Porter’s Five Force analysis of the Ecommerce

industry.
The Ecommerce industry has flourished at an impressive rate during the last
few years. The reasons include growing economic activity around the world
and the growth of technology. Both these factors have an important influence
on the growth of the e-retail industry. 

Particularly, it is in the US and Asia Pacific where the rate of growth is

expected to remain the highest in the near future. Some of the major players
in the industry include Amazon, Ali-Baba, E-bay and Flipkart. 

Moreover, the growing use of mobile technology has also proved favourable
for the industry and led to an increase in revenue and profits.

With new local and global players entering the industry, the level of
competition has also grown. The major global players like Amazon and E-bay
have made significant investments in technology to provide their customers
with a personalized shopping experience.

Bargaining power of suppliers:

In the Ecommerce industry, the bargaining power of the suppliers is generally
low to moderate. The reason is that the rules are set by the brand and the
suppliers have to follow the code of conduct set by them. Most of the
ecommerce brands are highly cautious regarding their supplier relationships
and set a code of conduct related to quality, labor and wages as well as
sustainability. Despite the number of players in the industry having grown, the
suppliers do not have too many options and therefore are bound by the rules
that the brands have set. It is why the Ecommerce brands have the upper hand
and the bargaining power of the suppliers is low. Some of the suppliers may
have some bargaining power because of their size and quality.
Bargaining power of suppliers:
In the Ecommerce industry, the bargaining power of the suppliers is generally
low to moderate. The reason is that the rules are set by the brand and the
suppliers have to follow the code of conduct set by them. Most of the
ecommerce brands are highly cautious regarding their supplier relationships
and set a code of conduct related to quality, labor and wages as well as
sustainability. Despite the number of players in the industry having grown, the
suppliers do not have too many options and therefore are bound by the rules
that the brands have set. It is why the Ecommerce brands have the upper hand
and the bargaining power of the suppliers is low. Some of the suppliers may
have some bargaining power because of their size and quality.

Bargaining power of the buyers:

The bargaining power of the buyers is moderately high in the ecommerce
industry. It is because several small and big brands ha e cropped up and there
is hardly any switching cost for the customers. Today’s customer is well
informed and has every piece of information available at a single click. Apart
from it some of the physical retail brands have also entered the commerce
market and the physical retail market itself adds to pressures. Most of the
brands are trying very hard to retain every customer and for this purpose they
make very large investments in technology and customer service.  Due to all
these factors the bargaining power of the buyers is moderately high the
factors that can moderate their bargaining power include brand image, quality
of products and service and prices.

Threat of substitute products:

There two main threats in terms of substitutes for the Ecommerce brands.  The
first are the competing e-retail businesses and the second are the physical
retailers. Brands try to earn a competitive advantage through low prices, better
quality of products or through a better overall customer experience.  For the
customers there are no switching costs and they can easily switch from one e-
retailer to another or from ecommerce to physical retail.
Threat of new entrants:
The threat of new entrants is low to moderate in the ecommerce industry. This
is because there is a need for large investment in technology, human
resources and marketing. The barriers to entry are moderately high.  One can
enter with enough capita. However, the difficulty is in terms of building brand
image and trust with the customers. So, the overall threat from the new
entrants gets moderated.

Rivalry in the industry:

The level of rivalry in the industry is high because of the large number of
players. The number of local and global brands in the ecommerce market has
grown and this has also led to higher competition. Apart from Amazon, Ebay,
and Alibaba, there are several other local brands like Flipkart, Coles etc along
with some of the retail brands like Walmart and Costco. So, the overall rivalry
between these brands gets to be very high.