The Amazon Effect
Updated: Mar 3, 2020
The shift in consumer behavior is noticeable and has taken a toll on large retailers. It's almost impossible not to notice and hard to ignore.
Over the last few years, there has been a shift in the way consumers shop. Now, about half of shopping is done online through e-commerce sites. Consumers like the convenience and variety that online shopping offers. Another major change in the economy is; once large retailers like Sear's, Toys R Us, and Payless have all filed for bankruptcy. So how is it that these once money making corporations have run dry? There are many different reasons for their filling but many have pointed their finger at Amazon. Amazon, an e-commerce store that sells virtually everything. From food, to tools, to skincare and books, it sells it all at an affordable price with fast shipping. With all that Amazon offers, it's hard to compete. It's no wonder why Amazon has been seen as a threat to large retailers.
If Amazon has this effect on large businesses then what's the impact on small businesses like?
Amazon has both positive and negative effects on small businesses, so it's different depending on who you ask. About half of the items sold on Amazon are produced by small and medium sized businesses.
In partnering with businesses, it gives them the opportunity to sell their product to a large audience and gain exposure. To reach an audience that large might otherwise be impossible for small businesses. That's not the only way Amazon has helped businesses. They also lent more than $1 billion to businesses across the United States. In a recent report conducted by Amazon, it reported that 68% of small business owners stated that Amazon has had a positive impact on their business.
Although it allows small and medium sized businesses to gain exposure, there is a negative effect to this. The increase in knock-off and counterfeit products. Businesses with unique products that do well discovered that Amazon had been selling products identical to theirs in bad quality and usually produced in other countries. Since the products are identical, it makes it difficult for consumers to know whether they are getting the real product. When this happens it not only creates more competition but makes consumers less inclined to purchase the item again.
Another problem that business owners face is that Amazon charges a high commission fee. Amazon charges a 15% percent commission fee, which is high compared to Etsy's of 5%.
As previously mentioned, many large businesses have filed for bankruptcy. Each of these retailers had something in common, they all had brick and mortar stores. When your product is sold online and easily accessible to the consumer it can be difficult to drive traffic to storefronts and even to a business' website. Amazon has proven that a storefront is not needed to be successful, therefore, motivating businesses to have e-commerce sites.
In the end, Amazon is changing the way we buy and sell products. The impact that Amazon has is different for every business owner. While Amazon can offer a variety of products and fast shipping, it still lacks one thing. Small and medium sized businesses are able to build a strong and more personal relationship with each customer. This is also helpful when changes occur in consumer behavior because they are able to adapt to those changes better than Amazon can.