E-commerce is spreading faster than we ever expected and thereby introducing new challenges the world has never seen before. This creates a stark contrast between a traditional business model that has been there for years and a sophisticated, easy and cost-effective technology for seller and buyer.
How can this contradiction be handled, especially as it goes against the interests of traditional traders and distributors while serving those of companies that provide new and fast means to doing transactions? At first, it has to be admitted that it is not easy to resolve such a contradiction or even find a middle ground in any way, given the fact that modern technologies usually remove the old ones in total.
For example, there are demands in some Scandinavian countries calling for a ban on the online retail giant Amazon from operating there after the damage it has caused the retail sector, mostly shopping centers, and which had led to bankruptcies and increased unemployment. As such, Amazon does not add much to these countries by virtue of basing its operations elsewhere.
On the other side of the Atlantic, particularly in Amazon’s domestic market, Sears Holdings, which was founded in 1886, has declared bankruptcy. It filed for creditor protection in accordance with Chapter 11 of the bankruptcy law because of its failure to compete with e-commerce. It also decided to shut down 142 stores by the end of this year, something that Toys R Us did with 735 stores since March.
These retailers are trying now to resist the fierce competition imposed by e-commerce through restructuring. The consequences from e-commerce have not been limited to retailers, but also affected the labour market and owners of commercial centres, as well as taxes many countries derive from the sales happening in the retail sector.
Is there any way out of this dilemma? Perhaps there are, but certainly not through banning the activities of Amazon or other e-commerce operators, as some have suggested in Scandinavian countries. The solution is easy and does not require much effort, and lies in the effective organisation of shopping centres through diversifying their activities from retail. They need to be places for family entertainment and other services and encourage shops to include e-commerce.
It is true there are many way outs, but that does not mean many retail companies and individuals will find themselves out although competition is increasing. If big and old companies such as Sears and Toys R Us are unable to compete and adapt to market conditions, smaller businesses would suffer more from this inability to compete.
At the same time, this challenge will not be faced by retailers alone. Rather, it is a challenge for commerce and industry groupings and ministries of economy and trade in all countries. Organising the work of e-commerce companies, for instance, should be a priority for regulators.
Legislation and laws can effectively contribute to adapting to developments arising from tech’s progress. This requires cooperation and solidarity by all parties in the public and private sectors to develop solutions that minimise the effect of such change while preserving one’s position within such transformation.
Dr Mohammad Al Asoomi is a UAE economic expert and specialist in economic and social development in the UAE and the GCC countries.