E-COMMERCE INDUSTRY ANALYSIS

FLOW OF PRESENT
SENSITIVITY TO THE BUSINESS CYCLE

E-COM INDUSTRY LIFE CYCLE ANALYSIS

PESTEL

SWOT

POTER’S FIVE FORCES MODEL

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SENSITIVITY TO THE BUSINESS CYCLE

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 PHASE – 1 EXPANSION

Amazon considered international expansion due

to investment in e-commerce technology.
Amazon significantly relies on e-commerce
transactions to access its global suppliers and
customer.
Then on the world scale, they now operate
across 5 continents with around 20 countries
having dedicated websites for shoppers and
sellers. These include the United States, France,
Italy, the United Kingdom, Turkey, India, Saudi
Arabia, Japan, Singapore, Mexico, and
Brazil to name some.
Contoso business plan 4
 PHASE – 2 PEAK
Amazon fulfillment center associates. Amazon warehouse facilities
get quite busy towards the end of the year 2018. This period is
referred to as peak in Amazon parlance.

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 PHASE – 3 TROUGH
• From an all-time high in 2021 to a 3-year low in 2022, Amazon will ring in the New Year
about half as large as it was a year ago.While the staggering $900 billion, 50%
contraction in Amazon’s stock over the past 12-months is its first negative annual return
since 2014, and its largest percentage drop since falling 79% during the dot-com bubble
pop in 2000, the path to its present trough has been strewn with efforts and innovations
aimed at righting the ship and restoring investor confidence.While the outcome of 2022 is
clear, we revisit the journey that brough the Seattle-based ecommerce giant to where it is
today — and perhaps will set it up for where it is headed down the road.Herewith is a
month-by-month reflection on a year of peaks and valleys for a company that’s
unaccustomed to not winning.

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 PHASE – 4 RECOVERY

More than 74 percent of the Amazon merchants are very optimistic on the
business recovery of the company during this upcoming sale, as per one of the
surveys conducted by Neilsen among Amazon merchants, owing to the
growth in e-com sales with more and more consumers shopping online.

Contoso business plan 7

E-COM INDUSTRY LIFE CYCLE ANALYSIS

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 START-UP AND GROWTH
• Startup:- the first stage of the industry life cycle, only few companies are present in the
industry, due to which almost no competition exists in the industry. At this stage,
consumers are unaware of the product, and companies are trying to make people aware of
their product.The eCommerce industry entered the startup stage after the internet was
made accessible worldwide. In 1995, the world’s first eCommerce company, Amazon,
was established.Initially, it started as an online book store. However, its customer base
increased as the customers became aware of its products.
• Growth:- the industry moves to the growth stage. In this stage, several companies enter
the industry since now consumers know the products and profits are being made in the
industry. Therefore, increasing the number of companies causes competition to
increase.The eCommerce industry experienced growth by the end of the 1990s when
companies like Alibaba and eBay were founded. During this time, many companies
entered the industry. Hence the competition increased in the industry.The eCommerce
industry is at the growth stage since it is currently experiencing growth. In 2020, it had a
growth rate of 26.4%. However, it is predicted that the growth rate will decline
to 9.2% by 2025. 9
 MATURITY AND DECLINE
• Maturity:-Maturity StageAfter the shakeout stage, an industry has to go through the
maturity stage. At this stage, the industry tries hard to grow since it is already operating at
its full potential. At this stage, the companies are already making maximum profits.The
eCommerce industry has yet to see the maturity stage. However, it is predicted that the
growth of the eCommerce industry will decline by 9.2% by 2025, so it might reach the
maturity stage in a few decades.

• Decline:- In this last stage of the industry life cycle, the industry begins to lose its market
share since the demand for the industry starts to decline due to a substitute or change in
preferences. Therefore, in this stage, companies begin to exit the industry to avoid
losses.The eCommerce industry is an emerging market, and its decline is yet to
come in the future.

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PESTEL

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 POLITICAL AND ECONOMIC
• Political Factors:-
• Operating worldwide can be problem for eCommerce companies
since governments across the globe have set different rules
regarding the operations of the eCommerce industry.
• Economic Factors:-
• The world is moving forward toward a global recession. If the
recession hits, the living standards of the people will decline. As a
result, consumption of people will decrease. This will cause a drop
in the sales of eCommerce companies, and losses will be observed

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 SOCIAL AND TECHNOLOGICAL
• Social Factors:-
• People don’t trust online retail in some countries. Instead, they
prefer buying products and services from physical stores. In such
countries, the demand for eCommerce companies will be low due
to their social norms and beliefs.
• Technological Factors:-
• The eCommerce industry uses the latest technology to make the
user experience more friendly. Moreover, as access to the internet
is increasing day by day, the consumer base of the eCommerce
industry is also increasing
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 LEGAL AND ENVIROMENTAL
V Legal Factors:-
Similar to physical retailers, eCommerce companies must also be
careful in dealing with customers and workers. Any unlawful practice
can result in heavy fines and a bad reputation. Moreover, companies
must abide by every country’s laws to operate in that region.
VEnvironmental Factors:-

Environmentalists keep a close eye on the practices of eCommerce

industries. For example, plastic packaging companies pollute the
environment, and laws limiting plastic packaging vary from country to
country. Neglecting these laws can put eCommerce industries into
trouble and cause financial losses in the form of lawsuits.
.
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SWOT

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 STRENGTHS AND WEAKNESSES
Strengths:-
The eCommerce industry offers good quality products at low prices since
it cuts off the middleman and provides products directly to the
consumers. Hence, consumers get products at lower prices compared to
physical markets.
. Weaknesses:-
The eCommerce industry is industry-specific. For example, certain
products like books and electronics can be easily bought from
eCommerce platforms. In contrast, products like clothes and shoes
are difficult to purchase online since you need to try
them before buying.
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 OPPORTUNITIES AND THREATS
Opportunities:-
The eCommerce industry is currently in the growth phase and is still growing.
In 2020, the industry grew at a rate of 26.4%, and it is expected to have a
reasonable growth rate in the future as well. This provides the opportunity for
eCommerce companies to maximize their market share since the company is
currently in the growth phase.

Threats:-
Competition is very high in the eCommerce industry since millions of
companies are present in the industry. Moreover, some big companies, such as
Amazon and Alibaba, hold a significant market share, making it hard for
smaller companies to compete.
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POTER’S 5 FORCES MODEL

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h

POTER’S 5 FORCES MODEL

e

s
uCompetitive Rivalry:- biggest eCommerce companies such as Amazon,
b
s
Alibaba, eBay, etc.
t
i
Buyer Power:- custmer have a wide range of options due to the large number
tof companies in the industry.
u
t Supplier Power:- The supplier power in the eCommerce industry is low
idespite having high number of eCommerce companies in the industry because
o
n
companies are the ones who set the rules for the suppliers giving them limited
power to influence the prices.ex-wholesaler,vendors
t
hThe substitution threat:- high in the eCommerce industry since many
rsubstitutes are available in the industry, and the switching costs for the
e
a
consumer are low.
t
Threats of new entry:- eCommerce industry due to high barriers to entry and
utough competition 19

t
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