After ten years of expanding their categories list and features to its platform, Amazon is taking over the e-commerce world! Just 10 companies (Apple, The Home Depot, Best Buy, Macy’s, Wayfair, Costco and QVC) and of course Amazon, eBay and Walmart already account for almost two-thirds of the overall U.S. e-commerce sales.
According to eMarketer and the U.S Commerce Department’s research, even as retail giants have worked hard to build their e-commerce and multi-channel operations, online retail is still below by 10% of all retail sales.
The narrowness of e-commerce might be the reason as to why Amazon has been actively expanding its brick and mortar play, by opening more bookstores and also buying up grocery giant Whole Foods this year. Followed by pop-up stores and also a few convenient shops. There is definitely an undeniable synergy between online and physical stores. Brick and mortar stores are helping boost the e-commerce sales, with the help of services like in store pick up of orders made online and also the marketing value of a physical location in a given area.
eMarketer said that regardless of eBay’s second place ranking, it is left as a considerable disadvantage. The site has low to no growth and losing share at the same time. Compared to eBay, Amazon’s sales were six times more according to eMarketer.
Businesses often underestimate the expense of e-commerce retail. This definitely applies to e-commerce giant, Amazon. Amazon, spends billions of dollars a year just on shipping fees, but unlike its other business rivals, Amazon has a lucrative cloud service business that is earning them huge profits. On the other hand, Amazon has been around for more than 20 years but isn’t very profitable relative to its sales.
Experts are increasingly taking to account the damage the shift to e-commerce is causing on retail margins. Adding to tepid sales overall, “the shift to the variable -cost model of e-commerce from the fixed-cost store model only continues to suppress operating margins for the sector,” said Moody’s Investors Service.
The undetermined cost model will only undermine digital growth at some point, according to retail analyst Nick Egelanian, He also said, “when shipping costs are fully allocated to the consumer some time in the future, we will see the rate of internet sales growth sharply decline,” in an email to Retail Dive.
Article originally by Retail Dive, written by Daphne Howland on the 25th October 2017