A stretch of fancy stores in Connaught Place, New Delhi is among the loveliest sights in the city, with quaint shop-fronts opening on to tree-lined pavements. Recently, a point of tension occurred when the streets were dotted with empty shops, their landlords are unable to find tenants.
Ecommerce will not demolish all retail trade. Stores that are distinctive in one way or another – because they offer excellent service, for instance, or unique products – will remain. In the longer run, the impact of ecommerce will not be limited to the conformist retail industry it is progressively replacing. It will also change how consumers spend their days, transform the landscape, disrupt workers’ lives, and reshape governments’ view of corporate power.
Ecommerce has escorted in a golden age for consumers. They can choose from more products of better quality than ever before and spend far less time and effort to get what they want. It has become essential for complacent manufacturers to fight fiercely against the ecommerce revolution that is about to take over every country and continent. No wonder Amazon is the most popular company in America, according to a recent Harris Poll.
But there are downsides, too. As debates over consumer privacy intensify, tracking online, at home, and in shops becomes ever more inescapable. Companies say they will anonymize and aggregate customer data collected by tracking, but their methods are opaque. The only reassurance given by the firms is “we will take care of it”, which doesn’t fulfil any criteria of satisfaction.
The effects of ecommerce on the physical landscape are just beginning. So far, the most notable changes have been in rich countries, and particularly in India and China. As demand for physical shops ebbs, that for warehouses will surge. But what will happen to the shops that no longer have enough customers, and where will the new warehouses go? There is no easy way of turning one into the other. Companies want to build warehouses close to consumer hubs, but the malls are also the ones most likely to shut down.
So warehouses will probably be built close to residential developments, with which they are already competing for land. Many regions of India are planning to build logistics centres and new homes side-by-side. Since land is scarce and expensive, warehouses will get taller, as many in Asia already are. For same-day deliveries, smaller distribution centres will spring up near central business districts. Rents there are likely to rise.
The future for ailing stores is less certain. Many shops in big cities will remain, less as sales hubs than as showrooms. Rents for them will probably come down. But there may not be enough of those to take over all the retail space that will become vacant in the years ahead.
That need not be a bad thing. In India, real retail wages have been flat for almost a decade. Technological change will improve productivity and create new types of work, and the jobs that remain will probably be better paid. But workers will need new skills as stores try to create more footfall.
The question looming over all this is whether governments might step in. Chinese leaders may want to exert more control over their powerful technology giants. According to one report, the Chinese State is mulling a direct investment in some of them. Barring any dramatic intervention, however, the biggest ecommerce sites look set to get bigger. Amazon and Alibaba typify a new breed of conglomerate that benefits from network effects. The more shoppers firms can muster, the more sellers will flock to them, attracting yet more shoppers. These effects are turbocharged by the breadth of their businesses and the vast amount of data they generate. This does not mean they will dominate every sector or market, but their mere presence in an industry will reshape it.
Ecommerce is changing landscapes in a big way and will continue to move markets along. In next decade, there will be unimaginable changes, from automated shipping vehicles (manifested as a drone service?) to improve delivery timings to the time when your pantry will get self-filled by smart-jars and kitchens – the potential cannot be visualized.
The question is not if the ecommerce giants will keep upending retailing, manufacturing, and logistics – rather, it is which industry and part of society will they change next.
Verun Rastogii is Founder and CEO of Mufubu.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)