E-Commerce vs. Traditional Commerce Series, Part 1

HOW ONLINE RETAILERS ARE WINNING YOU OVER FROM BRICK AND MORTAR STORES

Online retailers are luring an increasing number of shoppers to do business with them. According to the latest Census figures, e-commerce sales increased sixteen fold from $12 billion in 1999 to $192 billion in 2012. This figure will unequivocally increase in the years to come. The increase in sales is due in part to the increased efficiency in the supply chain. Here are just three ways online retailers make the online buying experience quick and seamless for consumers.

 

1. Building distribution hubs near strategic locations

Because shoppers are buying online more, e-commerce businesses are responding by opening more distribution hubs. Earlier this year, Amazon.com announced that it will open a distribution center in Redlands, CA (Inland Empire) in October. The demand in e-commerce has resulted in the company opening four other centers in California within the past two years. These centers tend to share many characteristics, such as being located in or near edge cities and being located close to multiple major freeways. By blending these characteristics together, they benefit shoppers in metropolitan areas, enabling delivery items to be sent quickly and efficiently. This leads to the next strategy of e-commerce business.

 

2. Giving customers in-store or same-day shipping

E-commerce businesses and retail stores are facing increasing competition from one another. Retail merchants are offering in-store pick up for customers that reach them online. Meanwhile e-commerce businesses are offering same-day delivery to consumers. In May 2014, Google expanded its Shopping Express program to the Westside. In June of the same year, Amazon.com also broadened its reach to select Los Angeles neighborhoods on the Westside and the South Bay by offering same day delivery on groceries and millions of other items. The aim is to become even more competitive against brick and mortar shops as any in-stock product there can be purchased by the buyer, allowing them to take it home afterwards. Although if online retailers offer cheaper prices, along with the convenience of same day shipping, then customers might forgo the instant gratification associated with buying in a traditional retail setting and choose to buy via the internet.

 

3. Mobile shopping experiences

More customers are using a smartphone for shopping – 84% of smartphone shoppers utilize their device as an aid while shopping in stores, according to a research study by the Google Shopper Marketing Agency Council. Just over half of those surveyed say they make price comparisons while shopping in brick and mortar stores. The mobile technologies also influence the way consumers shop. A study conducted in Europe mentioned that 20% of in-store shoppers decide to buy elsewhere and 22% of them decide to purchase online. Therefore, mobile technology presents challenges to traditional retailers. As measures to mitigate shoppers from buying elsewhere, both traditional & e-commerce merchants should “use price match guarantees, stock unique product bundles and create store specific brands and products.”

 As the three points above show, online shopping gives shoppers undeniable convenience and power when shopping for products. Nowadays, more consumers are experiencing less waiting because distribution centers are closer to where they live and as a result, shipping time decreases – allowing purchasers to receive items within a day or two, sometimes even on the same day.  Although e-commerce may not work for all purchases, such as clothing or mattresses, it presents itself as a good alternative to the traditional way of shopping.

E-commerce benefits and hurts different sectors of real estate. For example, it is beneficial for industrial sector, but less so for the retail sector. In the next part, we will explore how malls and other retail spaces are reacting to e-commerce.

 [UPDATE]: Click here to read part two - "Strategies Shopping Malls Are Using to Combat E-Commerce"