Is Amazon Putting Unfair Pressure on Independent Retailers?

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  • We all know how technology has changed the business landscape today. Tangible or intangible, it’s impact on us has been immense. But how many of us realize the way commerce, especially e-commerce have turned our lives upside down. For example, how many of us shop online today compared to how many of us ventured to an online shopping 2 years. The ease, flexibility, price and finally the overall shopping experience of buying something at the comfort of your house at the click of a button is what most of us prefer nowadays.

    According to a survey data from Pew, 80% of Americans shop online in 2018 as compared to only 22% in 2000. As per another survey done by BigCommerce, Amazon accounted for 49% of the e-commerce market in 2018. To put things in perspective, this is more than the combined e-commerce business done by their top competitors like e-bay, Apple and Walmart. Close to 200 million people around the world visit Amazon’s website, 12 million products sold, 95 million Amazon prime members, shipped over 5 billion items world-wide in 2017…the list goes on. It’s simply staggering! Needless to say, their presence benefits the economy and the consumers. But not so for all, especially the ordinary independent retailers. Due to the sheer volume and size of Amazon, the retailers are simply not able to match up to Amazon’s free shipping offers. The shipping costs constitute majorly for these retailers and have a direct impact on their business. According to a recent survey conducted by BigCommerce, it was found that 84% of 3000 consumers surveyed said that they specifically made a purchase because of free shipping. From the merchant’s side, only 13% of stores offer free shipping and 68% of merchants believe that Amazon free shipping practice puts unfair pressure on independent retailers.

    The story goes from bad to worse for retailers, many of them are filing for bankruptcy as they struggle with debt and competition from the Big Brother. There have been cases of retailers going bankrupt – twice; for example Barneys and RadioShack went through bankruptcy once, emerged, and then headed for it again. According to Stephen Selbst, chair of the restructuring and bankruptcy group at New York law firm Herrick Feinstein, ‘’we deal with sick industries, and retail has been a sick industry for a while.’’ As per the data provided by CB Insights, the retail bankruptcies are on the rise – 22 in 2019 as compared to 17 in 2018.

    Big part of this problem seems to be Amazon which is the dominating player in the industry and consumers prefer Amazon due to its wide variety of offerings along with no shipping costs. People are preferring to stay indoors and buy right from their couches without the need for going outside. And then there are some other reasons – like the case with Fairway that went bankrupt due to increased debt and fast expansion. The retail names in the bankruptcy list has been increasing and include some of the big and well-known names including Payless, ShoeSource, Gymboree, Charming Charlie, Wet Seal, American Apparel, and so on.

    We can’t be certain about the long term impact to retail industry. However, we know that certain retail stores will continue to exist like the Walmart and Targets. They are large, well-established, and have the scale to compete with Amazon. For non-chains, it is going to be harder to compete with Amazon. We might see independent stores offering exceptional services and high margin goods. But we will have to wait and see what’s coming next.

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