The role of e-commerce in the retail industry

Big-Data analytics retail ecommerce

Ever wonder why there’s so much buzz about e-commerce? Is it just a bubble or something futuristic? Or maybe a hype? Read on to get your answers.

By now you know that no matter how much property you’ve acquired, there’s always something you’ll need soon enough. Aside from basic items like food, water, clothing, and shelter, the need to acquire things we don’t have is human nature. 

So how do you acquire things you don’t have using what you have? The answer is simple — commerce (buying and selling). We buy what we need using what we have, or the monetary equivalent of what we have. 

Commerce at its core was built on consumer products (things you can use directly). The early men traded basic items like food and clothing using the barter system. Today, we still buy the same class of items using money.

Do you still think it’s hype? 

Humans had always craved convenience where available. The rise of the internet has provided new ways of doing old things, thus making life easier.

Basically, any commercial activity done over the internet is e-commerce.

E-commerce makes it easy for us to meet one of our basic needs. The desire to buy items conveniently, know the prices of items when budgeting, among others, has made e-commerce a better option for regular commerce. 

The retail industry, on the other hand, has seen a dramatic shift in the means of delivery of customers’ goods. In the early 1900s, big players like Walmart and Macy’s used departmental stores to give customers the best shopping experience.

Today, industry Titan – Amazon is leading the wave of e-commerce using the internet and fulfillment centers to give customers the 21st-century buying experience — shopping convenience.

The online retail marketplace is a cool place to shop, but many users complain that long delivery dates are a pain point. Amazon’s 2-hour delivery for prime users is a close shot at addressing the problem.

Gorillas, an on-demand grocery delivery company in Europe with the promise of delivering groceries within 10 minutes of ordering, is trying to address the issue of the prolonged goods delivery.

In Nigeria, a startup like Phlenyx is going to address the same issue, thus providing up to 90 minutes of goods delivery after its beta launch in December 2021. 

So why is there so much buzz about e-commerce?

The answer is simple — e-commerce is the future of retail trading, and we are living in that future. Buying from supermarkets and “mom-and-pop” stores won’t be going away soon, after all, over 95% of global retail trading is done offline. Nevertheless, the transition to retail e-commerce is quite rapid, with a 27.6% global annual growth in 2020 compared to 20.2% in 2019.

E-commerce is here to stay. As customers increase their expectations, retailers have to come up with innovative solutions to meet the demand. With this in mind, we hope to see more e-commerce innovations in the few years to come.

Ever since Amazon established itself as the go-to online retail marketplace, other retailers — big and small — had followed suit. The internet has created an easy-to-access stream of the audience, thus making it very easy for businesses to have direct connections with their customers. 

Shopify, a subscription-based software that allows anyone to set up an online store and sell their products, is helping small and medium scale retailers to take advantage of the e-commerce wave. Today, over 1.75 million merchants operate their online stores using Shopify.

The current supply chain of consumer products makes it hard for producers to get direct feedback from customers. Here’s how the standard supply chain works:

  • The producer sells to the distributors
  • The distributors sell to the wholesalers
  • The wholesalers sell to the retailers 
  • The retailers sell to the consumers

The above process is cumbersome and hard to keep track of. By using e-commerce, businesses and retailers alike can sell directly to consumers, thereby cutting the middlemen.

Direct to customer (D2C) sales aren’t limited to cosmetics and fashion as you may think. Tesla, an electric vehicle and clean energy company doesn’t use dealers to sell their cars, they sell directly to you. You can easily order a Tesla EV car on their website and have it delivered to your doorstep. 

Some of the advantages of D2C sales include direct access to customers feedback and higher profit margins. A key disadvantage of using this approach is that it is quite expensive to establish a logistics network to meet customers’ demands. Companies who use the model must make a hefty profit margin per item sold to cover the added operational cost from making low-cost deliveries to consumers. 

In summary, D2C sales remove distributors and wholesalers out of the picture, thereby leaving just two key players in the retail industry — producers and consumers.

Should this be the norm for all retail categories? 

Author Bio

Bethel Udochukwu CEO and Co-founder of Phlenyx. Product designer (UI/UX), data analyst, and AI enthusiast with a passion for innovative technology especially in e-commerce.

Bethel Udochukwu CEO and Co-founder of Phlenyx. Product designer (UI/UX), data analyst, and AI enthusiast with a passion for innovative technology especially in e-commerce.