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E-Commerce: Downfall of Brick and Mortar Stores 1

E-Commerce: Downfall of Brick and Mortar Stores 7

Down Fall of Brick and Mortar Stores

Downfall of Brick and Mortar Stores

Background

E-commerce is growing at a higher rate across the world as people begin to adopt online shopping as opposed physical shopping. In 2018 for instance, consumers in United States spent $517.36 billion on online shopping –accounting for 14.3 percent of the total retail sales. This presents a 15 percent growth from the total e-commerce sales recorded in 2017 amounting to $449.88 billion. E-commerce giants like Amazon continue to register a tremendous growth –commanding a 40 percent of the total online retail in U.S. Due to this unprecedented growth, e-commerce is expected to dominate the retail sector to become the largest retail channel globally by the year 2020. This new wave has begun to sweep some major brick-and-mortar retailers that rely on physical stores to sell their products and services. Failure by management to utilize technology in shifting their operations to online e-commerce has led to their agonizing downfall. This paper seeks to conduct a systematic analysis regarding the rise of e-commerce and its impact to the downfall of major brick-and-mortar stores witnessed over the last few years. Additionally, the paper will extend focus on other factors that may have led to the downfall of renowned physical retail stores across the United States.

Part I: Introduction

Remarkably, it is beyond no doubt that brick-and-mortar stores are facing a lot of pressure resulting from growth in e-commerce. Failure to embrace technological shift to e-commerce is forcing major brick-and-mortar retailers out of the market. Physical stores are “being pushed towards the path of extinction” for failing to adapt to new changes in the market. The year 2017 and 2018 marked the biggest trends in the closure of key reputable physical retail stores due to the “apparent disaster of decline in sales.” Macy’s, J.C. Penney, Sears, Bon-Ton, Fitch, Toys “R” Us, and Abercrombie, just to mention a few, are some of giant physical retailers which have been forced to close down their stores.

Truly, we are experiencing heightened level of big retail closures that has hit the U.S. in the last 10 years. On the other hand, companies like Amazon that have embraced e-commerce continue to register massive growth. In 2018, Amazon hit $206.82 billion in sales from their e-commerce site Amazon.com. Customers have developed confidence with companies which have e-commerce apps and websites since they offer them an opportunity to shop at their own convenience. By 2020, the growth in e-commerce is expected to hit a historical 200 percent –meaning that customers will be continue to find it convenient to shop online since it saves them time required to visit physical stores and make manual selection of items.

Part II: Literature Review

Many studies have been conducted across the world as researchers seek to understand the impact of growth in e-commerce and its contribution to the downfall of brick-and-mortar stores. The studies covered in this section are aimed at establishing the role of rising tide in e-commerce as well as any other factor that may have resulted to the widespread downfall of giant physical retail stores across the U.S.

Growth in technology has offered a platform for businesses to expand their operations. Web technological platforms offer a powerful business resource –mainly the e-commerce. Thus, technological advancements have offered organizations an opportunity to make strategic investment by acquiring websites and apps that can enable customers to shop for products and services online (Chatterjee, Grewal & Sambamurthy, 2002). Effective web assimilation offers businesses an opportunity to succeed since the maintenance costs are less compared to those of physical stores. When developing e-commerce systems, developers need to follow a logical structure that unifies all the elements of the system since this determines their success. According to Fang, Lim, Qian & Feng (2018), “e-commerce has emerged as an important strategic resource for firms facing fierce competition in traditional markets.” Thus, brick-and-mortar stored are being forced to make strategic decision on the need to allocate resources required to expand their online presence. Notably, e-commerce companies provide consumers with “multiple points of contact, personalized information, and convenient transactions.”

Unlike brick-and-mortar stores that require a lot of resources to coordinate their operations including supply chain management and communication, e-commerce retailers are able to minimize these costs hence increasing their profit margin (Xiao & Benbasat, 2011). Additionally, e-commerce companies have a huge advantage over physical stores in many aspects. Ghose (2009) found out that sellers’ reputation is high in online markets compared to physical brick-and-mortar environment. Thus, is because consumers have the ability to review products and recommend them to others. Also, e-commerce helps to minimize hierarchical structures hence making management easy and effective. Moreover, it is easy to search for a product and services while their prices are affordable due to reduced logistics.

E-commerce business model creates a more flexible, dynamic, successful, and long-lasting relationship between buyers and sellers. This relationship is created through easy communication between online retailers and consumers. Unlike in brick-and-mortar retailers whereby a customer must visit the stores to interact with the seller, e-commerce offers a feedback portal that allows consumers to contact them anytime and receive real-time responses (Mithas, Jones & Mitchell, 2008). This makes e-commerce companies to build strong customer trust and loyalty. E-commerce stores are definitely more user-friendly compared to brick-and-mortar retail outlets. According to Webster & Ahuja (2006), e-commerce sites are more engaging allowing buyers to easily navigate through them and access all the necessary information. The “help” buttons on e-commerce websites and apps helps consumers link up with support team and access quick help regarding the company’s products and services.

Notably, online e-commerce sites generate income by applying different revenue models. The two popular models used by e-commerce companies is brokerage model and advertising model. eBay.com for instance uses brokerage model whereby sellers pay the company for every transaction they make through their website. On the other hand, Taobao.com offers sellers a platform to advertise their products and services and thus pay an advertising fee (Chen, Fan & Li, 2012). However, sellers prefer advertising model due to its exposure and the ability to generate more social welfare. The adoption of e-commerce model by consumers in depends entirely on a number of factors. Notably, consumers getting information regarding a product and use it to make decisions on whether to purchase product. It was found out that “technological characteristics (download delay, Website navigability, and information protection), consumer skills, time and monetary resources, and product characteristics (product diagnosticity and product value) influence the customer purchasing behavior” (Pavlou & Fygenson (2006). E-commerce companies strive to improve operations based on the current business frameworks being applied in the world of online transactions. Continuous improvements ensure that e-commerce companies enhance their effectiveness hence attracting unexpected segments of new customers (Albert et al., 2004). These endless improvements make e-commerce companies stand out ahead of brick-and-mortar retailers. Notably, e-commerce retailers continue to experience new and promising opportunities. The growth of social media platforms has been a big boost to e-commerce companies. Integrating social media to a company’s online marketing model can help to increase product awareness hence driving more sales. Based on a study involving Groupon.com, Li & Wu (2018) found out that “social media plays a key role in spreading the information regarding a product hence increasing awareness and demand.”

E-commerce companies engage in market research aimed at collecting lot of data regarding their potential customers. This data is subjected to data-based analytical methods in order to establish the purchasing behaviors of customers as well as their needs and wants (Padmanabhan, Zheng & Kimbrough, 2006). The availability of online data collection and analytical techniques makes it easy for e-commerce retailers to collect and analyze consumer data. E-commerce retailers spend less time and resources in collecting and analyzing huge amounts consumer data compared to brick-and-mortar stores that spend a lot of time and resources to conduct market research. Xiao & Benbasat (2007) also strives to the techniques used by online retailers to study consumer purchasing behaviors and interests. Online retailers that rely on RA software to gauge the decisions that customers make before purchasing products online hence helping them to develop products which satisfy consumer needs and wants.

According to Lin, Goh & Cheng (2017), e-commerce sites also depend on product recommendation networks to drive demand for their products. This strategy has gained a lot of popularity among e-commerce retailers in the contemporary world of business. Based on a study involving Tmall.com, it was found that both co-purchase and co-view networks play a key role in increasing the product’s demand and awareness. According to Wu, Huang & Zhao (2019), products and services review is a very crucial element for e-commerce retailers. Notably, customers express their satisfaction or dissatisfaction through reviews whereby they give their honest opinions regarding products or services. Online retailers strive to engage customers carefully in order to satisfy their needs –leading to positive reviews. Negative reviews might discourage potential buyers from buying products or services from an online retailer. According to Mudambi & Schuff (2010), product reviews help to supplement the information provided by e-commerce retailers regarding their products and services. Notably, customers in brick and mortar stores have no access to products reviews unlike e-commerce sites whereby consumers find reviews which are helpful in guiding their purchasing decisions.

In modern days, e-commerce companies are facing a myriad of challenges which derail their operation and ultimate growth. E-commerce sites are unable to create online brand positioning due to low skills regarding search engine optimization (Dou, Lim, Su, Zhou & Cui, 2010). Thus, most of them lack the capacity to maintain competition and maximize sales online. Despite the fact e-commerce B2C business model has been operational for quite some time, the online environment uncertainties remain a major impediment. According to, Pavlou et al. (2007), “consumers are reluctant to engage in online exchange relationships hence presenting a primary barrier to online transactions.” Fear of seller opportunism, privacy issues, and online security concerns are some of the major problems that online retailers must address in order to win the trust of consumers. According to Tan & Canfetelli (2016), e-commerce systems experience technical failure that affect consumer shopping experience negatively. This may lead to customer dissatisfaction since their needs and requests might not be met. The study sought to explore the challenges facing e-commerce systems making them undesirable for some customers.

Tremendous growth in e-commerce has created a prime ground for deception and fraud that take place online. This trend calls for the attention of consumer organizations and government agencies to detect online merchants who are exploiting customers through e-commerce websites. Consumer education is also necessary to create awareness among consumers on how to avoid online deception (Koch & Schultze, 2011). According to Hinz et al., (2011), maintains that online retailers have been exploiting customers through discriminative prices which are exorbitant in nature. Prices set by online retailers are dynamic and in most cases, they are determined by “buyer’s willingness to buy.” For instance, Amazon was once found to have sold a DVD to one customer at $22.24 and another one at $22.74. Hence, despite their convenience, there prices still remain high compared to physical stores. In some cases, electronic systems are bound to fail hence affecting the organizational operations, and so is e-commerce systems.

Problem Statement

Notably, technological shift to e-commerce has introduced a new B2C business model that has pushed traditional brick-and-mortar retailers to the wall. This wave is forcing physical stores to adopt an online business model in order to counter competition and avoid the path of extinction. However, there is need to understand that e-commerce businesses face a lot of challenges which make them undesirable to some consumers. Lack of privacy and security, data theft, fraud, and price discrimination are some of the issues that make consumers shy away from online shopping.

Notably, brick-and-mortar stores are still popular since consumers can interact with sellers and inquire about the products and services. Physical stores also provide consumers with “instant gratification when a purchase is made.” Brick-and-Mortar stores also offer consumers with firsthand shopping experience allowing customers to test products before purchasing them. Moreover, there are some products like cars which require offline selling. All these factors make brick-and-mortar retailers somehow popular.

Thus, the literature in the articles has not substantially linked the rise of e-commerce to the downfall of brick-mortar-stores in the American market. Thus, there is need to carry out further studies to answer this question: “Is it purely the technological shift to e-commerce that’s squeezing brick and mortar retailers, pushing them out of the market?”.

More is needed to understand the psychological and economic factors that influence the decision to buy online versus face to face.

For each article you need to provide a detailed discussion of the major constructs (factors) in that paper. Then build a table that show the constructs and description from each article.

Then you need to build a model to test your research question which will continue to change as you dig deeper into these research articles.

Grade B – this team is off to a good start – make the above changes in Red.

References

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