a cool advantage - if you returned the movie to a store instead of mailing it, you could get a free store rental as well as the next movie in your queue.
    aep528
    • RE: Virtual storefronts vs. brick-and-mortar

      @aep528 Yes, they do have that service. Unfortunately, by the time they implemented it, Netflix had already become the standard for that business model--and they had a 7 year head start. It didn't save Blockbuster.
      Scott Raymond
  • Give me Brick and Mortar any time!

    I do NOT purchase on line because of the security risks involved concerning credit card and identity theft, etc. (no matter how infinitesimal, ANY amount of those risks is way to much!) and more so because I want to hold something in my own hand and in certain circumstances even sample it or try it out before deciding to purchase or not. Shopping on line is way too impersonal. That said, I'm not above perusing on line catalogs and THEN going to the brick and mortar to actually purchase.
    btljooz
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