This SWOT analysis of the eCommerce Industry examines how online shopping is poised for the future and which threats will need to be monitored.
The eCommerce industry, otherwise known as the online shopping industry, has seen massive growth within the last decade. Thanks to the growing popularity of the personal computer and the fast-paced development of mobile devices, eCommerce businesses can now reach more buyers than ever before.
While the world of eCommerce is continuing to grow, it's easy to wonder what the future has in store. In this article, we'll use SWOT analysis — which analyzes the Strengths, Weaknesses, Opportunities, and Threats impacting a chosen industry — to see how online shopping is poised for the future, having also conducted the industry's PESTLE analysis.
Strengths
Here are two big Strengths of the eCommerce market:
Accessibility
Perhaps the biggest Strength of eCommerce businesses is their extensive accessibility. In the past, shopping meant physically traveling to a certain place, within certain times. With eCommerce, buyers can now browse, learn about, and purchase products from the comfort of their homes, at whatever time of the day (or night). Although teleshopping offers similar benefits, the advent of the internet has seen a huge number of consumers move away from TV, radio, and press towards computers.
Lower Prices
Another considerable Strength of online shopping is that products tend to have lower prices, when compared to traditional retail channels. One reason for this is that eCommerce typically involves sellers interacting directly with consumers, cutting out middlemen such as distributors. Another reason is that the eCommerce stores typically have significantly lower overheads than brick-and-mortar stores, which have to account for rent costs, employee salaries, and more.
Weaknesses
Here's one big Weakness of the eCommerce industry:
Industry Specific
Certain products lend themselves to eCommerce better than others. For example, books, electronics, and kitchen gadgets are all easy to sell through online stores, since consumers roughly know what to expect. However, some items are much less universal; the best example of this is clothing. It's difficult for consumers to purchase the clothing they want online, since they don't know whether it will fit, how it will feel, and how it will look. Unfortunately, it will be very difficult for eCommerce stores to expand into these industries.
Opportunities
Here are two Opportunities for the eCommerce market:
Growing Market
One of the biggest opportunities for the online shopping industry is the growing market. While most consumers in developed countries already have electronic devices, there are plenty of consumers in developing countries who don't — and, as a result, don't buy goods online. As the prices of electronics continue to decline, it's likely that we'll see an increase in the number of potential internet shoppers. This will subsequently result in a greater volume of eCommerce sales.
Influencers
There are a number of internet users who use their large social followings to promote various goods and services. These people, known as influencers, present a powerful marketing opportunity for savvy eCommerce sellers. With social media becoming such a huge part of our everyday lives, influencers are set to play an increasingly important role in how products are marketed — and eCommerce stores are best positioned to take advantage of this.
Threats
Here are four Threats for the eCommerce industry:
Competition
Although the eCommerce industry's low barrier to entry is, on the one hand, a Strength, it also poses a significant threat for existing sellers. This is because of how easy it is for just about anyone — anywhere — to launch a new eCommerce store and compete with other online shopping businesses. It's important to know that this element of competition doesn't affect the success of the eCommerce industry as a whole, but affects individual businesses.
Fraud
The world of eCommerce is fuelled by digital payments, whether that involves credit or debit cards, bank transfers, or even cryptocurrencies. This makes it a huge target for fraudsters, who now have an easy way to cash out on their illicit activities. Fraudsters can buy goods online using others' payment details — while staying completely anonymous — and send those items to neighborhood doorsteps, where they'll be swiped while the homeowner is out at work. Unfortunately, it's incredibly difficult to combat internet fraud, which is why it's such a big threat for the industry.
Data Concerns
Aside from blatant fraud, there's a lot of potential for things to go wrong with online shopping — especially when it comes to users data. Shopping online requires you to hand over a lot of sensitive data, including your payment details, address, and other assorted information. If this information gets into the wrong hands, it can have devastating consequences. Also, since the introduction of new data-related regulations like the European Union's GDPR, there are new complexities in the data aspects of running an online business.
Monopolies
Since eCommerce stores can cater to entire countries — or even the entire world — it leaves a lot of potential for monopolies to form. Perhaps the best example of this is if you review how Amazon has affected bookstores. In the past, a variety of local bookstores (including mom and pop stores, smaller chains, and larger chains) would have serviced a given area. With the advent of huge eCommerce alternatives like Amazon, these stores are dying off and Amazon is becoming the one-stop-shop for books. This trend may spread into other markets, and may at some point warrant government regulation.
SWOT Analysis of eCommerce: Final Thoughts
Overall, the eCommerce industry is in a strong position but definitely facing some downsides. Its Strengths include accessibility and low prices — which allow consumers to shop wherever and whenever, at cheaper prices than usual. The main Weakness of online shopping is that it doesn't lend itself so well to some industries (such as apparel), since consumers can't buy before they try.
Looking to the future thanks to the SWOT analysis of online shopping, Opportunities for eCommerce include a growing digital market and the power of internet influencers. However, a multitude of Threats — including competition, fraud, data concerns, and the potential for monopolies — will need to be monitored. Doing so will likely require government regulation, clever business practices, and close attention to detail.
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