How Businesses are Surviving the Amazon Effect

Here's how businesses have found ways to survive and even thrive in the age of online shopping giants like Amazon.

Amazon Fulfilment Centre. Photograoh Geoffrey Robinson.

Browsing doesn’t appeal to Gayle Robinson in the least. The third-generation owner of downtown Victoria’s Robinson’s Outdoor Store would rather lace up her hiking books and trek through the real-life Amazon rainforest then return home to tell prospective adventurers all about it in her store.

“We’re not just an outdoor store selling stuff, we’re gearing people up for their experience,” Robinson says shortly before leaving for a trek to Bhutan this fall.

That experiential connection is hard to find online, and it’s a big part of a three-point strategy — customer service, knowledge and value — that Robinson uses to stay alive and thrive with a brick-and-mortar store in the face of competition from online retailers like Amazon.

In fact, Robinson’s strategy has proved so successful, the BC Sports Rep Association invited her to talk about how to succeed in the online age.

“One of the secrets to our success is [knowing] you can’t be everything to everyone,” she says. “So decide who you are and do it really well.”

And what she and her staff of about a dozen adventurers do really well is share their firsthand experience of locales such as Peru’s Inca Trail and the Yukon’s Kluane National Park at monthly in-store presentations.

“Our staff are hired on how much trekking and travel they’ve done — and that’s so they can gear you up because they’re passionate about it,” says Robinson, whose grandfather founded the store in 1929 as a bicycle shop. The store has since reinvented itself a few times. Now a local hub for hiking, adventure travel and fly fishing, it continues to reinvent in the age of online shopping.

A Threat, But How Big?

While online shopping has grown rapidly in recent years, it isn’t quite the across-the-board business killer everyone talks about. A 2018 eMarketer study gave Canadian e-commerce a 7.5 per cent share in 2017, projected to rise to 9.0 per cent this year and to 13.7 per cent in 2021. Flipped around, more than nine out of 10 Canadian retail dollars are still spent in the real world.

How much bigger a slice of the retail piece e-commerce will consume is anyone’s guess. At the extreme is the fear that it will lead to a dystopia where people order everything online for home delivery by autonomous vehicles or aerial drones. The website reported this September on a supposed phenomenon of young millennial women who while away the hours in bed, ordering everything they need online.

Innovating Amidst Disruption

It probably does nothing to soothe brick-and-mortar business to know that Amazon founder Jeff Bezos is now the world’s wealthiest person. Bezos incorporated Amazon in July 1994 as an online bookseller. A year later, he sold Amazon’s first book, reportedly out of his garage. From that first sale, Amazon has grown to become only the second company to achieve a valuation of US$1 trillion.

Nowhere has Amazon had a greater impact than in its hometown. In 2017, the company occupied 19 per cent of the city’s prime office space, the Seattle Times reported. Since that report, Amazon has also taken over the top six floors of Seattle’s downtown Macy’s department store, which is no small irony given how worried retailers are about Amazon.

“The value of Amazon comes from the economies of scale, and we don’t see that only with Amazon, but there are other online sellers that have similar models,” said Dr. Pascal Courty, an economics professor at the University of Victoria.

Dr. Courty recently co-authored a paper on how online retailers use scarcity and pressure tactics to induce online shoppers to buy products. They differ from traditional pressure tactics in that “they can target these messages to each consumer every time,” he says.

“They know a lot more about you and your responsiveness, given past behaviour or whatever information they can acquire online.”

As for pressures online retailers are exerting on the business world, Dr. Courty notes that “retail has always been exposed to revolution,” citing the examples of IKEA, shopping malls and the new business models of Walmart and Costco.

He says brick-and-mortar businesses will have to reinvent themselves “to add value and create some kind of experience that they can monetize,” just as they did in the 1970s and 1980s when shopping malls threatened “high street” retail.

“It’s not that shopping malls killed high street,” Dr. Courty says. “But high street had to be a different type of destination.”

As the CEO of VIATEC — the Victoria Innovation, Advanced Technology & Entrepreneurship Council — Dan Gunn knows a lot about the region’s $5 billion tech sector, although he admits he’s not a retail expert.

“I think the retail market is in transition,” Gunn says. “More people are finding it more convenient to buy certain things online, especially heavily commoditized and known things. So that presumably is having an impact. The other side of that is it does allow entrepreneurs to more easily reach a broader market.”

Like most everyone interviewed for this article, Gunn likes to shop in the real world and online. But when he shops in a brick-and-mortar store, he often uses his smartphone to access its website, which in the case of Home Depot, for example, can point him to the exact aisle to find a product he is seeking.

“I still think there’s opportunities for the boutique individual local experience, and I think there always will be,” Gunn says. “I don’t think e-commerce has peaked and I don’t think that’s a paradox to say those two things at once.”

Turning the Tables

The arrival of the online giants like Amazon has created massive disruption, but it’s also sparking innovation as more traditional companies figure out how to deal with the digital commerce.

In retail, the age of online shopping has led to some additions to the sector’s glossary. Take “showrooming,” a practice where shoppers check out goods at a store before heading home to buy those items online. It’s been blamed, at least partly, for the demise of Sears Canada.

The practice used to really frustrate the staff at Victoria’s Dodd’s Furniture, says marketing manager Jude Brown. “We are over it, so to speak,” he says, while adding, “Let’s be clear: 100 per cent we feel it.”

Nowadays, Dodd’s regards showrooming as an opportunity to engage with potential customers. “That’s when we can actually talk to them about what makes us different, which is being local, employing local, investing in local, [and selling] Canadian furniture,” Brown says.

Sometimes, though, even that isn’t enough. Brown often visits Dodd’s two other stores, in Nanaimo and Campbell River. At the latter, he recently ran into a couple from the north end of Vancouver Island who told him they shop on Wayfair only because Dodd’s doesn’t deliver that far north.

“So definitely in places that we don’t serve logistically, we are 100 per cent losing out there,” Brown says.

A major threat, he adds, is from big furniture retailers like Leon’s and The Brick, which already offer online shopping, so Dodd’s is planning to launch its own e-commerce site at an opportune moment, likely during the February lull.

“We’re just trying not to make a big mistake that would hurt a lot more for us than a similar size mistake for Amazon or Canadian Tire,” Brown says. Until the e-com site launches, Dodd’s has increased its online accessibility by adding a chat function that allows people to text in their questions.

“It was up in five minutes, and within hours of that being on, we had a lead that closed,” Brown says. “It more than paid for the cost of this program.”

While Dodd’s is savvy to the need for online presence, Catherine Holt, CEO of the Victoria Chamber of Commerce, notes that too many businesses still don’t even have a website or other digital presence.

“A 2015 survey by GoDaddy found that only 41 per cent of small businesses had a website, with 16 per cent planning to build one soon,” says Holt. “With the tools available today, it’s vital for every business to be online and find their niche to better compete against international players.”

Personalizing in an Impersonal Age

At the two Dig This garden store franchises in the Capital Region, staff probably wouldn’t even realize if customers were “showrooming,” says Elizabeth Cull, president of the franchisor company. What they have noticed is reverse showrooming, known as “webrooming.”

Every spring, customers come to the Dig This store in Broadmead with lists of seeds they’ve collected from online catalogues “and they’ve said, ‘Would you please order these for us,’” Cull says with a laugh.

While some are looking to avoid paying shipping charges, many are looking for quick answers and expert recommendations from Dig This staff. “And the same thing goes for people who are coming in looking for various hand tools,” Cull says.

For example, a shopper seeking a hori hori Japanese gardening knife could easily buy one on Amazon. But if that same shopper were looking for a gift for an aunt, Amazon would be hard-pressed to suggest a hori hori.

“Yeah, the millennials will order stuff online, but then they’re knowledge-hungry, and you can’t learn everything by Googling it,” says Cull.

New Opportunities

Not all sectors are as stressed as retail about the rise of the online world. Case in point: Many courier companies have watched their businesses expand with deliveries of products consumers purchase online. It’s a contrast to the early days of the Internet when the biggest fear for courier firms was they would no longer be needed to deliver documents. While legal documents now transmit electronically, couriers have more than picked up the slack by delivering online purchases.

Among Victoria companies that have benefited from that is Maximum Express Courier, Freight & Logistics. Maximum doesn’t contract with Amazon directly but handles overflow from an Amazon contractor.

“Usually during Black Friday [and] Christmas time it is extremely busy,” says co-owner Al Hasham. “We can’t even keep up.”

“I have seen our business grow through every year because of the online ordering system,” adds Hasham, who founded Maximum Express 15 years ago and previously owned DanFoss Couriers on Vancouver Island in the pre-Internet days.

Now the buzzing threats are drones, which Amazon has experimented with, and driverless vehicles. But those are far off and don’t really worry Hasham in any case.

“It’s looking good for me because I can’t see them finding a way to zap a box or a package or a skid any time soon,” says Hasham.

Despite the rise of home deliveries from online businesses, the Capital Regional District’s 2034 regional transportation plan makes no reference to e-commerce or online shopping. The transportation section of the City of Victoria’s official community plan (OCP) is equally silent, as is Saanich’s June 2017 Moving Saanich Forward Active Transportation Plan.

Evan Peterson of Barefoot Planning in Saanich sees UPS trucks on his street every day. But he’s not sure at this point if urban planners need to take them into account. Had Amazon decided to locate its second headquarters in Greater Victoria, as the City of Langford had proposed, that would have made an impact. But so would any tech giant bringing thousands of workers to the city. However, even that might be offset by the types of workers these industries attract. They prefer to live in walkable places, something that would tend to reduce traffic.*

“I think the most practical trend to look at is decreased car ownership from younger generations,” says Peterson, who at age 35 is on the leading edge of the millennials and can relate to the appeal of online shopping.*

One issue is providing adequate parking for delivery vehicles is an often overlooked concern, says Holt. “We have done a good job of making our cities accessible to active transportation options, but we also need to make sure delivery drivers and couriers can directly access their customers,” Holt says.

“The growth of e-commerce has amplified this issue and I’m not sure city planners have it on their radar.”

Less of a worry is that a flood of delivery vehicles will clog the roads. That’s not happening, says Victoria transportation policy analyst Todd Litman, because more delivery vehicles means fewer cars making short trips to the store.

He says it’s more efficient to have one truck deliver hundreds of packages than “the common practice” of having hundreds of drivers in individual vehicles make separate trips to various stores to buy one item each. He even cites a study that found 30 to 40 per cent of the embodied energy in a jar of yogurt is from transportation. And most of that energy is from the retail buyer’s trip to and from the store.

Wired magazine ran a photo gallery on its website this September of abandoned shopping malls and box stores “gutted by e-commerce” in the U.S. southwest. But U.S. Census figures show that bricks-and-mortar retailers still generate 90.7% of all retail sales. 

Here in Victoria, the Mayfair Shopping Centre has undergone a $72-million expansion. Mayfair is only able to make that investment because it already owns the land, says Peterson of Barefoot Planning.

Similarly, Gayle Robinson credits the survival of her store during the lean 1990s to her grandfather’s decision to buy the present building in 1946. Today, she is in the midst of a five-year succession plan to turn the business over to a new generation — her daughter Erin Boggs and 22-year employee Matt King, who is the first non-family owner of the company. Robinson is confident they’ll put on their hiking boots and guide the store to its 100th anniversary in 2029 no matter what obstacles the Internet giants put in their path.

This article is from the December/January 2019 issue of Douglas.

Editor’s Note: Please note that the full name and business name of Evan Peterson of Barefoot Planning in Saanich were inadvertently omitted from the print version of Douglas. This version includes the missing section, marked by asterisks above.