The Principle of Creative Destruction: How E-Commerce Has Reshaped Retail Industries
While there have been many eye-opening news items of late, one that stood out was that Amazon overtook Walmart in quarterly revenue in Quarter 4, 2025. For non-American readers, Walmart is the largest chain retailer in the USA and pulled in more quarterly revenue than any other retailer worldwide every quarter since 2012. Amazon’s success represents a significant milestone for e-commerce and recognition of a significant change in the way we shop. So, using the Principle of Creative Destruction as a guide, how has e-commerce reshaped retail industries? How has traditional brick-and-mortar retail responded to the online invasion? Indeed, will there still be a High Street for shoppers to visit in years to come?
What is Creative Destruction?
The economic term, creative destruction, effectively means, “out with the old, in with the new”. It sits at the heart of capitalism, whereby, you first remove the existing systems and processes, before you introduce a new improved version.
Creative disruption doesn’t necessarily require large-scale dismantling of a system, it just acts to remove any barriers to the implementation of something new. For example, the arrival of the internet has had a profound effect on almost everybody. This initially didn’t replace any existing system, however, so there was no need to destroy any system first to make the Internet available to a vast number of people. However, as the internet expanded and increased in popularity, and as bandwidth improved, people began to see many more uses for it, and this caused creative destruction in many related industries.
The Evolution of Retail
If we were able to go back in time to the main shopping streets of the mid-19th century, we would predominantly see small speciality stores, alongside a few general stores, selling a variety of merchandise. However, department stores came onto the scene in the late 19th century, changing the retail landscape, and bringing economic efficiencies, leading to lower costs and prices. Chain stores came into existence at the same time.
Notable US department stores from those early days included Macy’s, Saks Fifth Avenue, and Bergdorf Goodman. Macy’s was the USA’s largest department store by the end of the 1920s. Department stores became institutions as the 20th century progressed. By the mid-1960s, Macy's, Hudson's, and Marshall Field battled to have the biggest department stores by sales volume and physical size.
Sears began operation in 1892 as a mail-order catalogue company and opened retail stores in 1925. By the 1980s Sears was the largest retailer in the United States.
It wasn’t until the 1950s that the first shopping mall opened in Edina, Minnesota. This brought a collection of disparate shops together, allowing consumers to carry out their entire shop in one place. Typically, shopping malls had one or more anchor tenants (often a large department store or supermarket) and a cluster of other stores backing it up. The growth of shopping malls occurred alongside an explosion of growth in automobile usage. By 1960, there were more than 4,500 malls in the United States. This change led to the stagnation and downsizing of many central city areas, with people preferring to drive to the suburban malls for their shopping activities.
Walmart began operations in Rogers, Arkansas in 1962. This introduced the era of big-box retail. They were more like the old mom-and-pop stores than department stores but often operated on a massive scale. Consumers were able to find the goods they needed, but at a lower price than in other store types. Big box stores still dominate brick-and-mortar stores, with Walmart only just losing its title as the world’s largest retailer.
The Arrival of E-Commerce
Amazon started in 1995 as an online bookseller. By December 2024 it had annual revenue of $637.959 billion, and Net Income of $59.248 billion (a massive 94.73% increase year-over-year).
Over the last 30 years, Amazon (and other successful e-retailers like Alibaba) have disrupted the traditional brick-and-mortar model. Many traditional stores have fallen by the wayside. Sears, for instance, filed for Chapter 11 bankruptcy in 2018, after a wave of store closures. Others, like Walmart, have joined the online exodus, having launched their own online platform and marketplace. By 2024, Walmart U.S. had e-commerce sales amounting to $65.4 billion.
The growth of e-commerce mirrored the growth of the internet. According to the Digital 2025 Global Overview Report, 5.56 billion people now use the internet, 67.9% of the world’s 8.2 billion population. That was a growth of 136 million (2.5%) over the last year. Internet adoption ranges from 99.0% in Denmark, Netherlands, Norway, Saudi Arabia, Switzerland, and the U.A.E. to 12.5% in Burundi (ignoring North Korea which has blocked access to the internet). 98% of internet users aged over 16 have access to a mobile phone (nearly all are now smartphones). The average person spends 6 hours, and 38 minutes on the internet each day (more than they do watching TV).
With such a high uptake of the internet, it should be unsurprising that online shopping has become incredibly popular.
Creative Disruption Continues
One natural feature of creative disruption is that there is no end. It continues with time and innovative thinking. Businesspeople and marketers are always looking for new ways to promote and sell their goods and services.
As we saw above, mobile phone usage is now ubiquitous across the globe. As a result, m-commerce is now on the rise. M-commerce focuses on financial transactions carried out via phones and other mobile devices. The shopping app, Temu, was the most downloaded in both the USA and the UK in 2024.
Companies also regularly change their business models. For example, a decade ago, you typically bought software from a computer store and installed it locally on your computers (or sometimes on a local server). You would only replace your software after major updates, often years apart. You could pay more than $US1,000 for some products. Most software companies have changed their model now to operate by subscription service. You now pay to “rent” software every month, and receive updates incrementally throughout the life of the product. You generally download any software you use, bypassing any need to visit a retailer.
Amazon and its competitors have continued to innovate to improve their service to customers. Depending on where you live, you can pay for same-day delivery on Amazon, innovatively using drones in some places. Other companies have experimented with drone delivery, for example, pizza delivery.
As social media usage becomes the norm, brands are edging into social commerce, buying and selling goods and services directly within a social media platform. Facebook, Instagram, Pinterest, YouTube, and TikTok have all provided this capability, for example, TikTok Shop allows sellers to connect with creators and communities and sell directly within the TikTok app.
If you look at all the changes to the retail landscape caused by creative disruption over the last 30 years, and recognize that creative destruction is ongoing, imagine how differently people will be shopping 30 years from now.
