STRATEGIC MANAGEMENT

Assignment 2
Full Name: Nguyen Thi Thao Nhi
Student number: 050606180278
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PESTEL ANALYSIS OF THE E – COMMERCE INDUSTRY

The Ecommerce industry has seen immense growth in the recent years and apart from
some fluctuations in the global economy like demonetization in India, the situation has
remained favorable for its growth. China and US are the largest of the e-markets.
However, growth rate is expected to be even higher than US in the Asia Pacific region
this year. The US e-retail market is among the largest ones in the world. Apart from
Amazon, Ebay and Alibaba, there are a number of important players in the market like
Fipkart, Walmart, Coles and Best Buy. The technological factors have also supported
the growth of the Ecommerce industry. Growth in the use of mobile gadgets has also
pushed the ecommerce sales high. A larger number of people are now shopping using
their mobile phones. There are several factors apart from economic and political that

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affect the global ecommerce industry. This is a PESTEL analysis of the ecommerce
industry that analyzes how these various forces can affect the ecommerce industry and
how deep can their impact be on it.
1. Economical
Economic factors are very significant in terms of business. Whether it is an online
business or physical, economic factors can have a significant effect on it. It is because
economic factors are directly related to business and their effect is also direct on business
revenue and profits. During the period of recession, spending had decreased. People had
adopted cost cutting measures as the level of economic activity and employment had
gone down. During such periods when economic activity has gone down, the profits and
revenue of businesses can go down. E-businesses too cannot remain unaffected.
Economic fluctuations since the recession have also kept affecting businesses from time
to time since the recession. In several economies like Russia, Brazil and India, these
economic fluctuations affected both global and local businesses. Now that the recession
has passed and economic activity has returned on track, the ecommerce industry has
flourished in the recent years. Higher economic activity means faster growth and higher
revenue for the Ecommerce industry whereas lower economic activity means just its
opposite. In this way, economic factors can have a direct and deep impact in the
ecommerce industry.
2. Social
Socio cultural factors too have a deep impact in ecommerce industry. Most importantly
e-retail brands find it the easiest to flourish locally. Growth in foreign markets can be
full of challenges. Changing trends can also have an impact on businesses. The growing
use of mobile technology has affected ecommerce. In most societies the mobile
technology has been very popular and a larger number of people worldwide are now
using mobile gadgets for shopping and other purposes. Socio cultural factors affect
businesses in other ways too. Cultural factors have an impact on how these ecommerce
businesses market themselves. In several societies of the world ecommerce is still seen
as a sign of Westernization due to which it has seen low growth in these areas.

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 3. Technological
Technological factors are very important in the context of the ecommerce industry. It is
because the industry relies heavily on technology. Everything is based on technology in
e-retail from sales to customer service. All the ecommerce brands are in a race to be
technologically ahead of their competitors. From Amazon to E-bay and Flipkart, every
brand is investing a lot in technology to find faster growth. Technology decides several
things in the ecommerce world from popularity to profits. The reason that Amazon is
ahead of the others is because it is technologically ahead of the others. It has managed
its customer experience so well that its popularity is very high. In this way, technology
is a major influence on businesses and in case of ecommerce technological factors
acquire a very special importance.
4. Environmental
Environmental factors too have a special importance in the context of Ecommerce
industry. While the direct environmental impact of this industry is very low and nearly
zero, it still focuses heavily on sustainability. Brands like Amazon have invested heavily
in technology. Even in Ecommerce there are several areas where investing in
sustainability can be highly productive. From sustainable packaging to waste reduction
and renewable energy there are several areas where the e-retailers can invest in
sustainability. Amazon has invested in renewable energy to gain freedom from the use
of non-renewable energy resources.
5. Legal
Legal compliance is just as important for the businesses globally. Any tussle with the
law can be a costly affair and even the e-retail brands can become a target unless they
take care of compliance. It is why the big E-retail brands have separate teams to take
care of the legal issues. Non compliance can result in financial losses as well as loss of
image and reputation. From labor laws to sustainability laws, there are several areas
where the e-retail brands have to be careful regarding compliance. Moreover, these laws
differ from nation to nation and market to market and compliance in every area is

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important. So, in case of the companies operating internationally law can lead to major
pressures and an increase in operational costs. The e-retail brands also have to be careful
about the applicable laws and compliance.
6. Political
While the threats may not be the same before the e-retailers as the physical retailers, still
there are several political hurdles before them. There are several risk factors affecting
the e-businesses. For example for the global leaders like Amazon and E-bay growth in
Asia pacific region can be made difficult by the Red tape. Several news reports highlight
how Red Tape in India can become major difficulty in the way of new businesses trying
to extend their presence there. The political and regulatory challenges before the e-
businesses have kept rising. The growth of Ecommerce in EU has also been challenged
by political factors. EU has kept targeting technology giants from US. Google and
Amazon have already been targeted by EU. Such issues can be a threat to the growth of
ecommerce in Europe and it is why several sources predict that the growth rate of
ecommerce in Europe is going to be low. Political issues are not limited to just those
discussed above but there are many more. Political stability in most regions of the world
leads to economic stability. Political chaos can result to disruption of business both
online and physical. Overall, political issues can have a significant impact on ecommerce
and its growth.
Opportunities
Growing Market
One of the biggest opportunities for the online shopping industry is the growing market.
While most consumers in developed countries already have electronic devices, there are
plenty of consumers in developing countries who don’t — and, as a result, don’t buy
goods online. As the prices of electronics continue to decline, it’s likely that we’ll see an
increase in the number of potential internet shoppers. This will subsequently result in a
greater volume of eCommerce sales.
Influencers

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There are a number of internet users who use their large social followings to promote
various goods and services. These people, known as influencers, present a powerful
marketing opportunity for savvy eCommerce sellers. With social media becoming such
a huge part of our everyday lives, influencers are set to play an increasingly important
role in how products are marketed — and eCommerce stores are best positioned to take
advantage of this.
Threats
Here are four Threats for the eCommerce industry:
Competition
Although the eCommerce industry’s low barrier to entry is, on the one hand, a Strength,
it also poses a significant threat for existing sellers. This is because of how easy it is for
just about anyone — anywhere — to launch a new eCommerce store and compete with
other online shopping businesses. It’s important to know that this element of competition
doesn’t affect the success of the eCommerce industry as a whole, but affects individual
businesses.
Fraud
The world of eCommerce is fuelled by digital payments, whether that involves credit or
debit cards, bank transfers, or even cryptocurrencies. This makes it a huge target for
fraudsters, who now have an easy way to cash out on their illicit activities. Fraudsters
can buy goods online using others’ payment details — while staying completely
anonymous — and send those items to neighborhood doorsteps, where they’ll be swiped
while the homeowner is out at work. Unfortunately, it’s incredibly difficult to combat
internet fraud, which is why it’s such a big threat for the industry.
Data Concerns
Aside from blatant fraud, there’s a lot of potential for things to go wrong with online
shopping — especially when it comes to users data. Shopping online requires you to
hand over a lot of sensitive data, including your payment details, address, and other
assorted information. If this information gets into the wrong hands, it can have
devastating consequences. Also, since the introduction of new data-related regulations

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like the European Union’s GDPR, there are new complexities in the data aspects of
running an online business.
Monopolies
Since eCommerce stores can cater to entire countries — or even the entire world — it
leaves a lot of potential for monopolies to form. Perhaps the best example of this is if
you review how Amazon has affected bookstores. In the past, a variety of local
bookstores (including mom and pop stores, smaller chains, and larger chains) would have
serviced a given area. With the advent of huge eCommerce alternatives like Amazon,
these stores are dying off and Amazon is becoming the one-stop-shop for books. This
trend may spread into other markets, and may at some point warrant government
regulation.

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References
Marcia, K. (2013, April 3). SWOT Analysis for Ecommerce Companies. Retrieved from
Practical Ecommerce: https://www.practicalecommerce.com/SWOT-Analysis-
for-Ecommerce-Companies

Pratap, A. (2017, November 10). PESTEL Analysis of the E-Commerce Industry.

Retrieved from notematic: https://notesmatic.com/pestel-analysis-e-commerce-
industry/

Thomas, B. (n.d.). SWOT Analysis of the ecommerce industry. Retrieved from PESTLE
ANALYSIS: https://pestleanalysis.com/swot-analysis-of-ecommerce-industry/