When e-commerce began to really take off, financial experts anticipated that it would be a huge game-changer. It helped struggling economies change their structure and thrive through the manufacturing of products. It also changed the world’s hierarchy in terms of imports and exports. China, for instance, became a huge production powerhouse and improved its standing with the world through the ability to meet the incredible demand. Now that it’s fully established, how is e-commerce changing the markets?
E-commerce not only changes how we consume products, but how they are manufactured and shipped. Companies think nothing of shipping thousands of miles to make cheap sales. One of the biggest impacts of e-commerce therefore is the potential inflation that it results in.
Inflation could be a result of e-commerce because the rise in online purchases skews how inflation is measured. Moreover, as the cost of shipping products from overseas increases, so too does the price of the product for the consumer. Raw materials and the production of the products can also lead to inflation. So, the price of the goods rises and this leads to inflation.
Inflation can’t just be considered by itself. It will also have a bearing on the foreign exchange market, especially as countries have different measures in place for changing their inflation rate. For instance, the United Arab Emirates and Qatar have negative inflation rates, also known as deflation, meaning consumer prices are typically lower each year.
Elsewhere, Zimbabwe and Argentina reported high inflation rates in 2019. The inflation rate of Oman is lower than that of the USA and the UK, for example. This has a bearing on the exchange market and can be impacted by e-commerce.
Within the exchange market, forex trading signals help suggest to traders what to do on certain positions by listing the entry and exit prices. This means that traders can conduct trades without having to do any in-depth research themselves. Inflation and its effects can have an impact on these entry and exit prices. Inflation reduces the cashflow of a company and therefore could indicate that their stock value will fall as they would not be worth as much as they were previously.
Some have argued that e-commerce can have a dampening effect on inflation. The competition that sites such as eBay and Amazon create means that to be competitive, prices must remain low. With someone always willing to sell for cheaper, e-commerce could help keep inflation rates down by ensuring products don’t increase in price.
However, raw materials costs are affected by other factors and could still lead to inflation.
As the inflation rates are set country by country, being undercut by another nation could lead to individual inflation rates rising. While it may end up being good for consumers somewhere, buying cheaper products from overseas could lead to higher inflation rates somewhere else.
Regardless of its impact across the world of finance, e-commerce is here to stay. It helps people engage with new products and brands and helps businesses reach a wider audience. Lower prices and competitiveness across the industry is favoured by consumers, who then have more money to spend. Some suggest that e-commerce could lead to inflation, but others mitigate this by suggesting that inflation has been volatile before the internet was even conceived.