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Feb102012

Your local shops vs Amazon, a lost battle?


Let's look at behind the scenes at that small shop where a friendly old man sells coffee beans, and espresso cups, that shoe store owned by an Italian guy with funny jokes, how about that furniture store with always something cool in  display? Wait. Where did they go? Some of them are gone and some are about to give up. But why?

I hear some of you saying why do I care? I can buy (almost) everything from my smart-phone unless of course I can't wait for Amazon to ship it to me. Hey wait they now offer local same day delivery in most places or the worse case scenario there is a giant store not too far from me which has everything I can possibly need inside.

I'm not going get into explaining the benefits of an organic community not manipulated by a national corporation. Group of people living in the same neighborhood and supporting one another. I'm not even going to mention personal service and attention or forming trust worthy relationships between you and an individual store owner from your neighborhood. 

Instead I want to shed some light on the biggest and dirties secrets of large corporations that cause small shops in your neighborhood to edge towards giving up. I know understanding the tactics of a large and hungry corporation is way above my head but as a small business owner I can most certainly bring awareness on unfairness of massive challenges we face.

Let's start from the product. It does not matter what it is. Computer, coffee mug, watch, toilet paper, all the same. Amazon will pay less, in fact a lot less then a reseller a shop in your neighborhood will pay when purchasing it. Some manufacturers guarantee minimum sale price, some guarantee dealer net pricing across the board, and some guarantee availability. In the end when Amazon calls the manufacturer they simply settle for what Amazon wants. End result they can simply sell something cheaper then what we pay for it as resellers. What if we take returns form the customers? None of our distributors accept returns so we're stuck with an open box item but Amazon has different arrangements with the manufacturers in this area as well. Even though we're not aware of their return arrangements it's clear they can send stuff back to the manufacturer without a hitch. 

Let's talk about sales tax. Nothing much to say here. there are 2 states that I know of where sales tax does not exist but everywhere else in the country Amazon can save you close to 10% over local shops.

So they buy it for less, they can afford to sell it for less (even if the margin is $5 on an item, over millions of transactions it adds up), no sales tax, and now on top of it anyone can come to a local shop and scan a barcode of a product they want with their smart-phone and order it direct from Amazon. 

Many pod-casters and bloggers claim we the small business folks need to be more innovative instead of being anti-technology. I would love to have one of them sit in my chair for a day and see what they come up with. As a small business owner I too want the opportunity to give my clients the best service and the best prices but odds are against us. I would love to hear your thoughts on this. Should we wipe out all small business and have a few Amazons?

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