The signs of a good economy is the spread of services across the entire country, the level in which the economy of a specific country relies on services. For me, the evolution of services means this: I no longer have to wait to pay for my bills as I can pay them online; I no longer have to stay in never ending queues to pay my taxes. In the same time, the fact that I can buy a new phone online without even having to look at it, is also a sign that the economy is going on the right way.
Why Amazon is Growing Day by Day
What’s the first name that comes in your mind when you speak about e-commerce? For me, it’s Amazon, for others, it might be eBay. And we’re not talking here about local online retailers, I’m taking Amazon as the most obvious example that there is. I’ve seen the effect of online retailers in my country, I’ve seen how their popularity has increased and their number of sales has skyrocketed. And it’s obvious why: people want their goods delivered to them, as fast and secure as possible.
The reality is that e-commerce giants, that are active on a global or national markets, will not totally destroy the retail, as that’s impossible. The main categories that are becoming more and more popular in the online field are electronics, book, toys, digital goods and so on. You won’t buy too much of your vegetables, groceries from websites like Amazon as they are perishable (Amazon has launched the Fresh category), but the chance of buying the aforementioned products using a website is increasing.
Take my money and deliver my products ASAP!
A recent article on Slate informs us that Amazon’s latest strategy shift aims to deliver products to your door as fast as possible. Until recently, Amazon has had a better price than its competitors, because they weren’t required to collect local sales tax. That was possible because Amazon wasn’t physically present in those states. Obviously, Amazon has been the target of many legal attacks because of this advantage. If Amazon hadn’t been so successful, maybe they wouldn’t have so many legal battles around the “use tax”.
This tax has long been Amazon’s and others’ like it, main advantage. Being able to sell a product for a cheaper price and to have it delivered to your doorstep is a hard thing to achieve and maintain. To be able to benefit from this advantage, users would have to pay with their time. Therefore, if you were buying from California a product that was made or stored in New York, you’d have to wait for some days for it to be delivered. Now, Amazon agrees to pay that sales tax because it wants to be able to deliver your products as fast as possible.
Fast and reliable: keys for success
Imagine this: you wake up in the morning, you go to Amazon’s website and you buy some books and by the end of the day, you find yourself in the bed reading them. Now compare that to those 30 minutes you’d spend going to the nearest book shop, look for the book, discuss with the vendors and possibly wait in the line. Receiving your goods as fast as possible is a great way for Amazon and others like it to win and maintain loyal customers.
Surely, Amazon’s strategy will be felt in the Unitated States and UK, as these two countries seem to almost always be in the middle of digital evolvment. So, if Amazon will pay those local taxes, will deliver your products in the same day, or in in 24 hours from the moment of your acquisition, doesn’t this mean that physical retailers will lose even more from their appeal? I think yes. Why go somewhere else when Amazon does everything neatly for you?
Physical retail won’t die
E-commerce is successfuly attacking and wining some retail fields, but I find it hard to believe that it will be able to destroy physical retail, once and for all. Right now, the E-commerce sales account for almost 6% of total retail sales in the United States. And looking at the graph from aboe, we can see that it’s a steady growth, around 10-15% every year. So, to say that e-commerce is destroying physical retail is too much an affirmation. And these are numbers from US, I can easily suspect that in the rest of the world, there are much lower numbers. Amazon is winning the hearts of consumers with its name, speed, price, security and reliability.
This other interesting article from Seeking Alpha shows exactly why physical retail won’t die that easily. You might buy some jewelry online, but if you’re looking to experience the “shopping pleasure” or if you can afford it, then you’re going to shop from a premium brand. Online retailers, to a certain extent, are also related to cheap, moderate prices for everybody.
An interesting quote on this matter comes from Tim Hulbert of Hulbert & Associates:
“The problem for many retailers, especially the larger national chains, is that by necessity (they’re trading in commodities and near-commodities) they’ve had to emphasize the rational considerations of price and convenience. The challenge is to find ways to re-engage customers on more than just a rational level, to make shopping in their stores a more stimulating and satisfying experience, rather than just another trip to pick up whatever is on sale.”
Facts about online versus physical retail battle:
- More people buy books onlne
- Deliver my products fast and you’ll win me as your client
- Online commerce is growing year by ear, but only on some markets
- Customer service is crucial for both types
- Amazon tries to be unique and sell its own products (Kindle Fire, reader, apps, e-books)
- Physical retailers could adapt by also selling online