What is the ‘Amazon Effect’ – and how does it Impact all Sectors?

When it comes to shopping, consumer trends towards e-commerce are having a huge impact on the retail sector. Consumer behaviours are shifting, which means many bricks-and-mortar stores are struggling to compete with the online shopping experience. The demise of large retail brands such as BHS signals to a future where most purchases will be made online.

However, the so called Amazon effect doesn’t just impact on the retail sector – it has wider implications on the jobs market for example, and the demand for commercial property. Amazon came onto the scene in 1994, but the Amazon effect refers to the wider shift in consumer behaviour towards online shopping and the result it has had on traditional commerce.

A focus on the shopping experience

The digital revolution has changed most areas of our lives, including how we shop. Even simple things like groceries can now be ordered online and delivered directly at home, and companies which don’t have to pay large overheads for retail space can pass on savings to customers. Now that ecommerce is cheaper and more convenient, what will bring customers back into the physical stores?

A personalised, unique shopping experience which integrates technology must now be the focus for bricks and mortar stores. Retail companies need to offer an exciting experience when supports its online offerings. The entertainment factor is also being explored, with many stores hiring a DJ or organising in-store events and fashion shows to get people through the door. Exceptional customer service will also go a long way – face to face communication is the one thing that online shopping is missing.

The Amazon effect on commercial property

With retail businesses having to adapt to consumer needs, the demand for commercial property for retail use has also declined. Companies are shifting with the trends, which means they are offering the majority of products online and reducing the high costs of keeping stores open. This means a shift in demand from leisure and retail properties to warehouses and industrial spaces, so products can be shipped directly to customers – retail is cutting out the middle man of the physical shop.

There has also been a rise in online-only retail brands and digital platforms, driving the demand for industrial and logistics properties. Storage is now the biggest factor for retail businesses, with many companies investing in warehouses and distribution centres rather than city centre-based properties for retail outlets. Brands may also require more office space to operate a customer service centre for online customers – so the Amazon effect really does have a knock-on effect on the commercial property market.