Memo to retailers: Don’t do business with Amazon

When I first got serious about working out, I would go to my local GNC to shop for various health supplements. Soon after, I discovered an online retailer that not only sold a much wider range of products than GNC did but also for much less.

Today, I lament the days and dollars squandered shopping at the “brick and mortar” GNC and pity those who still do.

But it’s not just health supplements I buy online. I buy books, video games and clothes as well. In-store visits can still be fun, but rarely do they result in a purchase. Why? Because in the back of my mind, I know that more often than not, I can find that very same product online and for much less.

 

 

And it’s not just me making the transition to exclusively online shopping. During the past holiday season, U.S. retailers received half the holiday foot traffic they experienced just three years ago. Half of the shoppers did not just suddenly up and disappear but instead finally made the transition to online shopping.

So how should retailers respond to this shift to online commerce and compete with online retailer conglomerates like Amazon?

Well, for starters, they probably shouldn’t be doing business with them, which is exactly what some smaller retailers are pondering.

These retailers are considering using Amazon to list their products. The listings on Amazon will redirect shoppers to the retailer’s online site. The use of Amazon as essentially an advertising agent would undoubtedly lead to increased online traffic for these retailers, but it would come at a cost.

How high of a cost? Well, Doctor Faustus sold his soul to the devil for supreme knowledge and power. In doing business with Amazon, these retailers would essentially be doing the same, minus the knowledge and power part.

Listing other retailers’ products on its site works both ways: just as the retailers benefit from having their products on Amazon, Amazon benefits by increasing its own appeal as an end-all online retailer. By increasing its appeal, Amazon also increases the attractiveness of its unique “Prime” membership, which will soon increase in price. More members at a higher cost would yield enormous dividends.

There’s also the “lab rat” factor to consider. By using Amazon as a listing agent, these retailers relinquish the listings themselves to Amazon, meaning that Amazon would control how the listing is designed and organized on its site. Amazon can use these listings as lab rats to experiment on what exactly goes into making the perfect online listing by playing with a range of factors — product placement, photos, descriptions and the like. Amazon could then use this information to enhance its own listings.

Lastly, there is the matter of fees that Amazon would collect for its troubles.

When all is said and done, the retailers would receive the increased traffic, but Amazon would receive increased traffic of its own, along with consumer data that may prove much more valuable. The fees it collects are just the icing on the cake.

Some might call this a win-win, but really it’s more of a win-huge win in favor of Amazon.

As far as adapting to the new online shopping era, retailers should focus on developing their own websites, disinvesting from their brick and mortar locations, and finding other avenues to increase traffic to said websites that don’t include Amazon.

Amazon is named after the world’s largest river, and the river may soon be much larger if any retailer is foolish enough to dive in.

Reach the columnist at jjmah@asu.edu or follow him on Twitter @jonathanmah