By Evan Shields
The decline of physical shopping has been happening for some time now. No longer do we drive down to the store or add to our mental shopping list when we do not have an item we need. Nowadays, most goods are one click away through massive producers like Amazon, and this convenient form of shopping has become a staple of everyday life. Stores like Sport Authority and Borders have already collapsed due to this digital economy, and I would be surprised if Pier 1 Imports makes it to the end of this year. It appears that nearly everyone, not just millennials, prefer online shopping to physically going to a store.
Still, there are inherent problems with online shopping that are not immediately visible. Take Walmart as an example. Walmart is a big box retailer that would have likely survived without its own online marketplace, yet still adapted to consumer needs by giving consumers the ability to shop an extensive selection of Walmart items online. Although Walmart’s adaption to the changing marketplace appears to benefit the firm, Walmart’s decision to combine its in-store and online buying teams challenges that assumption.
This change may seem insignificant, but this now-singular team is tasked with pricing items to ensure that Walmart’s online marketplace becomes profitable. Indeed, although Walmart’s online sales grew 37% last fiscal year, a 35% increase in the fourth quarter, Walmart’s online sales still have not reached the point of profitability. In other words, this extensive growth was still not enough for Walmart to have a self-sustaining online sales platform.
That leaves a question about e-commerce as a whole: is its simplicity and attractiveness to consumers worth the loss in profitability that exists with in-store sales? As other stores begin to delve into e-commerce, they could find that even with continuous growth, e-commerce is not profitable (or not profitable enough to be sustainable). Perhaps this lack of profitability is a sign that e-commerce is not going to dictate our future as heavily as we may think right now. Perhaps in a decade, we will be back to our old shopping habits, driving down to the store to pick up our necessities.
Still, even without profitability, the adaption to the online marketplace may be necessary. No one wants to become the next Sears.