This article in the WSJ discusses the profitability of online sales. It reports that shoppers continue to move to online purchases. It reports that many traditional retailers have lower profitability on online sales than in their stores and that "Primark, the European discount retailer that plans to open eight U.S. stores, has shunned online retailing altogether because it deems it unprofitable".
Analyze this:
"If the e-commerce business was inherently so much more profitable, pure e-commerce companies would have higher margins," said Simeon Siegel, an analyst with Nomura.
"If the e-commerce business was inherently so much more profitable, pure e-commerce companies would have higher margins," said Simeon Siegel, an analyst with Nomura.
"I don't care if customers buy online or in store," he said. "We're focused on sales."
"Another factor weighing on e-commerce margins is that online sales have a higher degree of variable costs."
Questions to consider:
1. Do traditional retailers have a competitive advantage in online sales? If not, what is the future of traditional retailers? If so, what is the future of Amazon?
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