The Strategist

Rise of online shopping threatens intermediaries

08/25/2016 - 15:02

Rise of online shopping threatens intermediaries, writes The Wall Street Journal. The newspaper notes that retailers are taking steps to remain competitive, which, in turn, puts factories and intermediaries under pressure.

Take, for example, a trading company Li & Fung, based in Hong Kong. It cooperates with 15 thousand clothing, toys and other goods factories throughout the world. Its core business is connecting western retailers, including Abercrombie & Fitch Co. and Target Corp., with manufacturers from different countries.

However, consumers increasingly prefer to shop online. As a result, retailers have to reduce prices, which affects both factories and intermediaries. According to some experts, mediators need to find a way out, otherwise they may go out of business.

In addition, there’s another problem. Since consumers are turning to online shopping, brands are ordering increasingly small amount of goods from factories and intermediaries. Besides, brands started to place orders for unique products that cannot be found on the Internet.

According to a research firm In 2015, more than half of online consumers in the European Union purchased casual or sportswear online. Clothing is the most popular online category of goods in European countries such as UK, Germany, France, Russia, Poland, Turkey and Finland. 

Moreover, share of online retail sales of this product category continues to grow. More than 10% of clothing purchases were made online in the UK in the first half of 2016. Other countries in Western Europe are not far behind. YStats predicts that more than a third of clothes in Germany will be sold online by 2025.

However, the online fashion industry in Europe and around the world is still struggling with major drawbacks such as frequent return of the goods. Many customers return clothes and accessories bought online, because the goods do not meet their expectations due to impossibility to try on items before purchasing.

Another study made by eMarketer shows that China is most likely to soon surpass the US and become the largest retail market in the world with a total of 4.886 trillion dollars. Volume of the US market will reach 4.823 trillion dollars.

Moreover, China will maintain its position as the major e-commerce market. It is expected that Chinese e-commerce market in 2016 will take 47% of global sales, and its volume will amount to 899.09 billion dollars. Experts of eMarketer believe that online shopping will occupy 18.4% per cent of all retail sales, which is the highest rate of all the world’s countries.

In the next few years, e-commerce market in China will continue to evolve. According to forecasts its volume will reach 2.416 trillion dollars by 2020. Chinese also like to shopping via smartphones - 55.5% of all online purchases were done through this device.

Such a rapid development of the e-commerce market generally occurs due to domestic online giants, such as Alibaba, Tmall and, who took advantage of quite undeveloped retail infrastructure in the country.

Asia-Pacific remains the largest retail market in the world. It is expected that in 2016 it will amount to US $ 1 trillion, and this amount will be doubled by 2020.