E-commerce forcing out local businesses

(Jamaica Observer) – “To be honest, we were forced to. Sometimes you change things because you foresee things or because you are forced to,” said Ueli Bangerter.

The forced change referred to was when Bangerter, managing director of Swiss Stores Ltd on Harbour Street, downtown Kingston, found himself in a situation where he had to decide whether to shutter his jewellery business or continue to suffer losses month over month as the vibrant local economy which he once knew slowly started to change.

With the introduction of technology, Bangerter’s was one of many local business owners which had to go back to the drawing board to determine how they can remain profitable within the emergence of the e-commerce landscape.

Electronic commerce – e-commerce as it is more popularly known – is the transaction of buying and selling goods online. The shift towards online shopping has not only changed the way people conduct business in Jamaica, but is also forcing local business owners to keep up with global competition or get out of the game.

“Let’s say 15 years ago you were in the business of selling CDs, records or video cassettes. No matter how good you were, how big your business was, that market disappeared. So I think a similar thing will happen to traditional retail,” Bangerter told the  Jamaica Observer during a round-table conversation.

In fact, the business owner, reacting to the changes in Jamaica’s economy led by the global recession in 2008, e-commerce and the crash of Olint and CashPlus, transformed what was once a store filled with fine jewellery from Switzerland into a restaurant now known as F&B Downtown.

“We couldn’t keep up with the changes. The trends were changing so fast that when I stock the colours today, by the time the inventory would reach here they would be out of style,” he recalled.

“Sometimes the customers would even come in with pictures of a specific product they saw online, but it’s hard for us to stock in such large varieties. But the online stores can do it; these electronic businesses many times benefit from huge cost savings from not having to have so much staff, no A/C and, in some cases, no stocking of inventory. They will call on the suppliers and they get the goods to them in no time,” Bangerter said. “In Jamaica it’s not like that, so we had to do things differently.”

Luckily, Bangerter had prior knowledge of operating a restaurant. While he still supplies Swiss watches and jewellery in small quantities to impulse buyers, he has plans to expand his restaurant operation to meet an anticipated increase in demand as the redevelopment of downtown Kingston slowly takes effect.

He added that while he had to send home staff upon closing the jewellery business, they have since been replaced to effectively manage the restaurant.

On the other side of the equation, one local online shopper, Kim Hayden, notes that she opts to shop online instead of at local department stores because of the cost savings and higher-quality products that she can obtain.

According to Hayden, her purchases of clothing through American fast fashion retailer Forever21’s online shopping website total roughly $13,000 or US$130 tri-monthly. She also frequents electronic commerce and cloud computing company Amazon.

It’s understood that online shopping in Jamaica is mainly executed by consumers under the age of 35 and individuals who frequently leave the island.

According to data provided by the Jamaica Customs Agency, the change in buying habits — while small — has already begun to impact the island, with several entrepreneurs capitalising on the trend.

In 2015, the number of courier companies using the agency to facilitate international delivery, such as MailPac and ShipMe, stood at seven. But that number has nearly increas-ed by three times to 20 companies as at the end of May.

But not all brick and mortar stores are feeling the impact of e-commerce just yet.

Jacqueline Wedderburn, manager of local electronics store Watts New, told the Business Observer that while she is aware of the increasing trend for consumers to shop online, the change has not impacted the operations of Watts New. She reckons that despite the emergence of e-commerce, Jamaica will always have space for retail shopping.

“I’ve heard talks of it being cheaper to purchase goods online and ship it into the country, but I really don’t think it works out any cheaper than purchasing it in the local stores. In addition to that, customers like to see and feel what they are purchasing. And what if something goes wrong with the product, especially if it’s electronics?

“It would create some hassle for the customer to put the product back through Customs and send back to the international company, which also has a cost to it. If it was purchased in Jamaica, all the customer would have to do is walk back in the store with the receipt,” Wedderburn said.

Customers are also warned of Internet scams, get-rich-quick schemes, fake freelancing sites, the possibility of identity theft, and websites that request too much personal information when conducting business online.

Still, chief executive officer of the Private Sector Organisation of Jamaica (PSOJ) Dennis Chung believes Jamaica can move to create policies to capitalise on the growing trend before its impact becomes greater.

He reckons that the introduction of duty-free shops could allow Jamaica to not only become a shopping destination, but also eliminate the smuggling of goods into the country. Chung is now urging the government to pay closer attention to the changes in the global economy.

“I was at a Tourism Linkages Council meeting where one of the things discussed was the shopping network. Jamaica applies import duties, but people with the tendency to go online and shop are going to try and find ways of getting it into the country without having to pay the duties, and what that does is kill the local company.

“We put so many barriers up that if that trend actually continues, then local businesses can lose out. We don’t have to produce the goods, but we can be seen as a shopping destination like other islands,” he said.

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