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Markets and Economy

The Internet’s Impact on Retail

Digital innovation is impacting every industry. Learn how forward-thinking retail companies are using the Internet to their advantage—and what that means for the economy.

Digital innovation is impacting every industry. Learn how forward-thinking retail companies are using the Internet to their advantage—and what that means for the economy.

The Internet’s Impact on Retail
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The traditional economy has entered a new frontier. Innovative, technology-driven companies are disrupting myriad industries, from taxis to travel rentals. And in retail specifically, the Internet has changed how companies advertise and distribute their products—and, in turn, how economists monitor activity.

Here are five things for businesses to consider in the age of e-commerce:

1.  Consumers are driving the digital shift. Innovative companies have found success through new models of marketing and distribution, but it’s not the companies themselves driving this change. American consumers are sending a clear signal of how they want to shop. In 2018, Black Friday in-person sales dropped nearly 2 percent from the year before; online sales, however, reached a record high.1

2.  Social media is the new TV commercial. In the past, new products found a broad audience by advertising at set times during popular TV shows. Today, ads run constantly on web and social platforms, increasing the opportunities—but also the competition—to reach new customers.

3.  In e-commerce, national borders don’t exist. Because of the Internet’s global reach, popular brands in the US quickly cross borders to become popular brands across the globe. Companies can deliver anywhere, so they aren’t confined to a single market—and as such, the need to scale quickly is critical, especially for consumer-oriented companies.

4.  Innovation can help balance out monopolies. Clear leaders exist in many industries—particularly in e-commerce, ride-sharing and travel housing rentals—but that’s not a natural monopoly as much as it is a reflection of how these companies learned to use technology to their advantage. Over time, more and more companies will likely find innovative ways to compete, thereby leveling the playing field.

5.  Current economic measures aren’t telling the whole story. Economic metrics haven’t quite caught up with the current landscape; when consumers buy products from nontraditional vendors, it’s challenging to track activity through every different channel. GDP measures are based on traditional outlets and retailers, but the current environment is much more fragmented. As businesses and consumers make it clear that Internet-based retail is here to stay, economists will likely find ways to measure activity more accurately across these channels.

View our economic commentary disclaimer.

Jim Glassman, Head Economist, Commercial Banking

Jim Glassman

Jim Glassman, Head Economist, Commercial Banking

Jim Glassman is the Managing Director and Head Economist for Commercial Banking. From regulations and technology to globalization and consumer habits, Jim's insights are used by companies and industries to help them better understand the changing economy and its impact on their businesses.

Video Jim Glassman