What Net Neutrality Means for E-Commerce, Consumers, Retail

The Federal Communications Commission’s vote to repeal net neutrality continues to make waves as politicians and executives voice concerns regarding the various repercussions of the decision. The retail market stands to undergo a massive upheaval under the ruling. From disrupted consumer experiences, shaky social media regulations and debilitated organic product discovery, the tension that brands and retailers have been striving to relieve might shortly be naught.

“It will definitely change the way e-commerce web sites do business from today. The repeal will effectively disrupt the landscape and rules of engagement that exist. Internet Service Provides could potentially take full advantage of the repeal and exercise its ability to favor certain companies that is willing to pay more to get to the consumer faster and first. Should that occur, smaller companies would seem to be at a disadvantage,” said Ryan Patel, global brand-building executive.

The retail market has been shaky at best — retailers and brands regardless of scale have been investigating strategies and maneuvers to hold on to treasured consumers. The FCC’s turnover on net neutrality is a roadblock in a highway full of potholes.

“If a company is blocked or throttled by an ISP, its customers would see much slower access — making it harder and much more frustrating to browse the site or complete a purchase. And if an ISP wants to block a site altogether, its customers would not even be able to browse in the first place,” said Amy Spitalnick, press secretary of the New York State Office of the Attorney General. New York State Attorney General Eric Schneiderman has announced plans to lead a multistate lawsuit to block the repeal of net neutrality.

Where Schneiderman and others envision challenges for shoppers and merchants, the FCC views a restoration to order and a landscape leveling for broadband providers. “The FCC adopted robust transparency requirements that will empower consumers as well as facilitate effective government oversight of broadband providers’ conduct,” a FCC spokesman said. “In particular, the FCC’s action today has restored the jurisdiction of the Federal Trade Commission to act when broadband providers engage in anticompetitive, unfair, or deceptive acts or practices.”

Out of necessity, the retail market has shifted to increase digitization, mainly in the vein of omnichannel commerce, artificial intelligence-powered consumer experiences, and cloud-based, back-end solutions.

“Those who are not willing to pay for preferential treatment are quite concerned that the ISPs won’t be able to deliver their cloud-based solutions with the same type of service to their consumers. Consistency and quality are vital components for any retailer and brand to be successful,” Patel said.

Younger retailers and online-based companies are poised to feel the changes the most. “Entrepreneurs and start-ups need to have equal access to consumers in order to adequately compete in the digital economy and ensure that their products sell based on need and value,” said Carmen Scurato, vice president of policy and general counsel at the National Hispanic Media Coalition.

“Specialty products or local goods and services from retailers that cannot afford the additional marketing expense will become more difficult to find. Small businesses plagued by reduced revenue streams will have to cut back buyer incentives and may be ultimately phased out of the market,” Scurato continued. Last week the organization announced its plans to seek judicial review of the FCC’s decision in order to ensure hispanic and minority communities maintain access to an open Internet.

With the raging machine of social media and influencers’ pull on Millennial and Generation Z purse strings, net neutrality stands to be a final, insurmountable hurdle for many small, independent retailers that rely on social to reach target audiences.

“The repeal of net neutrality gives ISPs the green light to decide what web sites or services consumers can access on their networks — and this could include access to social influencers and their audience reach,” said Scurato.

“Small business have always relied on social media to not only reach the masses but as an effective marketing strategy to drive awareness and revenues, as well as a lower cost medium. But net neutrality shifts the power to ISPs and its ability to potential interfere on this crucial component,” Patel explained.

Spitalnick agreed: “Smaller brands generally have far less money to pay ISPs, and rely on social media in order to reach customers and grow their business. Yet those brands are the ones that will be most vulnerable without net neutrality. Not only will they be unable to pay ISPs for the speedy connections to customers they need in order to compete, but they will have less money to fund legal action against ISPs if they’re being unfairly targeted.”

Though small, independent brands that are reliant on the platforms might encounter challenges, the social channels themselves might innervate to become the next chapter of malls with the roll back of regulations. “With a repeal of net neutrality, the social platforms may have the capability of becoming the new department stores,” said Sarah Engel, chief marketing officer of DynamicAction. “Besides Amazon, they may become the only ‘department stores’ that can afford to offer the selection of amazing brands that rotate quickly enough to satisfy the consumers’ desires.”

For Millennials, who tend to be less swayed by labels and more by niche product that’s celebrated by online — and off-line — communities, this means potential challenges in uncovering new and exciting brands.

“If a company is blocked or throttled by an ISP, its customers would see much slower access — making it harder and much more frustrating to browse the site or complete a purchase. And if an ISP wants to block a site altogether, its customers would not even be able to browse in the first place,” Spitalnick said.

The FCC disagrees. “The framework adopted by the Commission today will protect consumers at far less cost to investment than the prior rigid and wide-ranging utility rules. And restoring a favorable climate for network investment is key to closing the digital divide, spurring competition and innovation that benefits consumers,” the department spokesman said.

While lawsuits get under way, e-commerce remains in a state of flux, though some seem more surefooted in how to navigate the market following the repeal.

“Thursday was a sad day for those of us who have fought so hard for the strong net neutrality protections that enable millions of micro-businesses to start and grow online,” said Althea Erickson, head of impact and advocacy at Etsy. “Though FCC chairman [Ajit] Pai had the votes he needed, this is not the end of the battle for a free and open Internet. Etsy and our sellers will continue to make the case for clear, simple, bright line net neutrality protections in the courts and in Congress. Ultimately, we believe the needs and concerns of millions of micro-businesses must trump those of a few giant cable companies.”

But while e-commerce web sites such as Etsy strive to maintain a sense of normality for both its vendors and shoppers, Engel argues that retail powerhouses like Amazon will gain more market share under net neutrality.

“The removal of net neutrality gives even more advantage to the largest players like Amazon and Wal-Mart, who have the ability to take on the incremental operating costs,” she said. “It puts control of communication, access and information into the hands of the ISPs, and takes it away from both consumers and retailers. Repealing net neutrality stands to impact both online retail — for example: consumers counting their available megabytes before shopping — as well as retailers’ operating budgets.”

And although retailers, brands and online shopping platforms will be forced to evolve, consumers will need to reshape search and spending patterns, too. The existing models to garner consumer intrigue and loyalty will arguably wane. As shoppers are put to either championing brands or selecting service providers that might support more enhanced distribution rates, loyalty will become even more endangered than it already is.

“A shift in net neutrality also casts the concept of loyalty in a completely different light. For example, where do consumers put their loyalty? Is it with the brands or the speedy distributor? Do you ask, ‘I love how well Comcast delivers, and I happen to get ESPN? Or, I love ESPN and it just so happens to be on Comcast?’ The same type of loyalty conversation will occur from an e-commerce perspective,” Engel explained.

Millennials and Generation Z, ever the deal-hungry and demanding consumer set, probably won’t develop patience to endure time-lagged video. They entered the digital shopping arena under former net neutrality regulations, setting up standards and expectations that are aimed at disappointment with the repeal.

Patel said: “The online experience has always been very important and crucial in leading to revenue online. The idea of slight delays in getting videos and sites to load, can present a problem to many of the consumers and product searches. In effect, can possibly change behavior in how consumers purchase from one site to another.”

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