Impact of E-commerce on the Retail Market

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The e-commerce market is on the rise, but that doesn’t mean the retail market has gone down significantly. You don’t see shopping malls closing down every other month or the retail stores of your favourite brand shutting down because the same products are available online. Yes, there has been a paradigm shift from retail to online shopping, and it has put the private sector employers in a harsh and peculiar position. Quite recently, Tesco, one of the biggest retailers in Britain stated that it needed to increase its cost-saving techniques by simplifying their operations. This meant that the company would axe down as many as 9000 jobs in both its head office and UK stores.

According to reports, the e-commerce market holds just 10% of the total retail, but that is proving to be enough to put a dent in the retail market. However, the rise in the e-commerce platform has been specific to a few product segments. It has been a combination of sorts where more than 20% of the retail has been taken over by the online apparel industry and only 2% by the grocery department. That goes to show that although e-commerce has been reasonably successful, there are sectors that will continue to exist in the retail market.

Simplifying the operations

One of the rising concerns of the retail market is the loss of jobs of people who are being replaced by technology. This is another reason why there are rumors that Tesco is going to axe 9000 of its employees so that they can simplify their operations and achieve their targeted cost savings.

The approach of Tesco has been pretty simple. It is planning to operate differently compared to its competitor Morrisons. The latter is giving more importance to fishmongers, trained butchers, and a team of other specialists who are responsible for preparing in-store food. This included third-party caterers too. So, what Tesco is planning to do is that it will increase the staff for merchandising and for stock and quality control instead of employing a third-party caterer to do what the in-store staff can do. But the ratio of people who will be losing their jobs and the number of people who will be relocated to the quality and stock control in the head office has a huge difference. This difference is going to be the estimated 9000 people who are expected to lose their job because of Tesco’s cost-cutting initiative.

Streamlining deliveries

Another reason why e-commerce has had an impact on the retail market is that the products can be digitally delivered instead of having to visit the retail store and collect the products physically. The fact that you can get the products and services at your doorstep is a huge bonus. This has increased the rise to close down some of the retail stores of renowned brands. Almost all of the top-four food retailers operating in Britain are looking to improve their efficiency savings so that they can fund price cuts. This will ultimately help customers to get the same amount of discount that they used to get before the e-commerce platforms became popular.

As per the reports of October 2016, Tesco had been able to reduce its operating costs by almost 1.5 billion pounds. This has been possible because of the procurement savings and efficient distribution networks. Their target is to achieve at least 3.5 to 4% of the cost savings in the 2019-20 financial year which will be a massive improvement to what they did in 2017-18 when the cost savings ranked at 2.9%.

Efficiency in the delivery system is being looked into by most of the retailers these days. Starting from the ease of payment to getting the product delivered within the specified date to the packaging of the items, everything is going under the scanner to ensure that both the retail market and the e-commerce market maintain the balance. It is not just for Tesco, but thousands of companies who are involved in retail and e-commerce business have felt the need to cut down the operational costs so that they can focus on the delivery and overall quality of service that the customer gets.

The verdict

E-commerce platforms will become the new sensation in the years to come, but again, they will be limited to a few sectors like apparels or gadgets. But if you look at the global scale, the competition between retail and e-commerce market will continue to exist. They are almost in a position where they coexist because they are dependent on each other. Retail stores are becoming popular because people are coming to know about the respective brand from online stores. The online stores, on the other hand, are becoming popular because of the presence of the brand. So, even though there is news of job cutting, there will be different avenues where doors will open for more employees.

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