E-commerce giants – boon or bane?

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The introduction and growth of technology has changed the way we operate and plays an integral role in our day-to-day lives. It has the changed the way we work, the way we learn and the way we shop.

Over the years, technology and enhanced networks have allowed us to obtain goods and services with a touch of a button at the comfort of our homes and this marvel has led to the vast development of one of the largest industries in the world, the e-Commerce Industry.

The industry has improved the movement of goods and services, the efficiency of individuals and supports the development of globalisation in today’s world. In addition, the growth of the e-commerce sector has led to the birth of many online businesses and platforms, including ‘Giants’ such as Amazon, eBay, Alibaba and Flipkart. Online enterprises have also supported delivery service businesses, such as Fed-Ex, thereby increasing jobs and adding value and efficiency to supply chains.

E-Commerce has led to higher consumer satisfaction as a result of the ease of payment, delivery, variety and service. The field has also allowed the rise of online start-up firms that sell various products online, thereby giving them the much-needed exposure to target the online niche market.

In addition, e-commerce firms generally offer lower transactional costs coupled with the fact that they do not need physical stores or infrastructural investments to operate and therefore, the cost of setting up is marginally low.

Moreover, consumers also benefit from prompt delivery, with some major ecommerce firms offering delivery of goods within 24 hours.

It was widely reported by Statista that the industry recorded 38.5 billion transactions in 2015 with a CAGR of approximately 25%. These numbers seem to offer a tremendous opportunity for the growth of the Internet and various other online businesses however; e-commerce industries have had a large negative footprint on retailers and businesses and are calling this downfall ‘The Amazon Effect’.

E-commerce firms have been seen as the culprits and are largely responsible for the lower consumer footfall at departmental stores while also taking a large market share from retailers. This is due to the ease of shopping that e-commerce firms provide and its tendency to offer lower prices than what retail stores offer.

Although online trading is a threat to retailers and businesses around the world, the giants of online marketplaces are also a threat to the e-commerce industry themselves.

Competitive forces such as Amazon, eBay and Alibaba have monopolised the industry and increased the barriers to entry of various other emerging online trading firms. SME e-commerce firms who have realised the significance of e-trading have been consistently barred down by these ‘giants’ and put out of business by incorporating competitive pricing, which eventually pushes these firms out of competition.

Subsequently, a majority of e-commerce firms around the world have not made profits in years due to the dominance of these ‘deep-pocket’ players, who are exploiting the industry and consistently creating obstacles for new entrants through a business model focused on discounts, promotions, easier delivery and easier payment channels.

In addition to this, the industry is under threat from further investment as many Venture Capital firms have taken a step back from investing in e-commerce start-ups unless there is something truly unique to offer, as is the case for India.

To conclude, E-commerce is growing quickly but is still a very small piece of the large retail pie. The industry provides endless opportunities and we are standing amidst them in a century that is touted to lead to the revolution of online technology. However, it is an integral part of our growth as a society and will determine how the world operates throughout the century.

It is not important whether we consider e-commerce as a boon or a bane but to look at the challenges and opportunities it offers us for the transition to a better and easier lifestyle.

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