A PESTEL ANALYSIS OF THE E-COMMERCE INDUSTRY
The Ecommerce industry has seen immense growth in the recent years and apart from some fluctuations in the global economy like demonetization in India, the situation has remained favorable for its growth. China and US are the largest of the e-markets. However, growth rate is expected to be even higher than US in the Asia Pacific region this year. The US e-retail market is among the largest ones in the world. Apart from Amazon, Ebay and Alibaba, there are a number of important players in the market like Fipkart, Walmart, Coles and Best Buy. The technological factors have also supported the growth of the Ecommerce industry. Growth in the use of mobile gadgets has also pushed the ecommerce sales high. A larger number of people are now shopping using their mobile phones. There are several factors apart from economic and political that affect the global ecommerce industry. This is a PESTEL analysis of the ecommerce industry that analyzes how these various forces can affect the ecommerce industry and how deep can their impact be on it.
While the threats may not be the same before the e-retailers as the physical retailers, still there are several political hurdles before them. There are several risk factors affecting the e-businesses. For example for the global leaders like Amazon and E-bay growth in Asia pacific region can be made difficult by the Red tape. Several news reports highlight how Red Tape in India can become major difficulty in the way of new businesses trying to extend their presence there. The political and regulatory challenges before the e-businesses have kept rising. The growth of Ecommerce in EU has also been challenged by political factors. EU has kept targeting technology giants from US. Google and Amazon have already been targeted by EU. Such issues can be a threat to the growth of ecommerce in Europe and it is why several sources predict that the growth rate of ecommerce in Europe is going to be low. Political issues are not limited to just those discussed above but there are many more. Political stability in most regions of the world leads to economic stability. Political chaos can result .to disruption of business both online and physical. Overall, political issues can have a significant impact on ecommerce and its growth.
Economic factors are very significant in terms of business. Whether it is an online business or physical, economic factors can have a significant effect on it. It is because economic factors are directly related to business and their effect is also direct on business revenue and profits. During the period of recession, spending had decreased. People had adopted cost cutting measures as the level of economic activity and employment had gone down. During such periods when economic activity has gone down, the profits and revenue of businesses can go down. E-businesses too cannot remain unaffected. Economic fluctuations since the recession have also kept affecting businesses from time to time since the recession. In several economies like Russia, Brazil and India, these economic fluctuations affected both global and local businesses. Now that the recession has passed and economic activity has returned on track, the ecommerce industry has flourished in the recent years. Higher economic activity means faster growth and higher revenue for the Ecommerce industry whereas lower economic activity means just its opposite. In this way, economic factors can have a direct and deep impact in the ecommerce industry.
Socio cultural factors too have a deep impact in ecommerce industry. Most importantly e-retail brands find it the easiest to flourish locally. Growth in foreign markets can be full of challenges. Changing trends can also have an impact on businesses. The growing use of mobile technology has affected ecommerce. In most societies the mobile technology has been very popular and a larger number of people worldwide are now using mobile gadgets for shopping and other purposes. Socio cultural factors affect businesses in other ways too. Cultural factors have an impact on how these ecommerce businesses market themselves. In several societies of the world ecommerce is still seen as a sign of Westernization due to which it has seen low growth in these areas.
Technological factors are very important in the context of the ecommerce industry. It is because the industry relies heavily on technology. Everything is based on technology in e-retail from sales to customer service. All the ecommerce brands are in a race to be technologically ahead of their competitors. From Amazon to E-bay and Flipkart, every brand is investing a lot in technology to find faster growth. Technology decides several things in the ecommerce world from popularity to profits. The reason that Amazon is ahead of the others is because it is technologically ahead of the others. It has managed its customer experience so well that its popularity is very high. In this way, technology is a major influence on businesses and in case of ecommerce technological factors acquire a very special importance.
Environmental factors too have a special importance in the context of Ecommerce industry. While the direct environmental impact of this industry is very low and nearly zero, it still focuses heavily on sustainability. Brands like Amazon have invested heavily in technology. Even in Ecommerce there are several areas where investing in sustainability can be highly productive. From sustainable packaging to waste reduction and renewable energy there are several areas where the e-retailers can invest in sustainability. Amazon has invested in renewable energy to gain freedom from the use of non-renewable energy resources.
Legal compliance is just as important for the businesses globally. Any tussle with the law can be a costly affair and even the e-retail brands can become a target unless they take care of compliance. It is why the big E-retail brands have separate teams to take care of the legal issues. Non compliance can result in financial losses as well as loss of image and reputation. From labor laws to sustainability laws, there are several areas where the e-retail brands have to be careful regarding compliance. Moreover, these laws differ from nation to nation and market to market and compliance in every area is important. So, in case of the companies operating internationally law can lead to major pressures and an increase in operational costs. The e-retail brands also have to be careful about the applicable laws and compliance.