Happy Bambino used to specialize in baby carriers. All kinds. Slings, wraps, backpacks. Now they don't carry them at all. Co-owner Alison Dodge says they simply couldn't compete with Amazon.
"I would say in the last two years we noticed things snowballing," says Dodge of the giant online retailer.
Dodge says her store at 4116 Monona Dr., which will turn 10 in November, maintains a base of "amazing, loyal" customers. But, increasingly, people would spend an hour trying on baby carriers with the help of an experienced salesperson only to "scan the barcodes in front of us," she says. Then they'd search online for the same items at a cheaper price.
Cash flow takes a real hit when enough former retail purchases start moving over to online buys, says Dodge. And that "affects your ability to keep an inventory that meets your customers' needs."
And customers these days want choice.
"There's just now this expectation that you can get any color, any size, any variation on a product you want," Dodge says. "There is just no way to keep that sort of selection."
Joe Golde found that more and more customers did not feel the need to test out merchandise at all -- even when shopping for beds and futons.
"It's mainly the convenience of being able to point and click," says Golde, who just closed Golde's Futon Warehouse after 16 years in the business. "Comfort becomes secondary to convenience."
Golde says he was at retirement age, and going up against "big box stores and the Internet" was getting old. "We always made money but decided it wasn't worth the effort anymore."
Other Madison store owners tell similar tales of competing with Internet retailers. The seemingly insatiable drive of Amazon founder Jeff Bezos, in particular, to supply -- and quickly deliver -- any and all consumables is transforming Main Street retail.
Local store owners acknowledge that online competition is here to stay and that their only choice is to adapt to the changing circumstances. Some are shifting gears, while others home in on their specialties.
Happy Bambino, for instance, is now focusing on its resource center, which offers classes and playgroups. Ward-Brodt Music Co., 2200 W. Beltline Highway, which has been in business since 1914, touts its expertise in fixing musical instruments and its inventory of instruments available to rent.
Says president Mick Faulhaber: "It's hard to repair things in cyberspace."
A competitive disadvantage
Just how big is Amazon?
According to Internet Retailer, an e-commerce research firm, the company pulled in $67.9 billion in online sales in 2013. That is more than the next nine largest U.S. e-retailers combined.
One reason for its meteoric growth, say critics, is that for years the company refused to collect sales tax. That was true in Wisconsin until Amazon announced plans last year to build a warehouse in Kenosha. The company started collecting sales tax from Wisconsin customers in November 2013.
In an email, Department of Revenue spokeswoman Nicole Anspach says the amount of sales tax Amazon collects and remits to the state of Wisconsin is confidential. But she says the department had previously estimated Amazon sales would generate about $30 million in sales tax revenue.
But not all online retailers collect sales taxes for Wisconsin customers. According to the Wisconsin Taxpayers Alliance, recent studies and estimates suggest that the tax loss for the Badger State due to e-commerce is about $100 million. A University of Tennessee study had previously estimated the loss as high as $140 million in 2012.
Anspach says the Department of Revenue estimates that if Congress passes the Marketplace Fairness Act, the state would collect an additional $71.7 million per year in sales tax revenue. That includes all online sales and other "remote" sales, including mail order and catalog sales, says Anspach.
Alice O'Connor, who lobbies for the Wisconsin Retail Merchants Association, says the current structure is unfair.
"All retailers who collect sales tax are at a competitive disadvantage from those online retailers who do not charge sales tax," says O'Connor. "The loss in sales tax revenue is a big number."
And it has a ripple effect. "If you're not making money, you're not adding jobs, not adding to the infrastructure of stores, not adding product lines," she says. "It's just not right."
O'Connor would get no argument from Sandi Torkildson, the longtime owner of A Room of One's Own, an independent bookstore at 315 W. Gorham St.
"The biggest problem as a retailer is the idea that it's not a level playing field," says Torkildson.
She says many customers simply don't realize the effect of online shopping on local shop owners and state coffers.
"It impacts all the things we want our government to do for us," she says.
Torkildson, like Dodge at Happy Bambino and Faulhaber at Ward-Brodt, has become familiar with the phenomenon of "showrooming," where customers use local shops to touch and see products but make their purchases online.
Torkildson says an older woman recently came into the store looking for a particular book. Torkildson even found a large-print version in stock. With book in hand, the customer looked at the price and asked, "Well, do you think I could get that cheaper on Amazon?"
Torkildson understands that people are on limited budgets, and that some might have to seek out the cheapest price. But she says there are real consequences when people don't spend in their own communities, starting with philanthropic giving.
Torkildson says she gets at least 25 requests a week for help with community causes and makes it a practice to give to one a week.
"It is all part of a circle," she says. "If you do spend it locally, a lot more money stays in the local community.
"I know people like to come into our bookstore and browse," Torkildson adds. "I hope they understand that will not be an option if they don't also buy."
'More of a relationship'
Peg Sholtes, who started Capitol Kids about 15 years ago at 8 S. Carroll St., has gotten used to people "showrooming" at her children's toy and clothing specialty store.
"Five years ago I felt distressed when someone was taking pictures and scanning barcodes," she says. "But now I've gotten used to it."
Sholtes says a few years ago Amazon was a hot topic on a private Facebook page operated by a national network of small toy store owners. The group even ran workshops for members on the impact of online sales. But Sholtes is convinced the best strategy is to accept the reality of online sales and focus on what her store does best.
That includes stocking carefully chosen products and employing well-trained employees who understand children, are aware of child-development issues and know the inventory well.
The store also offers a few perks, including complimentary gift wrapping and help carrying purchases to customers' vehicles.
Sholtes says there are also intangibles that keep customers loyal.
"I know so many people have a sense of ownership in the store," she says. "We listen to what people say; we pay attention to what they wish we had. It's much more of a relationship than just selling."
Still, the appeal of online shopping is undeniable, even to local shop owners.
"Taking my three children to the store is sometimes so overwhelming to even think about," says Dodge of Happy Bambino.
So Dodge can see the attraction for her own customers, most of whom are new parents.
"Financially, that's a time when people are paying for childcare and making other accommodations."
Dodge says many of her customers have also taken pay cuts due to Gov. Scott Walker's Act 10. "A lot of our customers are teachers or they work for the state," she says.
Dodge, like Sholtes, says shop owners need to accept the inevitable and plan around it.
"I don't think anybody is going to stop it," she says. "I think you have to adapt to the changing environment. That's what we're trying to do."
Give local a chance
Colin Murray, executive director of Dane Buy Local, says his group's position is not to bash Amazon. He says the online retailer, especially with its Prime memberships that include free, fast delivery options, offers many advantages.
"There is a place for them in the market. We don't want people to feel guilty about going there."
But Murray says it would be wrong to believe that local shops are always going to be more expensive than buying online. He says he recently bought four new appliances from Brothers Main for $400 less than what he could find online.
"Just give the local guy a shot," says Murray. "Give them a chance."