The Amazon Effect And How It Impacted Commerce
Technology has come a long way and it brought many changes into our daily lives. People don’t go to libraries to do research, but they just search the Internet. Socializing has also been given a new face and shopping was redefined to its sole core.
Over the past years, eCommerce became one of the biggest changes that we have felt. The brick and mortar stores received lesser foot traffic, while online shops gained traction. One of the game changers in this industry is Amazon.
The humble beginnings of Amazon
Amazon, first named as Cadabra, began as an online bookstore that was founded by Jeff Bezos in 1995. He used their home’s garage in Bellevue, Washington as the store headquarter. The name Cadabra was changed after Bezos felt like it was too close to the word cadaver. The Amazon’s first investors are Jeff’s parents, and they both received criticisms from peers.
One of the battles that Amazon faced was the people’s skepticism on online shopping since it’s never been done before. People also think twice when purchasing since the site adds a shipping fee, which would cost them more if they buy it in physical stores. Jeff’s idea of a free delivery service and the creation of Amazon Prime encouraged more consumers to buy from the site. On a fortunate day, Jeff received an email from Yahoo, asking him if it’s okay to feature the site on Yahoo’s What’s New page. In an instant, Jeff agreed and that was when the sales began to sore. Just after a week of being featured on Yahoo’s list, the site was able to earn $12,000 worth of sales.
What started as an online bookstore swelled into the biggest online retailer in the world. According to recent data, Amazon has already surpassed Walmart’s net worth. Walmart is the biggest brick and mortar store in the United States with a $216 billion worth. Now, Amazon is estimated to be worth $323 billion.
According to data, eCommerce covers 10% of the United State’s retail industry and Amazon is the biggest player. In 2016, Amazon was responsible for the 53% increase in online shopping, that ended some of the retailer stores like Toys ‘R’ Us. The company doesn’t just settle for their online empire. They are coming up with new technology to help people shop conveniently. One of its breakthrough projects is the creation of Amazon Go. Amazon Go is a store, more like a supermarket that uses technology, artificial intelligence, and science to create a zero-line shopping. The store doesn’t have any cashiers. Instead, all transactions will be made through the shopper’s smartphones. They are also coming up with self-branded products, and even taking over the delivery and courier world.
Impact on Commerce
Amazon has created a worldwide ripple that’s just too big to dismiss- they call it the Amazon Effect. It’s an evolution that continues to grow and increase the traffic to eCommerce. It’s where more and more people are making their purchases online. As a result, Amazon has been found to slowly shut down the physical stores and retailers, like shopping malls. Because of its convenience, some brands have switched to becoming an online store to be able to compete with Amazon. We can also see many new online brands like Jeffree Star Cosmetics and American Giant.
Impact on Real Estate
The Amazon has been linked to a lot of physical store closures. These closures mean that there are more spaces available and no one wants to buy them. Estates of stores like Sears that were valued with millions are not anymore. Because of the decline of foot traffic, there are lesser companies or people who want to buy the vacated stores. As a result, Amazon left the country with more storage spaces for sale and lease.
Impact on Job
Amazon’s trajectory keeps on increasing year after year. With the closing of some retailers stores, it also means that they are cutting off employees. JCPenny, one of the companies that are affected by the Amazon Effect is said to give 6,000 employees an early retirement. Macy’s will be cutting about 10,000 employees while HHGregg will let go 1,500 people who work at the stores that are set to be close.
Although Amazon has given people a lot of conveniences, it also eliminated some areas of other retailers to grow. We can never really tell if the Amazon Effect is a blessing or a curse.
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