- What is e-commerce, and how has it affected the retail sector?
E-commerce is related to social media and other new online platforms because it utilizes the internet for marketing communication. E-commerce refers to the development and maintenance of a company’s website and the facilitation of commerce on the website, such as the ability for customers to order products online, to get questions answered about products, and for the company to introduce new products and ideas. E-commerce can include special components designed specifically for separate target market segments, such as information boxes or games. Anything associated with an actual company website related to marketing can be considered e-commerce.
Estimates by various researchers say that more than half of all retail sales involve an online component; direct internet purchases in 2016 were more than 13 percent of all retail sales, and that percentage will continue to grow.21 Why? One reason is the economics of shopping. Think about time spent engaged in making a purchase in a brick-and-mortar location: the cost of fuel, finding a parking spot, locating your intended store, deciding on a purchase, and then driving home. Now think about the time spent reviewing products on a website, deciding what to purchase, and clicking a mouse or swiping a mobile device screen—it takes no time at all!
Countless small businesses have taken the plunge to serve the growing army of online shoppers. Many e-commerce businesses, including e-jeweler Blue Nile, luggage site eBags, and shoe and accessory retailer Zappos, are experiencing sales of $100 million a year or more. The increasing sophistication of search technology and comparison-shopping sites have allowed online businesses to market their products to millions of potential customers cheaply and effectively. Often, these innovations are bringing less-well-known brands and merchants to consumers’ attention.
Online merchants can offer a far broader array of merchandise than specialty brick-and-mortar retailers because they don’t have to keep the products on store shelves. In response to this challenge, traditional retailers are turning to technology to gain an advantage, outfitting their sales associates with voice headgear so they can look up prices and product information to assist customers.22
After a slow start, the world’s largest retailer, Walmart, has begun moving into e-retailing in a big way. It is now in almost every major category of web-related consumer commerce. It is estimated that Walmart has approximately 200 million items across all of its outlets, compared to 300 million items available through Amazon. The company has taken some innovative steps to leverage the web to drive people to its stores. In 2016, CEO Doug McMillon purchased Jet.com for $3.3 billion and put Jet.com’s CEO Mark Lore in charge of running Walmart’s online business. A case in point is the company’s online tire service, which allows you to order automobile tires to be picked up and mounted at a Walmart tire center. Customers can order prescription refills for delivery by mail or for pickup at a Walmart pharmacy department. Walmart’s online photo service, in addition to providing a way to store pictures on the web, allows customers to send digital pictures to be printed in a Walmart store of their choice, with a one-hour turnaround.23
Concept Check
- How can brick-and-mortar stores use technology to compete with online giants such as Amazon?
- What factors contribute to the internet’s soaring growth in retailing?