Remember when e-commerce was going to take over the planet?

From the HBR blog site: “The Myth of E-Commerce Domination” …

Forrester’s data on the top 30 product categories (which account for 97% of total e-commerce sales) indicates that e-commerce growth is clearly slowing overall:

 

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If historical trends continue, e-commerce’s share of retail will rise from 11% today to about 18% in 2030, way below projections from a few years ago.

Of course, 18% isn’t shabby, but it’s not exactly world domination.

What’s going on?

 

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First, e-commerce operations – whose economics resemble those of old-school mail order catalogs — aren’t as cheap to run as most people think.

For example, Amazon has averaged only 1.3% in operating margins over the past three years. In comparison, operating margins for department, discount and specialty stores typically run 6% to 10%.

Why the lower margins?

Must be Amazon’s low prices, right?

Turns out that Amazon’s prices aren’t uniformly lower than competitors’. One recent Kantar Retail study of 59 items found that prices at Walmart’s Supercenter stores were 16% below Amazon’s.

E-commerce companies’’ capital intensity is sky-high. They usually ship to customers from large, expensive, highly productive, state-of-the-art fulfillment centers that can cost about 10 times as much as a big box store. .

And, as w-commerce companies build fulfillment centers in more states, those states are now forcing it to collect sales taxes — an effective price increase of about 7% on average.

Researchers at Ohio State University say that the tax effect [potentially reduces site-specific spending by about 10%.

No wonder that Jeff Bezos is reported to have said that if Amazon can find the right idea, “We would love to open physical stores.”

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