Individuals across the world are scratching their heads wondering how Jeff Bezos may potentially become a trillionaire. However, the answer is simple. He was able to create a highly efficient method of fulfillment that has revolutionized the way people shop. A major component of his success is his utilization of electronic commerce, otherwise known as Ecommerce.
Ecommerce has provided an opportunity for the creation of new businesses that would not have been able to develop in a brick and mortar setting as well as propelled growth in existing businesses through expansion into new channels of distribution.
Explore the topics below to gain a better understanding of how e-commerce is revolutionizing the retailing world.
As barriers to penetrate the market decrease, competition is skyrocketing. Not only are there more options for the consumer, but they are becoming pickier. The introduction of the millennial generation into the buyers market has been a pivotal moment in the way consumers interact with brands. Brand loyalty has fallen to the wayside as corporate social responsibility and inclusion are put under the microscope. With a choosier demographic infiltrating the market, companies must incorporate new methodologies in order to meet their demands.
Traditional retailing relies significantly on human technology which has led to processing errors. A transition to electronic commerce allows for an increase in accuracy as many procedures become automated. With this automation, a decrease in cost per transaction is observed. Holding inventory in a brick and mortar establishment is a costly feat. With e-commerce, there are options such as drop shipping, the use of a third party to fulfill orders in order to reduce inventory holding costs.
As consumer attention spans are consistently decreasing, the speed of which a brand can transport a consumer through the marketing funnel must increase. Electronic commerce aids conversion rates by allowing the customer to make a purchase without having to change their physical location. Buy online and pick up in-store is an increasingly popular option for businesses that operate with both eCommerce sites and physical storefronts. This is beneficial for the business owner because they can secure a sale before physical deterrents. A consumer is satisfied with this option because it saves them time in the store and even shipping costs.
Once there is an increase in the speed of which a purchase can be made in-store, there is often an opportunity to scale back on payroll demands. A decrease in the number of employees needed also provides an opportunity to increase the pay of remaining employees. Pay increase can often lead to an increase in employee to employer relations, resulting in an increased rate of production.
Digital ad spend is projected to exceed $377 billion in 2020. This exponential growth is due to not only the growth in smart device ownership but an increase in the ability to track customer trends. Selling online allows a company to key in on specific metrics that can further assist in closing a sale. A major metric used is bounce rate, where a retailer can identify at which step in the purchase process the customer clicked away. From here, the retailer can now retarget the consumer with precision further assisting in a sale. According to Chris Costello, Senior Director of Marketing Research at Kenshoo, “The average click-through rate (CTR) for display ads is 0.07%, while the average CTR for retargeted ads is about 0.7%.”
For individuals just starting a business, e-commerce is a great method due to relatively low barriers to entry. In terms of cost, there is no need to fully stock a store with merchandise. In comparison to a brick and mortar location, there are minimal licenses and permits necessary to begin operation. There is also a decrease in everyday expenses such as taxes, maintenance, electricity, telephone and more. With an increase of information available on the web, a new business owner can cut costs by managing operations such as inventory and billing on their own.
When a business is operating without an electronic commerce platform, hours of operation typically restrict a consumer’s access to the brand. Operating online allows the consumer to have around the clock access to make purchases. Not only does the customer have 24/7 access a company, but they can also have access from virtually anywhere. Post happy hour flash sales can almost be considered a textbook advertising method in this day and age. Opportunities like such are plentiful once a brand takes the step towards digital operations.
The Demise of Brick and Mortar
According to Yahoo! Finance, 2019 was a record-breaking year for retail store closures with a 50% increase from 2018. Even powerful brands like Macy’s are on track to become a discounted retailer due to transformations in buyer patterns. After recording 4,005 retail closures at the beginning of 2020, Coresight Research projects a closure of anywhere between 20,000 to 25,000 brick and mortar establishments by the end of this year.
With powerful search engines, such as Google, at the fingertips of almost everyone, virtual pre-purchase research has become the new norm. A brand that does not have an e-commerce site will miss out on this huge market share. In simple terms, the higher up on Google that a brand’s website appears, the more sales they will have. Even if a customer is conducting a search simply to gain information, a sale is possible if there is an opportunity for a purchase alongside the knowledge they are searching for.
Starting with Millenials, there has been an increase in personal identity being expressed through the brands an individual chooses to do business with. This sense of community opens a fantastic channel for free marketing. A fundamental in this endeavor is creating a sense of community for shoppers. This community often runs closely intertwined with finding a brand niche. A buyer’s desire to join a certain community stems from individual motives as well as peer influence. Therefore encouraging the consumer to share their purchase, especially through social media. Electric commerce sites are making it even easier for customers to do so by adding quick links to social media sites at the end of the checkout process.
Transition to E-commerce Today
E-commerce is a valuable tool for business owners regardless of whether they are a beginner or a veteran. As technology becomes more and more integrated into everyday operations, electronic commerce is essential for company success.