Will retailers get cut out by consumers in the future economy?
Thanks to an obscure international trade deal made a few years ago, the growing direct-to-consumer trend might become more prevalent, if the hypothesis in a recent New York Times article holds true, cutting out retailers in the process.
The article details writer John Herrman’s experience shopping on Wish, an app which allows customers to order from a disorganized assortment of low-priced electronics, fast-fashion and apparel knockoffs, commodities, novelty tchotchkes and the like directly from manufacturers. Many of the orders he received shipped directly from China. He ascribes the success of the app’s model to a 2010 agreement, which allows packages weighing up to 4.4 pounds to be shipped from China as “ePackets,” at a drastically reduced rate of shipping.
The chaotic marketplace Mr. Herrman describes combines the ultra-low prices and “treasure hunt” appeal that’s proven so successful for off-price retailers like T.J. Maxx. He asks if we’re facing a future in which anything in the supply chain between overseas manufacturers and customers — such as retailers or even retail websites — will be seen as superfluous.
The “end of retail as we know it” posited in the article, however, doesn’t seem like a foregone conclusion. For instance, customers still appreciate customer service and it is doubtful an online clearinghouse such as Wish or an overseas manufacturer would effectively handle customer service requests. And even if a knock-off gadget or article of clothing is ludicrously cheap, it is hard to imagine a customer buying one after another as they break instead of a longer-lasting one from a reputable source.
But recent developments have indicated that the number of jumps between manufacturers and end-customers is shrinking. Manufacturers like Procter & Gamble, for instance, have begun subscription services that allow consumers to buy and replenish products from them directly rather than going to the store. Amazon.com recently promoted the direct-to-consumer model with major CPG manufacturers in a move some saw as trying to circumvent brands’ relationships with other retailers.
Retailers themselves have also been closing the gap between suppliers and consumers. More retailers have begun drop-shipping — fulfilling e-commerce orders by having a product shipped directly from the vendor rather than from the retailer’s own stock.
- The Online Marketplace That’s a Portal to the Future of Capitalism – The New York Times
- Will drop shipping online orders deliver results for retailers? – RetailWire
- Why is Amazon trying to convince CPG giants to go direct? – RetailWire
DISCUSSION QUESTIONS: Will technology enable more business to be conducted directly between individual consumers and manufacturers? What will stop retailers from disappearing as direct-to-consumer commerce becomes easier?