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It has been reported that the sphere of e-commerce has experienced an unprecedented rise over the last decade. From a couple of percent in 2005-2006 and up to twenty percent for specific products, the Internet has established itself as the key channel for Business-to-Customer commerce operations. Therefore, the global retail industry today is not what it was ten years ago because of the Internet and the expansion of online shopping. While the significance and the convenience of e-commerce are indisputable, it is important to study its impact on the traditional retail industry around the world to identify the challenges, which it has to withstand.
Benefits of Online Shopping
Before identifying the challenges, it is worth to briefly mention the benefits online shopping has brought millions of customers and companies around the world. First, online shopping allowed customers to purchase goods without the need to leave the comfort of their homes, offering a great advantage to those with a busy lifestyle. Second, customers can connect with the brands and leave feedback about the purchased products and services. Third, the cost retailers pay for storing and referencing their products online is significantly smaller than the costs of physical stores. Fourth, the benefits of delivery services such as Amazon Prime have made the lives of millions much easier.
Significance and Challenges of E-Commerce
The impact of online shopping can be considered threefold. At the same time with bringing customers a range of new benefits and creating some barriers for traditional retailers, online shopping completely transformed the sphere of marketing. According to the article by Doherty and Ellis-Chadwick (2010), new opportunities associated with the Internet facilitated closer interactions with customers and enabled companies to be much more innovative in their approach towards advertisement. Effective brand-to-customer advertising required companies to gather more customer-oriented data to tailor to their needs and requirements (Arora et al., 2008).
Apart from the significant impact on marketing, online retail forced many brands, especially clothing companies such as Zara, H&M, and many others, to expand beyond physical stores and offer customers online shopping options. Along with the convenience and the reduction of costs, retailers can now update their stock more quickly and offer the latest styles of clothing in ways that were not available ten years ago (Ellis, 2014). Another significant impact of online shopping was the facilitation of ‘relatively perfect’ competition. While it is naïve to assume that the sphere of e-commerce contributed to the emergence of perfect competition among brands on the Internet, customers received an opportunity to choose substitutes for many products. With a quick search online, users can look for cheaper alternatives for expensive items and base their purchasing decisions on the feedback left by other customers (Vannier, 2013).
According to the extensive research on the impact of online shopping on traditional retailing (Weltevrenden, 2007), the growth of e-commerce has been significant and sustained. While the ‘high street’ retailers are trying to keep up with such tremendous growth, they have yet been unsuccessful in reaching the level of online Business-to-Customer companies. The change in the channels of retail has shifted across the majority of spheres. Music, printing and publishing, travel agencies, entertainment, even technologies are currently dominating the market in the area of online shopping. Customers prefer purchasing computers and tablets directly from the brands’ websites.
On the other hand, many brands that dominated the market of physical retail are reluctant to enter the e-commerce environment because of the fear of security breaches or ‘cannibalization’ (domination of the brand’s online retail channel over the physical stores). Furthermore, the emergence of online shopping has facilitated the creation of previously unknown methods of retail. Virtual merchants such as eBay and Amazon allowed almost anyone to sell used or new items through the Internet. By cooperating with small retailers and offering them a platform to sell their products, Amazon became number one in providing customers around the world with an extensive range of products varying from children’s toys to dog food.
The same way globalization eliminated the range of barriers in the worldwide economy, the sphere of e-commerce removed the limits associated with traditional shopping and allowed customers to shop anywhere and at any time. To target specific groups of clients, brands are employing new methods of data gathering that offer more personalized information about the needs and requirements of potential customers. The sphere of online marketing and retail has also broadened the reach of already successful retailers that used to sell goods in physical stores.
Research has shown that the emergence of online shopping changed the world of retail, and it is unlikely that traditional retail channels will ever dominate again. Despite the fact that it was limited to already existing publications on the topic, the common theme across all literature was that online shopping facilitated the creation of the global phenomenon that eliminated the boundaries associated with traditional retail. In my opinion, online shopping improved retail and accelerated its rapid growth and development, and it will continue to expand in the future to cater to the demands of the globalized society.
Arora, N., Dreze, X., Ghose, A., Hess, J., Iyengar, R., Jing,…Zhang, Z. (2008). Putting one-to-one marketing to work: Personalization, customization, and choice. Marketing Letters, 19, 305-21.
Doherty, N., & Ellis-Chadwick, F. (2010). Internet retailing: the past, the present, and the future. International Journal of Retail & Distribution Management, 38(11), 943-965.
Ellis, M. (2014). The evolution of the Internet and its impact on retail spaces. Web.
Vannier, P. (2013). How the Internet is affecting retail – permanently. Web.
Weltevrenden, J. (2007). Substitution or complementarity? How the Internet changes city center shopping. Journal of Retailing & Consumer Services, 14(3), 197-207.