Amazon (AMZN) and brick-and-mortar stores go head-to-head

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NEW YORK (AP) — This holiday season, it's Amazon vs. everyone else.

The online giant has attracted customers from big store chains like Walmart and Best Buy with low prices and convenient shipping. Now, stores are fighting back and going head-to-head with Amazon as the contest for customers heats up during the busiest shopping period of the year.

Stores are doing things like matching the lower prices on Amazon.com and offering the same discounts in stores as on their web sites. For its part, Amazon is giving customers the option to pick up items at physical locations and adding Sunday delivery.

The two sides are dueling over shoppers like Jessica Danielle, a speechwriter who plans to do the bulk of her Christmas shopping on Amazon. "All the time spent going to brick-and-mortar stores, is it worth my time?" said Danielle, 31, who lives in Washington, D.C. "I don't think so."

There's a lot at stake for both sides. Amazon has built a following, but wants to grow its business globally. Meanwhile, brick-and-mortar retailers struggle to keep shoppers from using their stores as showrooms to test out and try on items before buying them cheaper on Amazon.

The holiday season ups the ante. Both online and brick-and-mortar retailers can make up to 40 percent of their annual revenue in November and December. And this year, they're competing for the growing number of shoppers who're as comfortable buying online as in stores.

Holiday sales are expected to rise 3.9 percent to $602.1 billion, according to The National Retail Federation. Of that, about $78.7 billion is expected to be online, up 15 percent from last year, according to Forrester Research.

Here's how the fight is playing out:

PRICE WAR

One of Amazon's biggest advantages is its low prices. It can charge less for everything from TVs to T-shirts because it doesn't have the high costs of running physical locations.

Last year, some retailers offered to match the lower prices that customers find on websites like Amazon during the holiday season. And this year, more have made this a policy. Best Buy even is offering to refund the difference if a customer finds a lower price after they purchase something up until Christmas Eve. The strategy could eat into profits, but retailers hope sales will increase.

Staples is among retailers also offering the same discounts online and in stores during big shopping days like the day after Thanksgiving known also Black Friday. "We want customers to be able to shop however they want and whenever they want," said Alison Corcoran, Staples senior vice president.

SPEEDY DELIVERY

Stores had long seen their physical locations as an albatross, but now, a they're using them to their advantage.

"Everybody was telling me ... 'These stores, that's really a liability that you have,'" said Hubert Joly, Best Buy's CEO. "Absolutely not. It's an asset that you have 1,000 warehouses strategically located close to the customers."

Best Buy is among the retailers using their locations as distribution hubs from which they can ship goods that customers' order directly to their homes. Wal-Mart, for one, said items ordered online and shipped from stores usually are delivered in two days or less — quicker than having items shipped from warehouses across the country.

But Amazon.com Inc. is widening its distribution network to offer speedier delivery, too. Amazon added 8 million square feet of distribution centers and hired 70,000 people to work in them. It also added 1,382 robots to its line to help get packages out the door. And it partnered with the U.S. Post Office to deliver some packages on Sunday.

"This year we're able to be faster and have more in-stock items," said Amazon spokeswoman Julie Law.

BACK IN STORES

Other retailers are trying to get shoppers into stores. Gap Inc. has expanded its service that allows shoppers to reserve items online, and then pay and pick them up within 24 hours at many of its Banana Republic and Gap stores.

And options that allow customers to order and pay online and then pick items up at stores are popular. That led Renada Skannal, 27, to go to Walmart.com to order protective gear that her nephew could wear when riding a bike her mother is buying him as a Christmas gift. Her mother picked it up at a store to save time and shipping costs. "I want to make things easier for me," said Skannal, who lives in Jackson, Miss.

At the same time, Amazon has started offering pickups at physical locations. Last year, it introduced lockers in 10 cities for customers to pick up items in stores like 7-Eleven and Rite Aid. But some competitors, including Staples and RadioShack, which initially welcomed the lockers, have taken them out.

WHO WINS?

Ultimately, experts say the battle is over customer service. StellaService, which tracks customer service, found that between August and October the time to talk to a live agent on Amazon's customer service line was one minute, compared with two-plus minutes at Best Buy and six minutes at Staples.

"When it comes to customer support, Amazon ... sets the standard for everyone else," said Jordy Leiser, StellaService's CEO.

But brick-and-mortar retailers are catching up and in some cases, surpassing Amazon by working on their customer service. For instance, Amazon resolved the issue when a customer called 86 percent of the time between August and October, according to StellaService. Best Buy had a 97 percent success rate.

"Online retailers have put so much pressure on brick-and-mortar stores," said Marshal Cohen, chief retail analyst at market researcher The NPD Group. "Brick-and-mortar retailers are trying to make people feel like the store cares again.

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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