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Trump's surprise win of the US presidential election has far-reaching implications for the retail industry, the most apparent of which include potential changes to labor and the supply chain, which could narrow the path to profitability for retail companies.
Protectionist positions could increase the cost of goods: Trump opposes the American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP), and has proposed taxing US companies that choose to manufacture goods overseas. Such policy changes would harm retail companies that manufacture their goods overseas. A recent GT Nexus survey indicated that 44% of retailers expect cost of goods will rise under protectionist trade measures, and another 22% expected a higher risk of delays or disruptions. And over one-third plan to raise the prices of their goods in response to these scenarios.
Resistance to increased automation could slow e-commerce's growth: E-commerce companies are seeking to deliver goods to their consumers as quickly as possible, and this involves automation within distribution centers as well as the potential utilization of drones for delivery. However, if Trump maintains his stance to protect American workers from being displaced by machines, this could make it more difficult for online retailers to boost their productivity if they are forced to invest in traditional forms of labor over new ones. This could stall the evolution of e-commerce and last-mile delivery, preventing the sector from delivering seamless shopping experiences for customers.
These factors could significantly limit margins in retail: Higher costs could make profitability a more daunting task for retailers. Although the GT Nexus survey indicated retailers planned to increase prices to compensate for costs, consumers can still harness the power of the internet to search for the absolute best deal on a product. This bargain hunting will fuel ongoing price competition online, which could force retailers to sell much of their inventory at a markdown, which could therefore thin margins against the backdrop of higher costs.
Amazon specifically could face pressure to pay additional taxes. Trump has dubbed Amazon a "big tax shelter," implying that he may examine the prospect of forcing Amazon to pay more in taxes. However, this could be offset by Trump's general policy of reducing the business tax rate from 35% to 15%.
The retail industry as a whole will have to navigate the changes in policy. However, for e-commerce companies in particular, higher costs and resistance to automation could limit their ability in the near-term to solve issues with delivery bottlenecks.
E-commerce has been on the rise in the last several years, thanks in large part to titans in the industry such as Amazon and Alibaba. And regardless of how Trump's presidency plays out, e-commerce will truly become the future of retail, as nearly all of the growth in the retail sector now takes place in the digital space.
BI Intelligence, Business Insider's premium research service, forecasts that U.S. consumers will spend $385 billion online in 2016. Moreover, BI Intelligence predicts that number will grow to $632 billion in 2020.
This is hardly surprising considering e-commerce's healthy growth. Though the U.S. retail average growth rate in the first half of 2016 was just 2% for total retail, it was 16% for e-commerce.
The number of online shoppers has grown by nearly 20 million from 2015 to 2016. And these 224 million shoppers are spending more, as the total amount spent online grew from $61 billion in the first quarter of 2015 to $68 billion in Q1 2016. Finally, these customers are transacting more frequently, as the number of online transactions has risen by 115 million from 2015 to 2016.
But all of this shopping online creates its own set of challenges, both for consumers and the companies that are trying to get their products onto shoppers' screens and into their shopping carts. In short, you need a plan.
And to create your ultimate e-commerce battle plan, you need the right intel.
BI Intelligence is here to help.
Our team of industry experts has you covered on topics such as:
Shopping cart abandonment
Marketing effectiveness
Merchandise returns
Customer satisfaction
Social media monetization
Mobile payments
Accommodating shoppers at the 11th hour
And much more
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