The Amazon Effect: Traditional Retailers Turn To Facebook Inc, Google Inc

Amazon (AMZN) has shaken up the retail sector and sending more and more retailers running with their proverbial tails between their legs and looking for ways to fight back. But the online retailer is doing more than just growing its business. Apparently it’s indirectly giving Facebook, Google and other online ad platforms a boost as well, thanks to traditional retailers’ attempts to combat it.

Hope for traditional retailers

Interestingly, as Amazon steals share from traditional brick-and-mortar retailers, it’s also planning to expand its own physical presence with even more stores in more cities. The company must see some value in having a brick-and-mortar presence, despite the fact that it got where it is now by selling products cheaply online, so all hope is not lost for traditional retailers just yet.

Wal-Mart managed to beat expectations for the first quarter at a time when department store chains like Macy’s are underperforming. This indicates that consumers continue to be cautious with their money at a time of economic uncertainty, although there are still enough shoppers who like putting their hands on items to touch and feel them before they buy.

So the fact that Amazon sees value in having physical stores means that brick-and-mortar stores do have an advantage in having physical stores – even if they haven’t yet figured out how to use this advantage. Wal-Mart must be doing something right though.

Facebook, Pinterest as weapons against Amazon

In a report dated May 18, Morgan Stanley analyst Brian Nowak and team highlighted how traditional retailers are trying to battle the Amazon effect through online advertising on Facebook, Google, Instagram and Pinterest. The big problem major retail chains are facing is that Amazon is growing in all categories, and there seems to be no end to CEO Jeff Bezos’ ambitions. The online retailer is now growing its share in apparel, and in response, some luxury brands like Calvin Klein and Tommy Hilfiger are moving their sales to a first-party basis online to combat falling sales in brick-and-mortar retail stores.