Is the US Online Retail Market Ready for Donald Trump?
Internet Retailing: A Growing Trend in USA
According to a report published by Euromonitor International, the best way to shop in the US is via internet retailing, which saw growth of 13% in online sales in 2015. This figure implies that more and more business will seek to sell their products and services online, increasing the competition in this arena manifold. The Internet is the preferred means for the millennial consumer, given the wide variety of choices available under one roof online.
Another statistic that supports the preference of the online arena is the sales of smartphones and tablets, which grew by a whopping 61% in 2015 and is expected to see growth of almost 80% by 2018. While this figure seems to point to the preference for mobile devices, these are also the devices of choice for accessing the internet.
In terms of online sales growth, Amazon.com outpaced its competition in 2015, accounting for 60% of the total ecommerce sales in the US, which amounted to a whopping $23 billion over the previous year. In fact, Forrester Research predicted that ecommerce sales in the country would grow to over $530 billion by 2020, with more than 206 million people shopping online.
Trump's Trade Policies
As part of the policy changes President Elect Trump intends to make once he takes over, is a renegotiation of NAFTA, imposing a 35% tariff on imports from Mexico and China. Mr. Trump stated in support of this decision, saying, “Our country is getting ripped off.” This has created a huge buzz amongst the trade manipulators.
Modifying US trade policy to reduce the trade deficit seems to be a prime focus for Mr. Trump, who is looking for big changes in the US trade industry. His alleged opposition of the NAFTA and TPP is meant to be an attempt to reduce the US trade deficit, which stood at $42.6 billion, as of October of 2016, with exports recording the largest decline since January and imports experiencing a prominent boost in the past 14 months.
Impact of Policy Changes
However, abandoning NAFTA could harm US retailers that manufacture their products overseas. According to a 2016 survey report by GT Nexus, 44% of the country’s retailers expect cost of goods to rise due to protectionist trade initiatives, while another 22% expect increased risk of disruptions and delays.
On the other hand, the TPP was a major undertaking by President Barak Obama, and is a trade pact between the US and 11 other nations trading in the Pacific Rim. This pact is also set to get slammed by the incumbent President and it is still unclear how trade deals would look under his administration.
Good For the US, Bad for Others
Imposing tariffs on import will affect the international trade benefits enjoyed by the American consumer, who will have to pay more for limited choices. President Elect Trump's opposition of the Trans Pacific Partnership (TPP) might feel like the perfect decision for manufacturing units in the country. However, will the American consumer be happy with the decision? The short answer is no. The 12 countries that are part of this pact collectively account for a population of about 800 million, big enough to capture 40% of the world trade. Including environmental protection and workers’ rights, TPP aimed at creating new investment opportunities for American businesses and retailers, large and small, both domestically and abroad.
Impact on Ecommerce
The main goal of online retailers is to ensure that orders are delivered to customers in the quickest possible timeframe. This means that some level of automation is required within the logistics process, whether it is at the warehouses, distribution centers or even the possible use of drones to make deliveries, according to a November 2016 article on Business Insider.
However, if Mr. Trump makes policy changes to protect US workers from being replaced by machines, ecommerce businesses might see a drop in productivity due to the need to rely on traditional methods and labor options. This could also mean that the evolution of the online retail space, as well as last mile delivery, might come to a standstill. The consumer today expects a seamless experience, with on-time last mile delivery, and if an online retailer is unable to ensure a smooth process, the consumer will simply move on to someone else who can, according to Boss Fulfillment.
Will the Trump administration make is difficult for ecommerce businesses to provide a seamless shopping experience? Only time will tell.