Thursday, December 22, 2011

Amazon, Ethics and the Changing Retail Landscape recently launched a promotion where customers were encouraged to visit bricks and mortar bookstores, use Amazon's price check app to scan the bar code on books, then enter the price the book store was charging for the book. For doing this the customer was rewarded with a 5 percent credit on purchases. The promotion was designed to point out to consumers that books are cheaper to buy on, and provide with valuable price comparison data.

There has been some interesting discussion online about the ethics of this practice. Bricks and mortar bookstores provide a great service, they allow people to browse books in a comfortable physical environment, their staff are knowledgable and can help customers find new books in more natural ways than sites like Amazon can, and they often run in-store activities such as having authors present and discuss their new books. But they can't compete with Amazon on price, and Amazon are doing everything they can to point this out to consumers, and actively encouraging consumers to browse in physical bookstores then order online from Amazon.

There's no doubt this is pushing the boundaries of what's ethical, but the reality is that this is one of the directions retail is heading. For commoditised products like books, it's challenging for retailers to compete on anything but price. Most of the value from the purchase is tied up in the book itself, with only a small amount of additional value provided by the shopping environment, staff and customer service.

Retailers need to understand this shift. Consumers doing price comparisons and ordering via a mobile phone is only going to get easier. If you're selling a commoditised product and aren't aiming for a lowest cost strategy it's important to start thinking through how you can differentiate your offer to avoid suffering from this trend. An alternative is to look to switch to selling products under your own brand, rather than selling commoditised products. Harder to do for a bookstore, but potentially simpler for other retailers. At Shoes of Prey and Sneaking Duck we avoid the commoditised product issue by selling products that aren't easily replicated and offering them under our own brand.

Cross-posted to Power Retail.

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