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Why online shopping may have peaked

18 December 2019

Retail is changing... a lot.

Gone are the days when all that was required to be a retailer was to rent a store on the high-street, buy in some stock, throw a few dollars float into the cash register and wait for customers to fill your pockets with their money.

These days, bricks and mortar retailers are under threat of extinction, honestly, I kid you not.

I remember way back in the mid 1990s, when the concept of online shopping was becoming "a thing", most people pooh-pooh'd the belief that one day we'd all be buying stuff from our keyboards via a network of inter-connected computers.

"People want to see and touch what they're buying first" was the claim of those who thought that e-tail was never going to work. "Who'd lay down money for a TV or a washing machine without actually seeing it first?" they'd ask.

Oh my, how that perspective has changed!

Today people are even buying their second-most expensive purchase "sight unseen", as thousands of customers pay up-front deposits for things like Tesla's EVs.

Even the most "hands on" purchase category of all is now becoming increasingly popular as an e-tail activity: grocery shopping.

Both New World and Countdown offer online grocery shopping with home delivery as an increasingly popular option for those who are either too busy to visit stores or whose personal circumstances make such visits inconvenient or impossible. Yes, folk are trusting the spotty-faced "store picker" to choose their tomatoes and vegetables for them!

I find it rather ironic that the commodity which probably kicked off the whole online shopping thing has now faded almost into obscurity.

Can you remember what it was that got e-tailing kick-started back in the 1990s?

Does the name "" ring a bell?

Yep, was a great place to buy books at a discount (a *huge* discount when compared to Kiwi bricks and mortar bookshops.

Sadly, printed books are increasingly becoming more of a curiosity than a staple these days. Why clutter up your house or office with weighty stacks of paper and cardboard when the knowledge and information of a thousand books can be stored on a single microSD card or in your favourite reader device?

Today we can (and often do) buy almost anything online. The entire world of "exciting stuff to buy" is just a few mouse-clicks and key-taps away, so long as your credit card can withstand the abuse. One of the keys to the popularity of online spending has been the willingness of vendors to accept credit card payments over the Net. Indeed, without such a facility, online shopping would have been virtually halted in its tracks.

Howver, now that we've sorted the payment problem we appear to have a growing issue with delivery.

The Western World's most successful online retailer (Amazon) has addressed that issue by creating its own delivery fleet of couriers but other sellers are increasingly facing the spectre of rising costs and sometimes unreliable service. I notice that Amazon has just forbidden its external merchants from using FedEx in the USA during the Christmas break because of poor performance, proof of the claims.

Freight, postage and delivery charges are constantly on the rise, especially as the climate crisis brings additional costs into the mix -- so where to from here for those wanting to get their products to customers around the country or around the world?

Drone delivery?

Ha ha ha... don't get me started on that joke!

China has a supreme monopoly on cheap/free shipping and that will continue to secure their position as a leading player in the online retail game. Other countries often find their competitiveness utterly crippled by the cost of delivery. I think I've already mentioned that I looked into making a small run of kitset model aircraft out of foam-board for sale around the world (due to popular demand from my YouTube viewers).

The cost of materials to produce the kit would have been less than NZ$10.

The cost of postage (tracked) to anywhere outside of New Zealand would have been five to eight times that amount.


We're talking about a package weighing less than 300g and of relatively compact dimensions costing NZ$60 or more to deliver via a tracked shipment method. Yet, Chinese e-tailers can ship a 1Kg box with 10 times the volume to me "free" with online tracking.

Yes, it's a huge subsidy on the part of the Chinese government and NZ has an ideological opposition to subsidising exporters, in the name of free trade, right?

Well explain to me why it is then that the farming industry doesn't have to pay the cost of its greenhouse gas emissions in the way that every other industry does? If that's not a subsidy I don't know what is because we're talking many millions of dollars a year. Surely subsidising the postage of small-scale exporters (in the way China does) might be a great way to help people start their own businesses and create jobs -- but no, instead we effectively give those millions to farmers.

Whatever... it's clear that if, as the USA has mooted, the postal system is reformed such that China can no longer take advantage of the rules that allow its exporters to export things by post almost for free, the growth of online e-tail may soon plateau.

The one thing that may further cement Amazon's dominance in the online marketplace could well be its in-house provision of delivery services. This allows it to control costs and maintain service levels in a way that can't be done via outsourcing.

The other fly in the ointment for small/medium online retailers who export will almost certainly be the digital taxes now being levied by countries like NZ and Australia. As I said in a recent column, once other countries join in on this tax-grab, only the largest e-tailers will be able to afford the overheads involved in becoming an unpaid tax collector for a dozen or more countries. The small guys simply won't have the time or resources to economically do this so they'll have to withdraw from selling to countries that demand this.

Enjoy your online shopping experience... things may never be this good again.

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