It is hard to imagine that a site that was originally selling used books became a near one-trillion-dollar juggernaut that came to rival some of the biggest giants in the retail industry and even wiped a few from the map. There’s no denying that e-commerce is a game changer, and that it changed how traditional retailers do business. But can e-commerce actually destroy brick and mortar stores?
Offline Retail Purchases Still in Good Shape
Offline retail sales are still very good, but the numbers don’t tell the full story. About 11 percent of all retail sales are done online nowadays, but that’s only because there are many categories in which e-commerce isn’t competing yet.
For instance, a large portion of offline sales happens in gas stations, an area that will continue to remain safe from e-commerce. The other two biggest offline retail sectors are automobiles and grocery stores. These three combined make up about 52 percent of the whole retail sector. So, in reality, e-commerce is cornering about a fifth of the market they can actually compete in, and it’s only getting bigger.
E-Commerce Sales on a Steady Rise E-commerce sales have jumped 12% in the last fourth quarter compared to last year. And e-commerce sales have been in constant progression. As a matter of fact, in the last five years, total e-commerce sales have more than doubled.
2018 was the first year that e-commerce sales surpassed $500b, and this certainly won’t be the last. E-commerce is gaining ground each year, and new customers also embrace it more than the people before them. As a matter of fact, over 60% of all purchases made from Millennials are made online nowadays.
Selling on Amazon now Easier than Ever
Another factor in favor of e-commerce is the low barrier of entry. Practically anyone with a product can use Amazon’s consignment service, which is something brick and mortars can’t compete with. This not only makes Amazon selection almost infinite but also drives prices down for consumers.
Amazon also made a great job at allowing sellers to advertise through their platform and increase sales. Search Scientists recently published a case study where they were able to take a home furniture Amazon account from five to six figures in sales in six months using nothing but Amazon PPC advertising. You should see their results. Brick and mortars now have to compete with sellers who sometimes don’t even have to hold inventory and who are getting results while not having huge overheads. Not to mention all this real estate brick and mortars have to maintain. Which brings us to our next point.
Amazon Could Be a Blessing in Disguise
While some alarmists might claim that Amazon is destroying retail, some believe that this could be a great opportunity for the retail sector to take a long hard look at itself. The sector has already started shifting their approach and has been trying to reduce overheads in part by getting rid of over 100 million square feet worth of real estate.
Another issue facing brick and mortar stores is supply chain management and inventory. The structure of most of these retailers’ supply chain is outdated and was originally meant for a few stores. Many have failed to adapt as they expanded, which made for even more inefficiencies.
Conclusion
While Amazon and e-commerce are gaining ground and taking more and more shares of the retail market, we can’t say that it's the end for the traditional retail industry…yet. Brick and mortar stores have the opportunity to gain from the experience and adopt some of the strategies that have made Amazon successful, and maybe even end up competing with them in the future.
