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Using Game Theory to Optimize the Pace of New Technology Adoption
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ecommerce

  • Will Traditional Retailers Continue to Struggle in On-Line Sales Markets?

    Amenability to On-Line Sales

    Current Market Segment Shares

    Trends in Market Segment Shares of Traditional Retailers

    Trends in Market Segment Shares of Amazon

    Will Traditional Retailer Continue to “Struggle” with On-Line Sales?

     

    A recent article in the WSJ, “Web Sales Remain Small for Many Retailers” by Shelly Banjo and Paul Ziobro describes the difficulties that retailers have been having trying to grow their online sales into significant portions of their businesses:

    Nearly two decades after the Web revolutionized shopping, many big retailers are still struggling to turn the Internet into a big part of their business…

    Online purchases accounted for just 5.8% of total U.S. retail sales in the second quarter of 2013, up from 5.1% a year earlier.

    They note the small portions that online sales constitute for specific retailers, including Walmart, Target, and PetSmart. In particular,

    •  While Walmart “has never reported its actual online performance,” it did say that “Web-based sales contributed [a paltry] 0.1 to 0.2 percentage point to Wal-Mart's 2.4% increase in U.S. comparable-store sales in fiscal 2013.”

    •  “… A Target spokesman said that the retailer tells investors online sales currently make up less than 2% of its $73 billion in overall sales.”

    •  “A PetSmart spokeswoman said the chain considers e-commerce a growth opportunity but because it currently represents less than 1% of its sales, it isn't a material part of the company's business.”

    They further report that Amazon has continued to dominate online sales for its various markets:

    Amazon.com Inc. sells more online than its next 12 biggest competitors combined, including Staples Inc. and Wal-Mart… Despite its greater online scale, Amazon continues to grow quickly and command a hefty share of new Internet sales.

    The article provides a weak response by the lagging retailers to the situation, namely that online sales become muddled with in-store sales, so it doesn’t make sense to report on-lines separately from total sales:

    Retailers including Target, Belk Inc. and PetSmart told the SEC that separating online figures doesn't give an accurate picture of their sales gains, because customers continually shift purchases between their stores, websites and mobile-phone applications.

    Retailers have branded this the "omnichannel" approach, arguing that they don't care how a customer completes a purchase as long as they don't buy from a competitor…
     

    Will multichannel retailers continue to struggle with growing their on-line sales portions of their businesses? Why does Amazon continue to dominate these markets?