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)
- online (modern e-commerce)
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
- 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?
- applying the “channel multiplication” paradigm
- ways not to be “disintermediated” by manufacturers