Small retailers and businesses survived the global pandemic that plagued 2020 on the back of rapid digitisation by relying on platforms which helped them power e-commerce, deploy touchless payments and so much more.
But, now that we have entered into a new year and the pandemic is slowly being wiped out, SMBs are now faced with a new problem – being at the mercy of the digital platforms that helped them survive in the first place!
Platforms such as Amazon, Shopify, DoorDash, etc. which enable other businesses to grow, always win big and that is why every company wants to be one. Yes, these digital commerce enablers were massive business savers, but going forward enterprises both big and small are going to struggle balancing costs of using these platforms versus maintaining profits.
2021: Enterprises To Face Build vs Buy Dilemma
Industry analysts believe that that 2021 has only begun to see the tip of the turbulence which is to start occurring between platforms and businesses.
Most digital platforms tend to serve businesses or industries which are already suffering from thin profit margins. Thus, the questions that arrive here are – Post the successful clearance of the COVID-19 pandemic, will enterprises agree to pay a cut of their already shrinking profit margins for platforms that enable fulfilment, point-of-sale analytics and so on?
Also, if not, will these businesses choose to build their own delivery networks and fulfilment chains?
Well, that is something only time will tell but major digital platforms have already got wind of their customer sentiments and they do not look positive.
The U.S. based online food-delivery platform DoorDash, in its IPO filing, mentioned how several of their merchant partners are also competitor as Domino’s and other restaurant chains already own their own online ordering platforms along with delivery fleets as well.
In their filing, the company also mentioned that they soon face a similar kind of competition from local players in the international markets that they are presently expanding.
Shopify, the popular e-commerce enablement platform made similar remarks about their customers as well. In their 2019 annual report, they mentioned how their users (the majority of which are SMBs) may become quite sensitive to price hikes and in turn be more open to considering bids from rival platforms. Therefore in the near future, the company might require to reduce its pricing.
Lastly, Square, the American mobile payments company has also has highlighted potential pricing pressure. The company stated that their gross profit might be reduced due to sellers demanding more customized and favourable pricing.
Square also mentioned that they are currently negotiating discounted pricing and various other incentives to appease some of their largest sellers. This is because the U.S payments firm wants to make sure their products and services keep being used in the face of competition from other budding rivals in the same space.
Now, how will businesses choose to move forward with digitisation in 2021 is something that is yet to be known. For now, it is quite evident that the build vs buy dilemma will continue to haunt both platforms and enterprises alike. We will keep you updated on all future developments. Until then, stay tuned.