How COVID-19 is Shaping the Future of E-commerce
Ever since online shopping started to take off in the early 2000s, dire predictions have been made about the future of physical stores. But while e-commerce has undoubtedly grown over time, plenty of people have continued browsing retail aisles in person. This is particularly true for the grocery industry, which still registered over 96% of sales taking place in stores at the end of 2019. But then COVID-19 happened, and the world turned upside down.
The Pandemic is Reshaping How Americans Shop
Suddenly the nation faced an unprecedented lockdown, and for the first time, hundreds of millions of people couldn’t drop by the store to pick up essential items whenever they wanted. Instead, we all started shopping online a lot more. Not just for random things, but everything including necessities like food.
According to data by the U.S. Census Bureau, e-commerce spending in Q2 was up 44.5% from the year before, and online grocery shopping is projected to surpass 10% of total sales in 2020. Before the pandemic, this level of growth was projected to take over five years to materialize. Instead, it happened in just a few tumultuous months.
What Is Considered “Essential” Is Also Changing
How people are shopping isn’t the only thing that is changing. The pandemic has also heavily impacted what consumers are buying. Based on data by IBM, groceries, home improvement materials, and alcohol are all up over 10%. At the same time, many other categories like clothing, jewelry, and consumer electronics, have been run over by a forklift and are down double digits.
In fact, department store sales will likely be down over 60% for the year. In many cases, the dire predictions about physical stores are finally coming true. But not all retailers are suffering. In a year full of contradictions, some are experiencing explosive growth.
Stores That Embraced e-Commerce are Thriving
If you follow the retail industry, you’ve probably heard that Walmart, Target, and Amazon are all setting records during the pandemic. It isn’t hard to figure out why. Even before the crisis was in full swing, Forbes noted that Target had become the 8th largest e-commerce retailer in the U.S., with Amazon and Walmart taking the first and second place.
When consumers went online, these companies were ready to ride the wave. Based on Q2 reports, Target added over 10 million digital customers and saw online sales increase by 195% YOY. Similarly, Walmart reported e-commerce revenue up 97% from a year ago, and Amazon posted another round of record sales and profits.
By embracing an omnichannel strategy that prioritizes e-commerce, and by building delivery capabilities or partnering with third-party services, these brands are pioneering what retail will look like in the future. Other stores who are struggling should pay attention to these trends before it is too late.
What Will Happen Next?
The implicit question in all of this is, what will happen once reliable vaccines are available and the pandemic finally subsides?
While it is likely that some things will go back to “normal,” new consumer habits are being formed, and decisions are being made that are unlikely to reverse. Among many other changes, companies are adapting to remote work, and people are leaving metro areas for the suburbs and smaller cities.
E-commerce may not continue accelerating at the same rate as it is today, but it is the future we’ve expected for a long time. The adoption of online shopping has been on fast-forward for a few months, and it is unlikely anyone will look back once the economy finally hits “play” again.
Whether you are a CPG brand or a retailer, keeping pace with the trends and data is more essential now than ever before. That is why RW3 is here to help. Stay tuned for more updates.
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