Is e-commerce just as fragile as the high street?

Thursday, February 28, 2013 - 09:27 by Mike Price

The high street retail market has been the subject of much media coverage over the past few years, with big names such as HMV and Jessops being put under control of administrators, after reaching the end of their financial tethers.

Most choose to blame the growth of safe shopping online on the high street's decline, but in an article for Wired.co.uk, Graham Cooke argues that in many ways, e-commerce retailers are in a position that is just as precarious as their bricks and mortar contemporaries.

Cooke points out that the real weakness of e-commerce comes from the fact that most online retailers only enjoy conversion rates of two or three per cent.

This means that the majority of the visitors to a typical e-commerce site will browse without buying anything. Hosting a site is expensive and if you cannot convert casual visitors into paying customers, actually making money from such a venture is difficult.

Only a handful of big players are able to truly operate successfully in the e-commerce market, according to Cooke, who points to the economies of scale accessed by Amazon, which allow it to sell products cheaply because it is doing so in such high volumes.

This should lead to a situation in which minor e-commerce outlets cannot offer safe shopping online sustainably, although a wider look at the market reveals that this is not exactly the case.

There are thousands of smaller sites that sell items to people in the UK and elsewhere, as well as those who harness the marketplace features on sites like Amazon, forming part of a wide ranging cottage industry.

Cooke claims that the only way that e-commerce retailers will be able to improve their conversion rates and avoid failure involves offering a premium shopping experience, rather than trying to compete on price. If this means overhauling sites to make them more appealing and intuitive, he is probably correct.