Essay about The Structural Characteristics Of The Online Retail Industry
Wal-Mart’s Rocky Path from Bricks to Clicks
1. Discuss the structural characteristics of the online retail Industry, from the point of view of the Five Competitive Forces (Porter) framework.
Porter’s Five Competitive Forces model is used to analyze an industry’s value structure.
1. Entry of competitors. There are many barriers for new comers to start an online retail business. The first and biggest one is the economy of scale that has been created by the pioneers in the industry. Among them, we can mention Amazon, and eBay. Also the capital and investment required to have the adequate technology and distribution channels to compete in this industry are a big deterrent. In addition, new entrants have to consider the loyalty of customers. Although not all customers are loyal, since they do shop based on prices, still most of them like to shop from those companies that have provided them with good customer service. Amazon has that advantage in term of no shipping costs, and fast delivery. It would be hard to compete against that without the adequate infrastructure. The most threatening aspect of these barriers is the retaliation from the existing players in the industry. Big companies like Amazon or eBay can easily make other ones go out of business as soon as they have started. For example, Pets.com and eToys.com.
2. Threat of substitutes. This force is a hard one to any new comer. There are no hidden tricks or suppliers that can offer to new entrants an…