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Why E-commerce Is NOT a Threat to Retail

April 16th, 2021 (Updated 04/26/2022) | 9 min. read

By Jochen Schmidt

Is E-commerce Is A Threat to Retail? Not Unless You Allow it to Be.

When Amazon and eBay launched in 1995, the disruption to traditional retail stores was immense. Retail music chain Tower Records and Borders bookstore went bankrupt, Musicland was sold and Blockbuster couldn’t survive. 

But old-fashioned brickandmortar retail still offers buyers a unique opportunity to try on, test out or physically feel the product they’re about to buy. The offline shopping experience can be therapeutic and social, and a growing attitude for ‘shop local’ gives hope to smaller retailers across communities. 

However, the unexpected events in 2020 only spurred on the rapid expansion of e-commerce. While the high street stores closed their doors for the duration of the pandemic, online shopping became everyone’s new favorite pastime. 

In 2020, e-commerce sales reached $4.2 trillion. 

When compared to 2014, where sales reached $1.3 trillion, you can only begin to imagine the true staying power of e-commerce and online shopping. 

Understandably, many retail businesses have moved online and many others have closed up shop. One of the greatest problems faced by retailers with no existing online presence was the suddenness of Covid-19 and the immediate changes that needed to be made. Many retailers were simply unprepared for making an online transition, and/or lacked the knowledge, experience and funds to make it happen. Even if some businesses could go online, their customer base would also need to be digitally savvy to keep making purchases.  

Retailers aren’t likely to move in reverse at this point, even after retail businesses resume operation. Covid-19 has taught us that having an online presence and effective online sales and marketing model is vital for when we’re faced with a side-blow.  

But, e-commerce is not a threat to retail. Instead, it’s an opportunity. 

Buying Habits Have Changed 

With 43% of online shopping being done while in bed, it’s clear that our buying habits have changed. 

Browsing, price comparisons, discounts, and customer experience… These are just a few of the many ways that shopping has evolved. 

Finding the best price is now possible when Google itself gives you a list of the same item across different stores. 

Chrome extensions like Honey help you find discounts the store may not have wanted you to use. Those that wouldn’t be advertised in-store. 

Taking advantage of free shipping offers, sales and product drops no longer require consistently checking your favorite stores. Instead, an email followed by a few clicks could help you grab your dream deal. 

Even infamous events such as Black Friday now take place online. Walmart, for example, offered customers the opportunity to make their purchases online and pick them up from the curb side of their nearest store.  

Retailers can adopt some of these strategies to create both an offline and online presence. Something as simple as setting up email marketing, utilizing CRM and becoming social-media savvy can help any struggling retailer in the battle to remain relevant. Retailers could also offer the best of both worlds, with trying on/feeling the product being the first step, and completing the purchase online being another. Some innovative retailers have created subscription packages whereby they send (for example) clothing (or whichever product they sell) in the mail, the customer tries it on, and they send back whatever they don’t want. 

‘#ShopLocal’ Is Trending 

The #Shoplocal phenomenon predates Covid, but was certainly catapulted into every social media platform as the pandemic took hold. Millennials and Gen Z are eager to boycott the e-commerce giants and support their local gift stores, book stores and other independent vendors. 

The challenge for retailers with a loyal customer base is to physically make it possible for them to buy during a pandemic that restricts access to the store. 

A CRM can also help retailers stay on top of anonymous online purchases, as it provides sophisticated data on who, when and how customers are using your website. Targeted ads tailored to your customer base will encourage purchases and allow you to experiment with different content for the best possible results. 

A CRM also allows you to keep information about your loyal customers (e.g., their birthdays, purchase history, shopping habits) so that you can send personalized messaging their way. 

Ecommerce Isn’t As Complicated As You Think 

For many, the concept of running a store and dealing with customers face to face may feel far less daunting than running an e-Commerce business or channel. 

Thankfully, the transition isn’t as complicated as it may initially appear. 

There are a number of systems to ease the process of moving your business towards e-commerce. Shopify is one of these. Shopify’s second quarter yielded double the revenue in 2020, as increasing numbers of businesses flocked towards ecommerce.  

Pricing Software 

Pricing software really does what it says on the tin. 

It utilizes a great deal of information, both on your own products and across the market, to provide you with effective and efficient pricing decisions. What’s more, it can do it pretty quickly too. 

Depending on the tool used, pricing software can look at your competitors, the entire market, or wherever your products are rivaled to help you set the best price. 

When it comes to e-commerce where you can no longer really compete based on your physical distance or general accessibility, pricing becomes even more relevant. 

All The Information You Need on e-commerce Is Already Out There 

Ecommerce may seem like a relatively new concept. 

To some it is. 

But in fact, it’s been around for over 40 years now. 

With the advent of mobile phones and the accessibility that things like 4G offer, online shopping has become part of our daily lives. 

That said, anyone looking to get into e-commerce doesn’t need to walk forward blindly. 

In fact, there are more resources available on running an e-commerce business than you could possibly have the time to read. Or watch, as the case may be. 

Nowadays, nearly every business you could name has an online store of some form. While many who rejected the move online were swept aside. Blockbuster vs Netflix being a prime example of this.  

e-Commerce professionals have a broad range of experience in making e-commerce work for you. 

Not just in presentation, i.e., the web page or storefront, but the usability and user experience too. 

Whilst some businesses require a longer, more consultative process to sell their products. Others benefit from 1 click purchases and essentially run themselves. 

Whatever the needs of your business, you can find a place for it online with e-commerce experts ready to help guide you through the process. 

Overcome Channel Cost with Ecommerce 

Retail channels don’t come free. 

Each includes its own cost which by embracing e-commerce, you can mitigate. 

The Cost of Running a Business 

In the average retail organization, personnel costs amount to 10-20% of your gross income. 

A scarily large number for any business. 

Moving operations online, whether entirely or partially, will drastically reduce personnel costs. 

Multiple 9-5 store employees can be replaced with phone-based customer services representatives. Or even a call center/chatbot depending on the size, complexity and needs of your business. 

That’s without counting the cost of the store itself. 

With the average retail cost lying somewhere between $11 and $23 per square foot, you would be paying more than an arm and a leg to situate your business in a desirable location. 

It goes without saying that the further you move your business from popular and busy locations, the less you pay for rent. 

However, that results in your business having to work many times harder to attract customers. 

Whereas online, location is nonexistent and simply having a presence online will work for your business. 

Saying that, going online isn’t free. There’re other financial considerations, such as buying traffic, advertising, hosting and producing content campaigns. The budget very much depends on the size of your business and the type of business you’re in.  

Restaurants quite cleverly worked together in 2020 to bring down running costs and boost takeaway sales. They collectively hired industrial premises to run kitchens and utilized local delivery services like Uber Eats to send their food straight from the chef to the customer. This brings down the cost of the building, staffing and general restaurant operation costs.  

Making Online Advertising Work For You 

The further your business moves into online territories, the more things change. Marketing and advertising costs are focused on different places. 

Unless your brick and mortar store is right in the middle of an incredibly busy high street, you probably spend a significant amount letting people know where you are. 

Whereas an e-commerce store, set up properly, will attract customers in droves through organic traffic.  

But assuming you need to step things up, PPC (Pay Per Click) is a business owner’s dream.  

Average PPC campaigns show an ROI (Return on Investment) of $2 for every $1 spent. 

When compared to traditional marketing campaigns such as leaflet drops, radio advertising or newspaper ads, the increase of value is clear. 

Pricing Solutions 

Your online pricing strategy is crucial. With the right pricing software, you can align online and offline prices to avoid potential disasters and steer traffic by playing your offline availability as an advantage via concepts like same day pick up 

Price analyzing software can help you to track online performance, monitor KPIs and metrics, design unique role-based dashboards for profit and margin analysis and provide instant insights for specific pricing questions as they arise. 

The transition to e-commerce can be seamless once you have the backing of the right software. 

Ready to find out how your retail data can be used to optimise your pricing?

Click below to watch the on demand webinar on getting your retail data in order.


Jochen Schmidt

Freelance Pricing Professional

Jochen Schmidt has over a decade of experience in strategy consultancy and advisory in addition to pricing and software. Over 7 years with Pricefx, he held several positions including Solution Strategist Manager for the EMEA region and spearheading the global retail industry team as a subject matter expert. Throughout his career he has held various positions at specialized consulting companies, providing value to clients by advising on pricing strategies and implementing pricing software. In his free time, he is a passionate cook, beach volleyball and volleyball player, spending most of his vacations travelling and hiking.