What is the 'Amazon Effect' and What are its Implications?

The term "Amazon effect" describes how the traditional brick-and-mortar company model is impacted by the online, eCommerce, or digital marketplace due to shifting consumer expectations, buying habits, and the level of competition in the market. Many conventional businesses have suffered as a result of having to compete with online marketplaces that only have physical locations. This is because online shopping and eCommerce are becoming more and more popular.

Brick-and-mortar retailers are losing out to e-commerce companies as a result of the rise in internet buying. More and more consumers are turning to their screens rather than physical storefronts; according to the US Census Bureau, internet sales made up 13.6% of retail sales in the country in 2020, up from 10.7% the year before.

Since its 1994 launch, Amazon.com Inc. has remained the leader in global online sales and has emerged as the symbol of this shift, lending the term "Amazon effect" to the phenomenon. The Amazon effect is credited as the main cause of the fall in retail sales, which has frequently predicted the closure of the stores eventually, among other considerations. 2017 saw the closure of almost 5,300 establishments, a 218% increase over.

The Amazon effect has not only negatively impacted traditional retail stores' earnings but has also significantly altered customer purchasing habits. For example, today's consumers demand a much greater choice even when they visit a physical store, owing to the ease with which they shop online. In a physical store, the contents and specs of a little pack of cashew nuts or an electronic device could be difficult to see, yet the same product details are readily available online in huge print. Consumers' behavioural expectations have also been affected by the seamless online purchasing experience; they now anticipate the same level of simplicity, promptness, and smoothness even from services that are often not available online.

The global crisis of 2020 highlighted the significance of internet purchasing, with many residents facing travel bans, stay-at-home orders, and quarantines. It went from being a luxury to a need for many. Online purchasing isn't going away as long as the Internet is around.

The growing number of consumers making purchases online puts physical stores in jeopardy. Something that can't be delivered online must be offered to entice visitors to visit a physical place. This might be something that individuals feel or experience when they go to the place. Some malls lure customers in with movie theatres, theme parks, or a variety of dining options throughout the afternoon and evening.

A few brick-and-mortar stores have prospered despite the rise in internet purchasing. This is because they provide a distinct or superior product that isn't easily copied into a low-cost knockoff that can be sold online by others, or it is just unavailable for purchase via online shops. Some retail chains have established a brand culture around their merchandise and locations, where customers want to visit and be seen. These kinds of strategies will probably be necessary for more physical businesses to succeed as online shopping continues to gain market dominance.

Bibliography 

Amazon Effect: Definition, Statistics, Impact on Consumers (investopedia.com)

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