The advent of smartphones has revolutionised commerce sector. Its impact has been indelible in almost every field of business. It has even birthed an entirely new market termed ‘e-commerce’. And since its inception e-commerce has made rapid inroads into the retail sector market.
The situation has come a to point where some of the market analysts are of the opinion that e-commerce is the death knell for retail while some still throw their weights behind retail holding its ground against e-commerce. Certain stats do support the latter section’s claims, for instance, a report by Fung Global Retail and Technology states that Amazon’s share in US apparel market is a mere 3.7% including third-party sales for the year 2016. The same study also states that none of the e-commerce stores made it to the top 10 preferred outlets. At the same time the fact that e-commerce has disrupted retail, cannot be denied.
Let’s take for instance grocery industry. E-commerce is reshaping grocery market in innovative ways. Advancing technology has opened up ways by which your grocery shopping experience will be as good if not better than shopping physically in the store, all within confines of your smartphone and without setting a step outside your house.
Two intriguing features provided by e-commerce grocery store are the Home Delivery(HD) and Click and Collect(CnC). While HD is purely an e-commerce product that involves the consumer visiting the grocery seller’s app or website adding items to a virtual cart and finally paying and checking out. The shopped grocery is delivered to the consumer by the seller. CnC, in turn, involves the customer selecting and adding items on the grocery app builder and then driving to the nearest physical store operating that online e-commerce grocery store and collecting their shopped products. Thus CnC is informally a hybrid between a traditional store and an online store.
Augmented Reality (AR) initially considered a gimmick is now seen as a feature with a tremendous potential for application in the e-commerce sector. The recent patent application filed by Amazon for AR related features have put it in the spotlight. Basically, AR helps bring the store to your home, quite literally. Features like virtual changing rooms, customisation help consumers make a more informed decision while making a purchase. A few of AR apps are mentioned
Despite all this, just how much of an impact has AR and e-commerce actually had in retail? Some studies paint a picture in favour of retail. For instance, a recent Food and Beverage Report released by Forbes states that the e-commerce share in grocery industry barely registers, it struggles to pip the 2% share mark. A minimum of 6 online purchases annually is made by no more than 5% of adults. Contrastingly, the traditional grocery stores see 78% of adults make purchases regularly, and Walmart has 56% of the shopping.
Interestingly, the survey also showed growth of online shopping by 14% as compared to a mere 2% increase for physical stores. But hold on, do those growth figures really tell the whole story? When scrubbing through data from the Food and Beverage Report, it was found that the online grocery’s growth from 1.4% to 1.6% of the market share totals up to $1.6 billion dollars in the increase. The 2% increase shown by physical stores totals up to $16 billion. 10 fold the growth shown by online grocery stores.
There are also reports that spell a starkly different tale. According to a study conducted by retail advisory firm HRC Advisory, Operating earnings fell by 25% due to a shift to online sales from physical stores. Additionally omnichannel and e-commerce investments along with expensive fulfilment of e-commerce transaction contributed to the decline.
Variable logistics cost, IT, supply chain upgrades, while simultaneous maintenance of high level of returns on online operation together are producing increasing SG&A costs(at approximately 2-3 percentage points of the net sales made).This combined with wage inflation, falling physical store sales, real estate has resulted in a decrease of 1-2 percentage points in the profit contribution by physical stores, concluded the study.
However might be their impact, e-commerce is here to stay. It would be interesting to how this competition unfolds or whether e-commerce actually spells doom for retail. Although tats are divisive and inconclusive, this is for certain that the arrival of e-commerce supplanted with features like AR has sure disrupted their unchecked reign over the market. And if retail doesn’t adapt to the changing needs in changing time, the divisive studies might soon send it out for count in unison.