Amazon vs. Bricks and Mortar Stores

Walk around Westwood Blvd. and you will see plenty of vacant commercial real estate.  Yes, the recession is the major cause but when a big store such as a Borders shuts down, it makes you wonder about how Internet competition affects stores who pay for urban rent.  Tax arbitrage is another issue here.  Amazon is launching an effort to keep from paying California sales tax.

How can "real stores" compete with virtual stores in this Internet age?  This is a crucial question for those who own commercial real estate.  The demand for leasing their space hinges on what are the expected profits from renting such physical space.    Richard Green and Kerry Vandell have written an important paper on this topic.

For example, consider the retail mall.  People will continue to go there to the food court to eat but in the near future will people go there to buy things? If a scanner can take all of your measurements and email them to an Amazon, would there be any reason to buy clothes at the mall when prices will be lower and the selection wider at an "Internet Store".   It is certainly the case that you may want to "try on an outfit" to see if it looks good on you but improvements in virtual reality may allow you to experience this at home without stepping into the store's changing room. 

Another reason to go to a "real store" would be if you want to try out a product before buying it.  Apple opened up many physical stores as display areas to highlight how cool their products are.  Will they keep these in the near future?  If not, who will rent this space?  Will more and more commercial urban real estate be converted to residential?

Comments

[Hendri Prastio Kurniawan]

wow It is certainly the case that you may want to "try on an outfit" to see if it looks good on you but improvements in virtual reality may allow you to experience this at home without stepping into the store's changing room.
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