Amazon’s Purchase of Whole Foods Validates Relevance of Brick and Mortar Retail Stores

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According to the Census Bureau of the Department of Commerce online retail sales (E-commerce sales) in the 3rd quarter of 2017 accounted for 9.1% of Total retail sales in the U.S. Additionally E-commerce sales increased 3.6% from the prior quarter (Q2 2017) AND had a 15% increase from the same quarter a year ago (Q3 2016). Compare that to a total retail sales increase of 1.1% and 4.3% respectively.

Does that mean the death of brick and mortar stores?

Not according to retail giants Target, Walmart, and yes, Amazon. Traditional retail brick and mortar stores will have a lot of work to do to meet the demands of modern shoppers however it seems that retail space real estate will remain at the heart of retailing for a long time. To continue to grow online platforms such as amazon must deal with high transportation costs that are incurred with free delivery offers and free returns.

According to hospitality and retail advising firm, IHL Group more new stores will open then close this year, especially from discount retailers such as T.J. Maxx and Marshalls.

• Target – they have opened and have plans to open over 130 smaller format retail stores by the end of 2019
• Walmart – they have slowed their expansion however continue to open smaller format stores and are leveraging their over 4,000 brick and mortar stores to support its E-commercial business. They are also working on giving their customers more in-store experiences.
• Amazon – Why would Amazon purchase Whole foods with over 460 stores? Maybe this validates the relevance of having brick and mortar stores.

Online retail sales still continue to have double digit year over year growth however at the end of the day consumers still like the convenience of walking into a store. While the stores maybe shrinking in size they won’t be going away anytime soon. If that were the case why would Amazon purchase Whole Foods?

 

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