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How costs affect the E-commerce Industry

E-commerce costs structure is undeniably well distributed and well maintained – as most of the costs associated with overhead expenditures don’t make a great impact on its pricing. That, of course, because e-commerce businesses’ costs mainly coming from the purchase price of the products, handling costs and wages. Online stores’, unlike department stores, indirect costs are reduced to a minimal (IBISWorld: iExpert Industry Summary 45411Aca - E-Commerce & Online Auctions in Canada). This fact directly impacts how retailers price their products in order to obtain a markup.

For a retailing industry to make it big, a great focus on the overhead costs must be on the top of their priorities on how company’s price changes must be done – because all other costs are fixed costs. E-commerce costs structure, however, remains to be an edge for them in the retailing industry.

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Online Shopping dominates

Based on the key statistic - market share report provided by IBISWorld (iExpert Industry Summary 45411Aca - E-Commerce & Online Auctions in Canada), Canada’s e-commerce industry is currently at its peak as compared to other retailing industry sectors. With its continuous growth, a few years from now, it is no doubt that it may eventually become the core of all retailing industries.

With the technology now dominating almost all traditional aspects of communication or interactions – or what we called the “medium of communications” used before – online shopping could possibly dominate retailing industries in no time as well.  As the economy grows and as the technology innovates, a clearer view of what’s in store for e-commerce businesses’ is pleasingly convincing and encouraging. In fact, in North America alone, there are at least 50 Amazon listed locations/warehouses (Amazon Website – Locations) within the region. It will not be surprising if a few years from now many other retailing businesses will make drastic changes just to leverage the robust growth of e-commerce businesses.

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Factors of E-commerce Business Growth

It takes no knowledge of any sort to know that online shopping is getting bigger by the day. With the very low prices and convenience that it promotes, it is not surprising that e-commerce business is now expected to have an annual growth of 9.8% globally (E-commerce Report 2017 by Statista DMO – Market Report).

This fact, however, when I was still living in the Philippines is not highly evident or at least in my hometown. Many Filipinos still prefer buying at the local markets than shopping online. So, when I first came here in Canada, I was so reluctant to buy anything that has to do with online shopping – I was thinking it was too convincing. But when I realized how big it is here and how entrusting the people are with goods they bought online, and how they are so at ease with packages or deliveries they will receive at their front doors, I decided to try. With that, I finally understood – on my own perspective – that e-commerce business boost in a country is not just about the two factors: low prices and convenience, but as well as the public trust within a community and/or with the government system as a whole.

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The Pros of Online Shopping?

The everchanging e-commerce business’ structure continuously creates a more dynamic and time-saving shopping experience to the consumers. These changes somehow have helped innovate online shopping to a whole new level, where embracing technology became a must. In fact, some of the working parents and the so-called “millennials” I know are spending more time shopping online than ever before – not-to-mention I, myself shop online more often than before. This drastic change in the industry seems to be the effect of today’s techy era, where everything could be possibly done with a click. The increasing use of social media became a norm to us and somehow, prevented us from noticing the negative effects that comes with it. We became more reliant on its pros without considering how it will affect us in the long run. And now, as my first blog, I listed below some of the negative sides/effects – I believe online shopping blinded us with its pros.

Ø  Social interaction – this, obviously, has a lot to do with today’s social media addiction. We became so comfortable interacting online that we forgot the importance of verbal communication. Same goes for online shopping, we failed to realize that it also contributes to the decreasing social interaction in today’s generation.

Ø  The importance of arms-length transaction – long before e-commerce businesses emerged in the retail industry, retailers have been using arms-length transaction as a way of giving discounts. It may not be an issue for online shoppers as options are available, however, as a consumer, it is always beneficial getting discounts out of the sales price.

Ø  Post-sale satisfaction – products’ satisfaction always comes first as one of the primary concerns of the consumers when buying online. It’s true that online shoppers tend to be more reluctant buying goods because of quality concerns, but somehow expecting the worst became part of it – this, of course, is not okay.

Ø  Product returns – it is not new to anyone who has experienced buying online the difficulties of returning products. It’s time-consuming and sometimes, costly if not done within the time provided for returns.

Ø  Retailing industry downturn – e-commerce businesses’ slowly killing department stores and other retailing companies’ sales (IBISWorld Industry Report 45211CA). Convenience and selling price are considered the main factors of this downturn – online shoppers save more money and time buying online than in stores.