The Impact of E-commerce on Retail Growth

The Impact of E-commerce on Retail Growth | CBRE India

Context

Nowadays, due to the globalisation and modernisation of technologies in the present scenario, every sector has attracted attention for automatization and becoming technologically efficient. And due to which, the rise of e-commerce has drastically transformed the retail industry, creating both opportunities and challenges for traditional retail stores and employment. This shift is largely driven by technological advancements, such as increased smartphone usage, better internet connectivity, and evolving consumer preferences.

Growth of E-Commerce

E-commerce has grown exponentially, with online sales rising from just 0.63% of total retail sales in 1999 to 13.3% by 2021. This surge is attributed to the convenience e-commerce offers, allowing customers to shop from anywhere at any time via computers or mobile devices. Consequently, more consumers now prefer shopping online over visiting physical stores, fundamentally altering customer behavior.

Impact on Traditional Retail Stores

  • Traditional brick-and-mortar retailers face significant competition from e-commerce platforms, which are not restricted by physical space. This allows online retailers to offer a wider product selection, contributing to a decline in in-store sales. For example, in-store sales fell by 14% in 2020, while online sales grew by 44%. As a result, many physical stores are seeing reduced foot traffic, leading to store closures and layoffs.
  • Electronic commerce has also presented operational and financial challenges that affect the retailers. The growth of e-commerce fulfillment centers has been a detriment to local retail employment as the authors find that the centers have cut slightly more than 1,000 quarter jobs in the nearby counties. This decline is on account of a decrease in working hours of the retail employees and job losses in the conventional outlets.
  • In response, the traditional store-based retailers have responded well, and the companies are providing the customers with integrated omni-channel access to the products online, in the stores, and on the mobile phones. As an example, the customers of the societies can buy goods online, and the same goods can be taken physically in the stores, or sick people can return items that were bought online in ordinary stores. This kind of strategy is meant to close the gap between online and offline retailing.

Impact on Jobs

  • E-commerce is a double-edged sword as far as employment is concerned. Even if it has resulted in the loss of employment in physical stores and, in general, with low hourly wages, it has given a boost to new jobs in logistics, delivery services, and call centers. 
  • For example, in India, through e-commerce the economy can create millions of employment opportunities both, directly and indirectly. 
  • For every Internet seller or for every million US dollars invested in an IEM, four direct and twelve ancillary employment opportunities are generated in areas like logistics, delivery and support services for e-business.
  • But here the idea is that the e-commerce industry requires a certain set of skills rather than the traditional business of selling. 
  • New generation businesses especially the start-ups are demanding professional skills and knowledge needed in fields such as data analysis and marketing, logistics and supply chain among others. 
  • In order to address this need, there is a continuous investment in training and development of the human resource.

Future Trends

  • There are certain trends defining the future of e-commerce. Mobile buying, in which customers make purchases directly through social media sites, is picking up, especially among the youth. 
  • Furthermore, the integration of artificial intelligence (AI) is getting mandatory in the field of e-commerce. AI aids companies in the provision of customized customer relations and enhancing the sales through serving relevant ongoing notices and promotions.

Conclusion

E-commerce has reshaped the retail industry, presenting challenges such as increased competition and job losses in certain areas, while also offering opportunities for growth and innovation. To succeed in this evolving landscape, businesses need to focus on customer experience, data analytics, and emerging technologies. As the sector continues to grow, staying ahead of trends will be key to maintaining competitiveness.

Source: The Hindu

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