The Death of Physical

Nothing new here… just my observations on why so many brick-and-mortar stores are dying a slow death.

I went to the closings of nearby Circuit City and Tower Superstore stores recently.  Even with the 20% off "We’re Closing" discount, their copy of the Wall-E three disc special edition was $10 more than Amazon’s everyday price.

And the DVDs that usually go for $15 each — Amazon is still $2 cheaper on all of ’em after Tower’s Final Sale price.

No wonder they’re closing.

This reminded me of some very important reasons why physical is dying.  First, digitally you can almost always find it cheaper somewhere else, especially if you have your internet-enabled phone in your pocket.

Second, no brick-and-mortar store will undersell every internet store.  Amazon can sell any DVD they want cheaper than any four-walled retailer and still pay 2 to 15% per item in their affiliate program.

Third, physical will be dead soon enough.  Steam, Valve’s digital game publishing platform, noted that every decrease in price created a huge increase in sales.  No physical store could match digital’s everyday price much less that price cut.

After the revolution, you’ll be able to count the industries that require "physical" on your hands:

  • clothes
  • food
  • transportation
  • housing
  • utilities

Ok, you can count ’em on one hand, leaving your other hand free to… surf the web.

Circuit City closed 567 stores, putting 34,000 out of work.  Tower closed 6 stores with 1,000 employees.  Blockbuster is trading for less than $1.

Amazon made $1.3 billion in profit last quarter.  Netflix made $126 million.

Who will you bet on?

One Reply to “The Death of Physical”

  1. I had the same “no wonder they’re closing” feeling at the Virgin Megastore liquidation in San Francisco, but apparently early liquidation prices are strategically set to be *closer* to MSRP than non-liquidation prices, according to the latest This American Life:
    http://www.thisamericanlife.org/Radio_Episode.aspx?episode=377

    So, price might be playing into brick-and-mortar death (especially for media) but perhaps the liquidation experience shouldn’t be too prominent a factor.

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