ICYMI: E-commerce tools are helping small retailers grow, innovate, and thrive
As we enter 2024, the retail industry is a vast and diverse space, stocked with businesses both large and small. The prominence of small retail businesses is especially notable: contrary to claims made by some inside the Beltway, research shows that, in recent years, digital tools and marketplaces have helped Americans shop small. It’s a development that is benefitting small businesses, competition, and consumers across the country.
Here’s what you need to know:
Small- and medium-sized businesses (SMBs) are succeeding in e-commerce alongside, and often with the help of, Amazon and other digital marketplaces.
E-commerce innovations in the 2010s spurred a massive development for SMBs: they encouraged traditional brick-and-mortar SMBs to invest aggressively in online retail. As Dr. Robert Kulick of NERA Economic Consulting writes, these SMBs used e-commerce investment to overcome difficult years in the shadow of the Big Box retail revolution and brought retail-startup survival rates to an all-time high in 2019.
SMBs expanded into e-commerce in two main ways, CCIA’s research center found in a recent report. First, they set up their own retail websites, a solution that 59 percent of SMBs with online presences use. Second, they joined digital marketplaces like Amazon. These digital marketplaces partner well with SMBs’ own online efforts because they “enable SMBs to sell through multiple channels while gaining the benefit of economies of scale and scope that previously were only available to larger companies.” During Black Friday and Cyber Monday in 2023, the benefit of digital marketplaces for SMBs was clear. Customers ordered more than 500 million items from independent sellers, most of which are SMBs. Retailers who participated in Amazon’s Buy with Prime holiday promotions also experienced, in aggregate, more than a 300 percent increase in units purchased compared to the Amazon daily average.
One of the important features about digital marketplaces is they offer SMBs a lot of choice and flexibility. CCIA writes that “as their needs change, SMBs can add or change [digital marketplaces] to better address those needs.” A marketplace like Amazon or Walmart offers the ability to scale to a much larger consumer base and can handle shipping, payment processing, and other integrated benefits. A smaller marketplace may not offer all these benefits but may give SMBs more leeway to customize their advertising or offering. The key point is that SMBs aren’t pigeonholed into one marketplace—they can decide which marketplace works best for them or even use multiple marketplaces.
The widespread availability of digital tools and marketplaces leads to business competition, innovation, and ultimately lower prices—an ideal situation for consumers.
While Amazon and other digital marketplaces have been accused of stifling competition and raising prices for consumers, recent research reveals that the booming number of online retailers actually allows consumers to make better choices and find lower prices. A study by Deloitte finds that, in the age of online retail, shoppers constantly compare product prices and availability across retailers, and use a simple calculation—what’s cheapest and most convenient—to decide whether to buy from online or in-person retailers. Interestingly, this leads a majority of online shoppers to make purchases at brick-and-mortar stores.
A study by the Brattle Group finds that, 95 percent of the time, online and in-person retail prices are identical, demonstrating these channels are highly interchangeable. Retailers across all channels are competing to offer convenient shopping experiences, a wide selection of products, and low prices. As CCIA concludes, “this is good news for customers.”