The simple dynamics of failing retail

The local retailer says, “I’m sitting here all day, with a limited selection and a paid staff, waiting for you to come and buy something I have in inventory. I’m paying rent, just waiting for you to come in, try things on and pay for them.”

The online retailer says, “I can use the same size staff to serve a town of a million, not a few thousand. I have a much bigger inventory, of course, but my rent and my staffing costs are tiny. And so what I sell you costs a lot less.”

The local retailer depended on two groups of people: Folks who needed or wanted the hands-on service, the ability to try things on and the chance to chat. And, people who didn’t demand those things but had no choice because there were no other options.

When online showed up, the second group defected. And with just the first group remaining, most local retailers are doomed.

The answer isn’t to figure out how to be as cheap as Amazon… you can’t. The answer is to figure out how to find the people (and the products and services they demand) so you can eagerly and comfortably charge a fair price.