As more retail heavyweights focus on ecommerce, and online leaders expand their offerings, smaller stores will be forced into more specialized niches, according to a recent Practical eCommerce survey. When asked what was likely to happen to ecommerce in the next five years, 68.7 percent of respondents to the survey said they believed big brands will dominate online retailing, while smaller merchants will become more specialized.
Big Brands Already Dominate
The fact is that big brands already dominate online retailing to a great extent. As perhaps the best example, Amazon recently reported sales of $4.89 billion in the first quarter of 2009. Meanwhile, by some estimates, total U.S. quarterly online sales reached about $35.2 billion, giving Amazon a relatively large share of the total available market.
Furthermore, big box retailers like Wal-Mart and Best Buy have been working hard to increase their share of the online market, and these corporations have significant advantages over the mid-sized online merchant. As an example, Amazon pays next to nothing for its shipping charges (just $348 million on $4.89 billion in sales, or about 7.3 percent), while small Internet merchants pay close to retail (often 40 percent of sales or more) for shipping services at UPS or FEDEX. Essentially, this means that Amazon and other massive merchants can offer customers free shipping that cuts only a few points from their profit, while smaller merchants have to virtually give their products away just to cover the shipping costs. This single advantage could mean that, in the next five years, it will not be possible for average retailers to compete with large retailers for sales of mainstream products.
Amazon to Become the De Facto Online Marketplace
The same respondents also believed that Amazon would become more of a marketplace and even, perhaps, the de facto marketplace online in the next five years.
Asked what Amazon (perhaps the most recognizable ecommerce company on earth) would do in the next five years, 43.3 percent of those surveyed believed that Amazon would be the single most important online marketplace, and 37.7 percent believed that the company would do less retailing itself in favor of providing a marketplace or platform for others to sell from. 10.4 percent believed the opposite was true, saying that Amazon would ultimately turn on its ecommerce customers and take all of the business for itself.
|In the next five years, Amazon will likely…|
|Become more of a marketplace and do less retailing itself||37.3%|
|Become the de facto online marketplace||43.3%|
|Replace eBay as the leading online auction site||9%|
|Turn on its ecommerce customers and take all of the business itself||10.4%|
Some respondents did have a better opinion of Amazon, believing the company would actually save some smaller merchants. Essentially, as Wal-Mart, Overstock.com, and even Amazon push out the smallest of retailers, they would provide new platforms for those retailers to sell from. The survey respondents seemed to predict that buying on Amazon won’t be buying from Amazon — it will be buying from someone selling on Amazon.
Video Will Be Everywhere
The survey also asked respondents to prognosticate about which technologies had the potential to revolutionize ecommerce. Far and away, those surveyed believed that online video would dominate; with one respondent commenting that even eBay descriptions would be replaced with demonstration videos in the next half decade.
Interestingly, PHP, which powers most ecommerce platforms and tools, did not earn a single mention in a list of revolutionary technologies.