Consumer habits accelerate toward digital marketspace as COVID-19 continues

August 31, 2021

Headshot of Professor Mohammed Elahee

Amazon has surpassed Walmart to become the world’s largest retailer outside of China, according to recently released corporate and industry data — a seismic shift that Mohammad Elahee, professor of international business, said was only accelerated by the COVID-19 pandemic.

“Amazon would have eclipsed Walmart even without COVID-19,” said Elahee. “But the emergence of the pandemic certainly accelerated the process. People who were not comfortable with online shopping earlier were suddenly forced to go online. Once they experienced the benefits of online shopping, they stuck to it even after the Brick-and-Mortar stores reopened.”

The pandemic also influenced consumers’ buying habits as they made lifestyle and priority adjustments, redefined the meaning of “family time,” and stocked up on food and products for future use, Elahee said.

“The fear of premature death forced people to set their priorities in a different light, which consequently also affected what they buy, for whom they buy, how they plan to spend time with family, what they want to do during their leisure and what services they need for their new priorities in life,” Elahee said. “This pandemic created a yearning in people for more balance between work and life. This is going to affect their consumption pattern even after the threat of death from the pandemic subsides.”

It’s important to remember that Amazon was not always the global retail giant it is today. The company initially faced years in which it was not profitable, Elahee said. But, through reinvention and shift in its strategic plan, Amazon’s persistence paid off. Although Walmart has increased its presence online, it has not had as large of a footprint as the digitally native Amazon.

“Walmart had the cash and the market power to build its own presence in the market space, but it didn’t,” Elahee said. “Walmart could have built its own home delivery business, it could have created its own proprietary software to rope in its customers, it could have brought its own suppliers online. It could have started its own financing arm and reinvent its store credit card and even create its own digital currency- something that Amazon did not do. Walmart failed to read the writings on the wall; it failed to see how the generation y and z gather information and purchase; it failed to see how it can lure elderly customers who do not or cannot drive to a physical marketplace to its online market space.”

Demographic changes have also continued to play a critical role in consumer behavior and retail marketing, Elahee said. Younger generations who have grown up with the Internet integrated into their everyday lives and routines are proving to be extremely technologically savvy and favorable toward convenience, he added.

“We will see the rise — and also fall — of many digital retailers who would eat up the market share of brick-and-mortar companies,” he said. “But no matter how digital the world becomes, there will always be a segment of customers who would like to buy from brick-and-mortar stores. Therefore, I would not write a death certificate for all brick-and-mortar retailers.”

There are still regulatory, technological and changing consumer habits and preferences that could completely shift the current marketplace, Elahee noted.

“Governments in different countries may curb powers of big retailers through legislations,” he said. “As big retailers — including Walmart — become increasingly global and digital, tax disputes with different jurisdictions can emerge as a major challenge. Stricter environmental liabilities and fairer labor laws could also put a break on their growth. Regulatory changes and growing nationalism may also negatively affect — or even dismantle — the carefully built global supply chain that underpins the efficiency of both Amazon and Walmart. Technological changes may catapult some other companies that do not even exist today on top,” said Elahee.

The pandemic has continuously proved the fast pace of the changing marketplace and the numerous factors that are at play, he said. To survive in the modern era, Elahee contends that businesses will have to redefine their approach and accommodate to consumer needs and preferences.

“Uncertainty is the only certainty for any business firm at this point in time,” he said.

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