How does Online Shopping affect Physical Stores?
As using technology in today’s society has become extremely prevalent, the use of online shopping compared to in-store shopping has increased more than ever. This means that certain retail stores could shut-down if their revenue is only covering their total variable costs. Already, it is easy to see how online shopping can have a negative effect on in-store shopping; however, from the consumer’s eyes, the opportunity cost of online shopping just may be less than taking the time to shop in-store.
While there are many benefits to in-store shopping such as getting your item immediately or asking for opinions from others, there are significant barriers to entry, which may include real-estate costs, staff, and more. This means it can be difficult for a brick and mortar retail location to stay in business if online stores become a prominent choice of consumers. In addition to that, there are fixed costs as well as variable costs that must be covered. While both retail models will have their own set of costs, the physical stores will most likely have more to deal with. This can include the space in which the business operates in, weekly payroll, and the sales commision for example (A Guide). If the in-store owners are not making enough profit due to their competitors however (which in this case are the online stores), they will most-likely shut-down. For example, according to Fox Business, “the children’s clothing retail said it will close hundreds of store locations by 2020 as part of a shift toward digital commerce” (Retail).
Based off of this research, there are many reasons why online shopping can affect brick and mortar retail operations negatively, even though online shopping has significant benefits. Though ultimately, because online shopping is so accessible in today’s society, this might cause for more shopping in the digital world, instead of the real world.
Barrabi, Thomas. “Retail Apocalypse: 21 Big Retailers Closing Stores in 2017.” Fox Business, Fox Business, 19 Sept. 2017, www.foxbusiness.com/features/2017/09/19/retail-apocalypse-20-big-retailers-closing-stores-in-2017.html.
Peavler, Rosemary. “A Guide to Fixed and Variable Costs Doing Business.” The Balance, The Balance, www.thebalance.com/a-guide-to-fixed-and-variable-costs-of-doing-business-393479.
S, Anamika. “Top 10 Benefits of Online Shopping That Make Your Life Easy.” ToughNickel, ToughNickel, 13 June 2017, toughnickel.com/frugal-living/Online-shopping-sites-benefits.