E-Commerce is the Future

For much of the past decade, the World Wide Web has become an increasing part of every person’s life. Online retailers such as Amazon and eBay were among the largest e-commerce companies that would propel the online retail movement in the mid 1990. With constant innovation in technology, the rise of social media platforms and developing economies establishing their own online retail markets, e-commerce revenues will most definitely continue to grow in the next decade.

Perhaps the largest driver of the growth of the e-commerce industry is the emergence of e-commerce companies in developing economies. Among the leaders of these developing economies are China and India. In 2013, China became the world’s highest grosser of revenue from e-commerce sales, which totaled approximately $314 billion USD.

China’s e-commerce market, for the most part, has been dominated by one company, Alibaba Group Holdings. In 2014, Alibaba reported total revenues of approximately $8.46 billion USD. With the largest population in the world, Alibaba and other online retailers still have more opportunity to increase profits in China.

India’s e-commerce market has also grown significantly, increasing its value from $600 million to $2.3 billion in just two years from 2012-2014. Similar to China, India’s huge potential comes from its vast population (the second-largest in the world) and the possibility of more e-commerce companies to enter the market as there are currently only three e-commerce companies valued at 1 billion dollars: Flipkart, Snapdeal and Paytm. Estimates show that this enormous growth potential could increase India’s e-commerce market to approximately $32 billion by the year 2020.

Another driver of the growth is social media. With many online retailers offering their products exclusively online, social media has become a dominant way to market online brands. In an age where people are spending an increasing amount of time on the internet, online retailers are posting advertisements on social media websites where it is both fast and convenient for potential customers to access the retailers’ websites. Of all social media websites, Facebook accounts for almost two-thirds of all visits to Shopify websites. Other social media platforms such as YouTube and Instagram provide retailers opportunities to market their products through their own profiles or through profiles of those with a significant number of followers.

With more people around the world gaining access to the internet every day, the e-commerce industry is set for unprecedented growth in the future. Not only are online retailers easily accessible, they also make it possible for consumers to easily compare prices across retailers and allows consumers to buy products not available domestically. This will make it especially beneficial for consumers in developing countries, where there is less variety of products for consumers to choose from. Offering online shipping to developing countries is also an effective way for retailers to determine the level of demand that a certain country has for its products, which helps in retailers’ decisions on whether or not to open retail stores in that country. These are only a few of the reasons why online retailing is set to grow more and more into the future, as e-commerce is an easier, cheaper and more efficient way to shop.

About Kazutaka Miyuzumi

Kazutaka Mayuzumi is currently a 4th year undergraduate student pursuing a double major in Economics and Human Resources/Industrial Relations at the University of Toronto. His main research interests include: economic policy and macroeconomics, financial economics, and financial market structure. His other interests include the causes, impacts and results of financial crises, in particular the 2008 Financial Crisis. After completing his undergraduate degree, he hopes to pursue his Masters degree in Economics and to work at a central bank or other type of financial institution. During his leisure time, he enjoys browsing the web and catching up on events occurring around the world.