Will new e-commerce vendors push existing merchants?

The Coronavirus pandemic has forced some brick and mortar companies to focus on e-commerce, but this shift in focus is unlikely to stop many permanent closures.

"If this is not the retail apocalypse, I don't know what would be," said Sarah Wyeth, lead retail and restaurant analyst at S&P Global Ratings, according to an article in the Wall Street Journal on May 14, 2020.

Wyeth has estimated that 19 major retail companies are a coin tossed out of business due to mandatory shutdowns and Covid-19's total financial impact.

In addition, according to The Wall Street Journal, about 100,000 stores may close in the next five years due to consumer interest in e-commerce and the pandemic-induced recession.

One could say that there is a parallel between the virus and its economic impact: Patients and companies that already have poor health are much more likely to die from the infection.

Effect of e-commerce

As brick-and-mortar chains, stores and stores work to survive (or in some cases thrive) post-coronavirus, they can focus on e-commerce and its close cousin click-and-collect trade or, as it is sometimes called, buy -online-pick-up in-store.

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The Coronavirus pandemic and its associated store closures have driven some brick-and-mortar companies to focus their attention on e-commerce. Photo: Charles Deluvio.

Asked if he thought some brick-and-mortar companies that had not had a strong e-commerce presence before the Covid-19 pandemic were more likely to invest more in online sales, eCommerceFuel founder Andrew Youderian responded, "Totally, 100 percent."

“I talked to a number of local retailers in recent weeks who strive to swing online as best they can. This will be good for SaaS companies and those who help sellers work as well as for customers who will have more store options online. If a meaningful number of these merchants successfully swing online, it can also lead to a more competitive marketplace, especially in the short term, "Youderian said.

Data from some e-commerce platforms support Youderian's claim.

For example, in a press release May 6, 2020, Shopify said new store creations on its platform grew by 62 percent between March 13, 2020 and April 24, 2020. At the same time, the company reported $ 470 million in revenue from the first quarter, up 47 percent from the same 2019 quarter. .

Similarly, 3dcart, another provider of SaaS e-commerce platforms, saw new account activations by 34 percent in April compared to the average for the first quarter of 2020, according to Jimmy Rodriguez, the company's chief executive.

"We are seeing a combination of bricks and mortar just beginning to explore e-commerce and retailers who already had a presence of e-commerce that shifted resources to make this their main source of income," Rodriguez said.

"In most cases, we see the need to quickly serve their existing customer bases more than invest in online marketing to catch new customers, so it would be difficult for these" newer "companies to catch up with more experienced e-retailers."

Small retailers

A key issue is whether an increased interest in e-commerce, especially if it comes from established brick-and-mortar retailers, will pose a significant competitive threat to existing e-commerce vendors.

There are several possible scenarios.

Rooms for everyone. E-commerce can thrive in the "new normal" after the pandemic, leaving room for all – or at least many – merchants to sell online.

This is the best case. But it can also be the least likely. BigCommerce, for example, reported on May 12, 2020, that "buying panic for panic is leveled off and people are starting to return to more of their usual spending habits."

As of May 12, the total trading volume on the BigCommerce e-commerce platform had increased only one percent compared to the previous week. Earlier in the shutdown of the pandemic, BigCommerce retailers experienced significant GMV increases in week-to-week transactions. And in some industry segments, the three-digit increase year by year.

Weak brick-and-mortar. In another scenario, many smaller retail companies will build new and significant investments in e-commerce, but only in the short term.

"While some (brick-and-mortar SMEs) will undoubtedly use this as a springboard for online success, I would guess that most of them do not have a meaningful online presence in the long term," said eCommerceFuel & # 39; s Youderian.

“Online success takes a lot of deliberate time, effort and study and is a very different business than (physical) retail. I guess many smaller merchants will return to focus on the retail side when they open to the public, although there will undoubtedly be a small halo effect from merchants who will now do both. "

If this were the case, small, purely gaming e-commerce vendors, especially established ones, would probably not feel any major impact from new competitors. These pure-play companies would still have to deal with the coronavirus's impact on the economy and their business – but not with inexperienced competitors.

Small shops are squeezed in. Finally, a significant number of traditional bricklayers who migrate online can squeeze small e-commerce transactions.

On the issue of smaller brick-and-mortar retailers who had not paid much attention to e-commerce before the outbreak posed a possible threat to smaller, pure-playing e-commerce, Rodriguez told 3dcart: "It will definitely have an effect since one of the new requirements is the ability to provide in-store retrieval on the e-commerce site, and for customers who prefer this method of delivery over traditional shipping, the new brick-and-mortar e-commerce hybrid model would win over stores that only offer e-commerce . "

Scenarios, only

Will an increased interest in e-commerce pose a significant competitive threat to smaller e-commerce? Perhaps. It may be a version of one of the three scenarios above. Or it may be that none of these will be realized.

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