E-Commerce and the Threat of New Entrants.

In: Business and Management

Submitted By amcgivern96
Words 530
Pages 3
Internet-based technology can lead to an influx of new entrants in a particular market in the form of new web-based only businesses as it can reduce barriers to entry.

New entrants can take away scales and market share from existing businesses. They can put pressure on prices, or on businesses to invest in improvements in order to offer better value to consumers and customers, both of which reduce profitability. An example of this is the book industry; because of e-commerce books are now widely available online, in audio and also available on e-readers, tablets and phones. In the year 2014 alone the sales of hard-backed books fell by 11.6%. These figures indicate that people are no longer wanting a hard backed book that they are preferring in a more ‘convenient’ form of being able to access them where ever they are on their phones, tablets an e-readers.

New entrants from online businesses can pose a significant threat to traditional bricks and mortar business due to the benefits they provide customers and consumers- in terms of lower search cost, greater flexibility and convenience, and lower prices (as a result of lower cost). An example of this is the closing down of HMV/xtravision and the introduction of Spotify and deezer. In the year of 2014 music which was bought in stores decreased by an outstanding 14.2% that was a loss from 32.4 million to 27.8 million (albums) and 12.5 percent, from 356.5 million to 312 million (tracks). Whereas, the downloads from sites such as Spotify and deezer increased of an astonishing 34.7 percent rise, form 25.44 billion streams to 34.28 billion.

Businesses most likely to be at risk most likely at risk from the emergence of e-commerce and the subsequent competition from low costs online competitors are likely to be the smaller, traditional bricks and mortar businesses – as they are able to benefit the economies of scale…...

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