The Challenges Of Retail In An Online World

The internet has proven to be a very useful tool in the last few years.  It has allowed people to connect, and stay connected, with long lost friends, relatives, or even long time co-workers.  As with most things in this world, however, where there is a positive, there is also a negative.  While on the surface it may not seem negative, there are pitfalls.

I, of course, am talking about online shopping.   On the surface, online shopping seems relatively harmless.  You can find any product you need, it’s the cheapest price out there, and it’ll ship straight to you with you ever having to leave your home.  Not many people stop to consider 2 things: 1- How most online stores operate, and 2- The long term effects on our economy.

Let’s start with how most online stores operate.  Most online stores start out as 1 person, at a computer.  Since any website can be run from a home computer, most “stores” don’t even require an “office”.  That said that person has very little business expense.  Additionally, most are set up to “drop-ship” items, meaning they never see it.  They order it from the manufacturer, and send it straight to the customer.  This is part of why so many online stores do not accept returns.  They simply are not set up to handle it. 

On the other hand, a store such as ours has: overhead, payroll, electric bills, taxes, insurances, etc.  Brick and mortar stores have 2-3 times the expense of most online retailers.  Additionally, most online retailers don’t collect sales tax.  That leads to the online retailer offering a much cheaper price.  This is because, even if they just make a $2 profit, that’s $2 that goes straight into their pocket.  A brick and mortar store, however, has to split that $2 to pay for the items I mentioned earlier. 

“I’m still not seeing the problem”, I can hear some of you saying.  Well, that leads me to the 2nd point.  The more people turn to online shopping, the more brick and mortar stores will close, or have to cut back.  JC Penny, Wal-Mart, Best Buy, and others have all experienced this.  When you wonder why a local grocery store has only 3 cashiers working, it’s because they can’t afford the added payroll.  Some analysts project that by 2020 more than 70% of shopping will be done online.  That’s money that leaves your local economy.  That leads to multiple things: less revenue for government agencies that are funded by taxes (government numbers say that over $12 BILLION was lost in uncollected sales tax last year), less jobs available for people with office skills.  I could go on, but you get the idea of where that leads.

If these trends continue, I fear that we will all lose our ability to just walk into a store and try out the product we want.  What we have to decide is whether we want to pay the cheapest price now, or the heaviest price later.




31 July 2013, 16:20
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