Electronic commerce versus traditional commerce
The era of electronic commerce has arrived. Amazon is past its 20th birthday and eBay is following in Amazon’s footsteps by being just a year younger. E-commerce is now a $200+ billion industry in the US and is projected to grow as much as 15% a year as shoppers realize there is no longer a need to go to the traditional mall . In the war between e-commerce and traditional commerce, e-commerce is clearly emerging as the winner. Due to electronic commerce, traditional commerce is being taken to the grave.
Well-informed traditional businesses recognize the inevitable rise of online shopping. They are indeed adapting to the new and very evident realities. The megalithic retail chain Macy’s shows facts indicative of this. This 154-year-old retail chain saw online sales increase 40% in 2011, while brick-and-mortar retail sales grew by just 5.3%. Macy’s is currently transforming nearly 300 of its retail stores into distribution centers, speeding up the entire checkout-to-shipping process for online shoppers. It’s gotten to the point where this retail giant is considering the option of in-store online kiosks. Another brick-and-mortar bigwig, Nordstrom, is doing it even more aggressively. With perks like free shipping and free returns in its online store, Nordstrom saw a 35% increase in online sales over the last three quarters. It can also be noted that the company plans to invest $1 billion in its online ventures over the next five years. Online trends and the focus of such large and well-established traditional commerce companies validate the acceleration of e-commerce growth. Simply put, if they don’t become current, they won’t survive.
When buying a product in the traditional way, what the consumer does not know is that the item has been marked at least three times. It has been branded once when it went from factory to brand, again when it went from brand to retailer, and again when it went from retailer to consumer’s shopping bag. Companies that are exclusively online essentially cut the last margin by selling direct to the consumer. By doing this, they can be much more competitive. They do not have the costs of maintaining large networks of physical retail stores. It’s good to keep in mind that the staffing requirements of an online site are much less than those of retail stores.
There are numerous advantages to e-commerce that make traditional commerce crumble under its competitive presence.
1. Geographic limitations are not necessarily taken into account. With e-commerce, the world is your oyster.
2. Consumers can be reached by making use of the Internet and search engine visibility.
3. Lower costs
4. Less staff
5. Traditional commerce is based on physical store space that needs to be rented. With e-commerce there is no cost of real estate.
4. Locate product faster
5. Travel time and cost eradicated
6. Comparison shopping
7. Easy and Abundant Information
8. Communication is targeted
10. Create niche markets
E-commerce is not just the future, it is now. The bottom line is that traditional commerce companies will need to take a hard look at how they conduct business in order to remain relevant and competitive in today’s massive business realities.