About moving money from offline (brick-and-mortar stores) to online (e-commerce & Co.)

 

Where is the money going and why?

As ecommerce is becoming widespread, a lot of money (coming from shoppers) is moving from:

  • offline (traditional brick-and-mortar stores)

to

  • online (modern e-commerce)

 

Why?

Because conventional retailers are losing their exclusive role of distribution-points for goods, so:

  • retail revenues and profits move from offline to online, while costs and investments don’t

and, accordingly

  • the traditional store business model is not sustainable anymore, in fact “comp” store sales (“comp” = comparable) are often disappointing (they’re flat or declining) and physical stores suffer eroding margins and slipping market-share

 

Specifically, where do retail revenues and profits move to?

Basically they relocate to:

  • pure e-retailers (e.g. Amazon) – these are brand new players, starting from scratch and usually employing advanced digital technologies
  • manufacturers, that (going from B2B to B2C) now sell direct to consumers through their ecommerce websites, applying the “disintermediation” paradigm to shorten the supply-chain
  • traditional retailers’ ecommerce websites – these are known retail players (e.g. Target) that apply the “channel multiplication” paradigm, that is, adding online to (their existing) offline

Recap: are you a traditional retailer?

Think about:

  • applying the “channel multiplication” paradigm
  • ways not to be “disintermediated” by manufacturers

Andy Cavallini

 

 

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