The future of online retail

The future of online retail

2014 was tumultuous for online retail.

So What is The future of online retail?


The two longstanding stock market leaders in the sector – eBay and Amazon – were eclipsed by a newcomer, Alibaba. eBay announced a split that looks set to change their business dramatically by the end of the year. Amazon had possibly their highest-profile failure yet, the Fire Phone. Even smaller British players will look back on a troubled year: ASOS had to contend with a major warehouse fire and issued three profit warnings over the year.


Those interested in online binary traders in Australia could be wondering whether it was a one off annus horribilis for the leading lights in online retail, or are we facing a future where their primacy in the sector faces threat after threat?


The good news for Amazon and eBay is that there is unlikely to be another Alibaba anytime soon. Its IPO took the title of world's biggest after raising $25 billion back in September, with the company arriving with a valuation of $230 billion.


For a business to float at the very top of the US stock market is a rarity, but there has been little sign thus far that the company has been overhyped. After a brief dip in its first few weeks on the markets, Alibaba grew a further 25% in value, and was worth more than $255 billion by the onset of the New Year. 17 brokers on IG's platform rate it as a buy, 15 a strong buy; nobody recommends selling the stock.


Alibaba are comfortably sitting in the top 10 companies in America by market cap, and the battle between the Chinese e-commerce giant and US retailer Wal Mart in 2015 looks intriguing: Wal Mart is currently worth around $20 billion more. Alibaba got to this point by taking advantage of the massive opportunity presented by the growth of the internet in China, though, and the chances of another company repeating the feat are slim.


Neither does Alibaba look likely to bring major competition to either Amazon or eBay on their home turf. Jack Ma has stated in the past that he sees Alibaba's success as replicable in other emerging markets – India being the clearest example – rather than a developed, tech-led economy.


But that does not mean that competition in the online retail sector is dying down. For a long time, the top tech companies in America have attempted to eat into each other's business. Despite some moves towards cooperation, that situation looks unlikely to die down in the near future.


Given that situation, the need for eBay and Amazon to compete becomes ever more prominent. eBay will lose a significant revenue after it splits with PayPal, and many people believe that PayPal is the stronger half of the business. Certainly, PayPal is growing at a much faster rate than eBay, with revenues increasing at about double the speed of the online auction house. Many investors doubt eBay's ability to compete on its own – come the end of the year it must prove them wrong.


Amazon too has its work cut out in order to convince investors that it is a worthwhile proposition this year. For a long time, the company was able to largely ignore shareholders thanks to meteoric growth and dominance of its market. In 2014, though, share growth stalled and the company ended the year worth 20% less than at the start of it.


At the moment, there is little call for alarm yet. But after years of relatively unchallenged dominance, eBay and Amazon have something to prove in the coming months.


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Debbie Fletcher