Amazon is taking over the internet sales world in the US. Don’t believe me? Just ask your friends and relatives where they shop online. I’ll bet a good portion of them will at least mention Amazon.
Estimates are that Amazon will have a stranglehold on the internet sales market within the next 5 to 10 years. To be clear, they estimate that a majority of all internet sales will go through Amazon within 5 years.
Other retailers are suffering because of Amazon’s takeover. However, there are a few that should survive when the dust settles. Maybe they’re doing something differently or maybe they sell something that people don’t want to buy online. Whatever the reason is here is my list of the top 3 retailers that can make it through and thrive.
1- Best Buy (BBY)
It wasn’t too long ago that Circuit City went under. It used to be that when you wanted to buy some new electronics you would go to either Circuit City or Best Buy to check out what was available.
So how is Best Buy going to make it when Circuit City failed?
They’ve made some changes since they got their new CEO a few years ago. With a revamped website in the works they started price matching competitors on everything. Whether it was Amazon or any other brick and mortar competitor Best Buy wasn’t going to be beat on price anymore.
With their renewed site they were starting to click with some customers. My personal experience with them recently was great. I was in the market for a new washer and dryer. I did some research and found a pair that I liked because of reviews and style. Then I searched everywhere for the best price. Where did I find it? At Best Buy.
Finding the best price isn’t everything that’s keeping them afloat though. With a purchase as heavy as a washer and dryer I was anxious to see how well they did with delivery. To my surprise they did better than I could have ever expected.
The delivery men were very professional. When I spoke to them I found out that Best Buy, unlike Amazon, was doing their deliveries in house. What that means is that the people delivering the merchandise actually worked for Best Buy. They weren’t 3rd party delivery vendors like you would get with Amazon. This creates a powerful and memorable experience if it’s done right.
Best Buy is also banking on the fact that people still like to try some things before they buy them. That’s definitely true for me with some things like TVs where I want to see the picture in person and mess with it a bit before I make the purchase. Best Buy is catering to people like me by putting out more displays for you to try out before you buy.
2- Home Depot (HD)
We all know Home Depot is in the home improvement industry. They sell all sorts of things you can use to renovate your home. Amazon does sell a bunch of the same stuff that Home Depot sell, tools and lawn equipment for example. However Amazon stay away from the heavier items that are harder to ship.
One day Amazon might go after some of the items they don’t yet sell, lumber for instance. However, for now, Home Depot is the king for the heavier home improvement items.
People also like to see things in person when they’re trying to find new paint for a room or when they need new carpet. It’s unlikely that I’ll be buying any kitchen countertops without seeing them in person first for example. With Home Depot you can do that. I can go check out the displays and actually touch and feel what I’m buying.
Home Depot also gets a good chunk of their business from pro contractors looking to run their businesses. These businesses need some things immediately and they can walk into a Home Depot and make that happen.
Home Depot isn’t all about the stuff that Amazon can’t do though. Their site is making some headway in the fight with Amazon for e-commerce market share. You can find all sorts of items for sale with free shipping to a store for pick up. Home Depot understands that Amazon may one day start to fight for some of the market share of the those products they don’t sell yet today. In order to fight off some of that they need to be ready with a good online presence.
3- Costco (COST)
Most of the people going to Costco to shop are looking for groceries. Amazon hasn’t quite figured out how to tap into the grocery market. It’s not easy to deliver the perishable items. There’s an added cost to get things to your come in top shape when it needs to be refrigerated or frozen.
Not only that, but produce also bruises in shipment. When batches arrive at Costco they are picking out the bad ones and throwing them away. You can’t quite do that with an Amazon shipment of apples.
Amazon isn’t sitting idly by when it comes to groceries though. They do have Amazon Fresh in some parts of the country which is a service that delivers groceries to your door. It hasn’t quite taken off as of yet though. It seems that people may want to pick out the food that they get or maybe it will just take some time for people to accept this new way of getting groceries.
In any case, Costco has a strong and loyal subscriber base. About 90% of their members decide to renew every year. That’s a strong retention rate. My parents have been Costco members for decades and people like them will stay members for a long time to come I assume.
One of the ways that Costco lures people in is with lower gas prices at the pump. People go to fill up their car and then they go inside to fill up their cart. When you’re in a Costco you get to try different foods out too. They always have someone handing out samples of something in there. A lot of the time it’s just nice to try something new, but sometimes I’ll buy something that I like.
When it comes to price on food Costco has the edge on many items that it sells in bulk. That doesn’t mean that Amazon can’t lower their own prices and compete, but they’re going to have to figure out a way to keep costs down when you add the shipping. Only time will tell whether or not Amazon will succeed in the grocery business, but for now Costco is relatively safe.