Rising Competition in eCommerce
- January 4, 2023
- Posted by: Marek Niedzwiedz, Your CFO
- Category: eCommerce general
Technical barriers to entry and initial capital costs are low for the industry. It gives people the ability to create their own eCommerce platforms relatively quickly and cheaply. Companies such as Squarespace and Shopify are third-party software tools that provide a variety of templates for new retailers, so there is no need to be skilled in or pay for web development. The simplicity of launching an eCommerce store has contributed to a rise in industry participation. The number of industry organizations in the US is expected to grow at an annualized rate of 11% over the next 5 years, from 341,000 enterprises in 2022 to 626,000 in 2028.
In line with these trends, industry employment is also expected to rise–an expected increase of an annualized 9% to 1.5 mln workers in 2028.
Increased industry competition puts pressure on online retailers to differentiate themselves from industry rivals. Amazon has become the industry leader by defining and redefining customer expectations. For example, while 2-day shipping was a luxury, Amazon set a new standard by offering free 2-day shipping to millions of its Prime members. Then the company redefined customer expectations by offering 1-day shipping to select metro areas across the country. Its rival Walmart has responded by increasing investment in its eCommerce business by acquiring Jet.com, a company founded and led by former Amazon employees. Also, Walmart recently announced it would apply discounts to online orders that are picked up in-store. In-store pickup is becoming increasingly popular, as chain brick-and-mortar stores such as Walmart, Target, Nordstrom and Macy’s can quickly fulfil purchases and have bags ready for pickup the same day, presenting a challenge to Amazon and other eCommerce stores that do not have physical locations. However, Amazon acquired Whole Foods in 2017, which operates more than 400 physical stores in the United States.
The battle will continue, that is for sure. Are you prepared for this rising competition in eCommerce?