Decoding E-commerce: A Threat to Offline Retail?

Amazon, Flipkart, Jabong, Myntra and Nykaa- these are some of the names from which almost all the people in the country shop. The faster checkouts, home deliveries, easy return and exchange are the unique selling points of online shopping. They have made shopping for Indians and people around the world hassle-free. While earlier people used to roam around the market to find their “It” product, now it is available at the touch of a finger with different filters and refines adding to the ease of shopping. Earlier people were at the mercy of the shop-keeper for return and exchanges, now it is available without any questions asked. It’s a huge relief for people who do not want to go out and shop, for people who want to shop at any time of the day and corporates who cannot escape their respective offices.

What is E-commerce and Why is it so Easy to Set up?

According to Wikipedia, e-commerce is the activity of buying or selling of products on online services or over the Internet. Electronic commerce draws on technologies such as mobile commerce, electronic funds transfer, supply chain management, internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. It is very easy to setup because all you need is a good website, application that is mobile and desktop-friendly, a warehouse, database, a BPO and relations with good brands. E-commerce is also cheaper than other forms of retail business because retail businesses have a larger setting up cost. Rent, electricity, employee salaries and maintenance, wholesalers etc. incur a lot of cost in comparison to e-commerce where there is no fixed setting cost and everything is outsourced from BPO in the fields of customer care, delivery and warehouses. This is the very reason why stuff online is cheaper than retail.

How Do These Businesses Earn Exactly?

Every city has common shopping centres, where there are different shops selling their respective products under the address of that shopping centre and they provide rent to the owner of that centre to set up the shop/showroom. Similarly, Amazon, Flipkart, etc. are the shopping centres where different sellers put up their products for sale. For putting up their products, they must pay rent in the form of commission to these sites which may be in the form of pay per sale and the rest of the process is handled by e-commerce logistics, from product pick-up to shipment and delivery. The people who promote their products on their respective sites, blogs, videos, etc. are awarded a small commission, and that is why these businesses are in profit every single year. Very small traders who specialize in one product get their sales online. For example, a trader dealing in women’s stockings or shorts will not setup a shop because he will not incur a lot of sale in the particular city but when the same shop is set up online, people all over the country can purchase stockings or shorts. Even though these e-commerce giants produce a lot of profits, they do generate employment in various parts of the country like, delivery agent, customer care executive or a warehouse agent, which adds economic growth to our GDP.

E-commerce: Threat to Retails

Today everything is brought and sold online which is a huge danger for people who are engaged in offline retail business because for them, their shops and showrooms are used as a trial room, where customers come, view the product that they are selling, the texture, colour and feel because images online can be misleading, get the product code and buy it cheaper online. For the retail shops, it is a waste of man-power, electricity and rent if such an act is performed daily. Although they are helpless at the hands of their fixed cost they cannot give so much discounts that lands their business in loss, some shops have tried to provide a free home delivery option and other post-sale perks at their respective business. Some businesses try to keep a lot of variety of products in their shops but due to space constraints they are unable to do so. This limits their prospects of growth even more as their sales decline rapidly.

Retail shops must realise that they need to gear up and get new innovations into their businesses so that they are not left behind in the race of survival.

Picture Credits : plan9.pitb

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