economics

Traditional Retailers Catch Up to Startups Who Falter

Published November 28, 2017 by Carl De Luna
authorphoto

Amazon and Uber are two of the more popular tech startups. It is undeniable that they have established themselves as disruptors of the traditional means of buying and hailing transportation. Amazon was laughed at by traditional brick and mortar stores in the 90’s, but who is laughing now? Amazon saw the future of retail and laid the foundation of a seamless quick order and delivery system which has overtaken traditional retail stores. Its founder Jeff Bezos is now worth billions.  Uber has ushered in the rise of ride hailing apps as the norm throughout the world. With their easy to use app available to Apple iOS and Android users, it has become the marquee brand of ride-hailing apps with other competitors such as Lyft, Gett, Addison Lee, Grab, Blabla Car following behind.

Amazon reported fabulous sales this holiday weekend due to Black Friday and Cyber Monday. Since online shopping has become the norm for most Americans, traditional retail stores have been losing their grip on the pool of shoppers. Like Folio, who tracks social media data for investors, revealed that some retailers have started to use social media to raise awareness about their offers. Perhaps the best example of this was Best Buy, which bucked year to year declines of the past, to post stronger performances ever since 2016. Like Folio data showed over that period Best Buy experienced four spikes in online purchase intent mentions. Adobe Analytics showed that Cyber Monday brought in sales of $6.59 billion USD while Black Friday had $5.03 billion in sales. It is estimated that Amazon took 42% of all online sales over the holiday, according to market research firm Slice Intelligence. A big surprise was Walmart narrowing the price gap against Amazon to 0.3% this year, much lower than last year’s figure of being 3% higher.

Amazon should now be wary of tightening competition from traditional retail stores such as Best Buy and Walmart. They have realized that they can use social media to attract customers. Their use of technology is maturing, they have learned to spruce up their websites to be easier to use. They have also learned to lower the price difference between themselves and Amazon. Walmart has also invested heavily on their online buying experience and pairing it with in-store pick-up. They bought Jet, ModCloth, Moosejaw, and Bonobos as they attempt to eat away Amazon’s edge. It remains to be seen how they have weakened Amazon’s advantage in terms of price and shipping. Acquiring those online retailers will help Walmart to expand its reach towards new demographics such as the younger and hipper generation. It has mostly focused on its lifestyle and fashion apparel which will attract people who have not shopped at Walmart before. But Amazon has not rested on its laurels. They too have acquired various startups and invested in various technologies to help them widen their product offering. Body Labs was one of their more recent acquisitions, who have technology which could potentially lead to virtually trying on clothes. Such is a potentially game changing technology if they could offer it on their website.

With all the battles that Amazon must face in the United States, it has several problems which could derail its prospects abroad. Amazon workers in Germany and Italy held strikes during one of Amazon’s busiest shopping dates, Black Friday. The workers on strike in Italy were expressing their discontent about pay and working conditions. While workers in their German warehouses were exposed to a poor leadership culture, intense demand for more work in less time and permanent performance controls and monitoring. They also denounced the short recovery times between working stints. German union Vardi claims that these conditions permanently endanger the workers. But Amazon said that most workers in Germany and Italy came to work. They also pointed out their record of job creation and are confident of meeting the customer demand for the holidays. They also revealed to Reuters that they pay some of the highest wages in the logistics industry with incentives such as monetary compensation for training programs and private medical insurance.

It might be better for Amazon to answer these accusations as it is widely felt that Amazon is a horrible place to work. A Sun undercover investigation in Essex, United Kingdom, at Amazon’s biggest Europe packing plant, came out with the news of horrendous working conditions where employees have timed bathroom breaks and are sleeping on their feet due to exhaustion, with most of them walking more than 10 miles to fulfill orders. This is horrible and slave-like treatment of workers. While it is tempting for corporate to replace human workers with robots, having human employees is still the best as they do not require electricity to function while also are not dependent on a single program/function. Humans are also able to practice logic, and use their heads when the situation demands it. Perhaps Amazon could consider giving employees performance related incentives to make them feel confident that their effort will be rewarded. Efficient practices would ensure that effort is maximized and not wasted. While competition is tight, and there is a need to lower cost, there should be no excuse for such treatment of employees.

Uber faces another controversy and setback to their already rocky year. In the United Kingdom, they lost a landmark case which could lead to the reclassification of the status of their drivers from being self-employed to workers. They have plans of elevating the case to the Supreme Court. A reclassification would mean that drivers would be entitled to sick leave and holiday pay. As a response to the Employment Appeal Tribunal, Uber UK has given their drivers more control while also offering illness and injury coverage. Uber must recognize that they should be more caring towards their drivers as they are the one which is delivering the service that Uber provides. These drivers are important and thus must be given the necessary safeguards to ensure that they are not abused or neglected.

A favorable action towards its drivers could lead to a favorable response towards its private hire license lodged at the Transport for London. London authorities have initially been denied the chance to operate in London, which they appealed. The appeal process will take months, which gives Uber leeway to continue their services. Their new CEO, Dara Khosrowshahi, held constructive talks with TfL Commissioner Mike Brown saying he would like to have a thriving taxi and private hire service in London.

Perhaps the biggest outrage was the reported Uber data breach in 2016 which was only revealed last week. There were reports that Uber initially told the news to potential investor SoftBank Group before exposing it to the world. The breach involved over 57 million accounts with the hackers being paid $100,000 USD to hackers to destroy the stolen data and be quiet about the incident. Worse news is that they could be facing potentially three action lawsuits and investigations from Attorney-Generals from different US states. This could potentially damage their prospects towards their potential investor SoftBank Group. As it always seems to be with Uber, things will get messy before they get better.

Both Uber and Amazon face controversies which could see them lose value and appeal. Their problem is that traditional service providers are now catching up to them and learning their moves. Startups see their enterprise more as a financial play, in a way traditional businesses do not. This foundation results in a different end product, with different experiences for both users and employees. Startups might get a shock when they are no longer able to hire staff or attract customers because of their disrespect of both groups.

Other Articles by this Author

Westfield Continues History of Restructuring

Corruption Drives Philippines Pharma

Futures Trading to Reduce Bitcoin Volatility

Leave a Reply

Your email address will not be published. Required fields are marked *