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Despite the ongoing pandemic and economic problems, Jeff Bezos’ net worth keeps going up. He’s so rich that he’s worth more than Bill Gates and Warren Buffett combined – an astonishing achievement.
What’s driving this hyper success? How can a retailer store operator make more money than the guy who invented Windows and introduced the world to the PC? It just doesn’t seem possible.
The answer lies in the megatrend that is currently underway in e-commerce. Despite all the talk about the importance of physical shopping as an activity, it can’t compete against the convenience and price of its online rival. No matter what it does, it will never grow at double-digit rates ever again. It could even disappear. City centers might be venues for eating, driving, and being entertained. Retailers could move out almost entirely – either that or rents will collapse.
E-commerce, therefore, looks set to dominate in the years ahead. But it’s not just tastes and the pandemic driving the change. Other forces are at work behind the scenes.
Traditional retailers had to follow a set path in business. First, they made their initial location a success, attracting customers, and gaining business. Then, over time, they expanded to new places in the same country. And that’s all that happened. Most chains “top out” at the national level, never really taking their business overseas.
Multi-currency payments and brand customization, however, is changing all that in the e-commerce space. Firms in this sector can simply adjust their national websites for a particular audience and take payments in any currency. What’s more, they can manage their cash flow using services that convert all receipts into USD, so they don’t have to juggle multiple accounts. It’s changing the game for small startups and big players alike.
When Amazon introduced same-day shipping in some regions of the US, demand for its services rocketed. The reason for this is simple: it removes a transaction cost that encourages people to go out to the shops. Some buyers are willing to wait a couple of days for their goods to arrive in the post, but many want products right now.
Over time, however, e-commerce companies are getting better and better and providing this level of service. By 2030, it might be possible to get your parcel delivered in just a couple of hours, allowing it to compete directly with the immediate gratification of brick-and-mortar stores – an incredible achievement.
Thanks to reductions in their incomes over the last several years, consumers are always on the lookout for bargains. But regular retail outlets have a bunch of overheads. Not only do consumers have to fund the cost of distribution, but they must also pay for the stores themselves, and all the retail staff. Thus, regular shopping necessarily implies an inescapable overhead.
E-commerce stores don’t have to pay for any of this. Their digital storefronts are virtually free. Plus, they only need one, allowing them to slash costs dramatically. Even more substantial differences in prices between online and offline will likely develop over the coming years.
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Written by: Partner Contributor
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