This is the next iteration of a comprehensive series of articles examining the massive impact of COVID-19 on various facets of the eCommerce market and economy. These analyses are dedicated to charting the trajectory of the global eCommerce marketplace in a post-pandemic landscape. You can find the start of the series here.
The virus has not only irrevocably changed our global healthcare systems, educational structures, and workday operations, but it has also demonstrated the elasticity of the global digital economy. As the world treks through the sixth month of the COVID-19 crisis, it is clear that the marketplace has stretched, contorted, shrunk, and expanded to reflect changing consumer needs and priorities.
Company responses and economic activity in response to accelerated consumer behavior changes have fundamentally altered the eCommerce landscape. While eCommerce has never before held so much potential, the marketplace is also rife with volatility, uncertainty, and micro-economies recovering from the virus at different rates. Indeed, accelerated growth and constant change have cemented themselves as pillars of 21st-century online commerce. It is crucial that eCommerce professionals stay abreast of the latest eCommerce developments and prepare for another year of uncertainty in digital sales.
The eCommerce Climate Pre-COVID and Post-COVID
The 2019 economic conditions predicted robust eCommerce sales in 2020 aligned with the trend of slow but steady growth of the digital marketplace. In 2019, online retail was 12.8% of total retail sales and was driven by the younger generations.
For the period March 2020- June 2020, online retail was 16.7% of total retail. For that same four-month period, online retail grew 22.3% versus the same period in 2019, while total retail sales fell 7.5%. An earlier edition of this series took a deep dive into consumer behavior changes, which revealed a myriad of shifts in consumer buying behaviors, namely a growing number of adults and seniors utilizing eCommerce to buy essentials.
Data from Signifyd estimates that online consumer spending in June 2020 is double what it was in June 2019. These extreme shifts in eCommerce sales and patterns have become the new norm for the growing digital marketplace.
Rapid and Radical Changes in eCommerce at the Outset of COVID-19
The outbreak of COVID-19 across the globe ignited an unprecedented and post-apocalyptic fear in consumers. Not only were governments restricting in-person outings, so too were consumers. The fear of infection drove millions of new and old online consumers to rely on the internet shopping for everything from basic needs like food and household goods to gear for home offices and entertainment.
Indeed, the eCommerce industry saw an influx of shoppers because it has an unparalleled ability to allow for contactless purchasing and delivery. Nearly 80% of consumers worldwide modified their payment habits to reduce contact, and over 2/3 of SMBs have had to adapt their point-of-sale system to maintain sales and safety standards. In other words, while point-of-sale systems and payment methods were already a substantial contributing factor in eCommerce sales, they rapidly became a deciding factor in bottom lines and economic activity.
COVID-19 has accelerated the widespread adoption, dependence, and expansion of eCommerce by lightyears — or four to six years, to be exact. According to a recent Adobe report, projections show that eCommerce is four to six years ahead of where it would have been if the COVID-19 crisis had not hit. In May alone, online spending hit $82.5 billion, a 77% increase from last year.
The National Retail Federation highlights the rapid progression of eCommerce and notes that companies investing in digital infrastructures pre-COVID have been the ones to emerge relatively unscathed from the crisis. They were the organizations that could accommodate safe, contactless transactions right away, fulfil orders despite supply chain disruptions, and adjust their marketing and advertising strategies to align with erratic consumer opinions.
Another facet of eCommerce that emerged at the outset of the Coronavirus pandemic back in February and March is the buy online, pick up in-store model (BOPIS). Forbes reports that the BOPIS model grew by 195% in May alone. Brick-and-mortar locations will continue to serve this critical eCommerce function in the months ahead.
Looking Forward: eCommerce Today and Tomorrow
According to Visa’s report, SMB owners expect another six to ten months of relative economic hardship before their business and industry rebound more fully. However, another integral buying pattern that has become slightly more pervasive throughout the pandemic is shopping small and locally. While 15% of consumers say they shop exclusively at large retailers, 9% say they shop solely at small and locally-owned businesses in their community. Most people fall somewhere between the two extremes, but the trend of supporting local businesses will continue to grow, making it vital for eCommerce owners to engage with local communities.
While the global health crisis undoubtedly created a divide amongst consumers when it comes to supporting local businesses or shopping at massive conglomerates, many eCommerce giants have made swift and significant investments in eCommerce throughout the back end of the pandemic. Facebook Inc. recently announced the launch of F2 — short for Facebook Financial — a new division of the eCommerce and social media empire spearheaded by David Marcus. The team will focus on payment integration across all of Facebook’s apps and social media platforms.
Similarly, Amazon CEO Jeff Bezos is reportedly in communication with Simon Property Group Inc., the largest mall owner in the United States, to potentially turn empty department stores into distribution centers. Amazon initially made waves in the COVID-19 eCommerce economy because it was forced to hire an influx of workers to accommodate increased order volumes. This latest strategic development indicates the end of malls as we know it and reinforces the Amazon standard of Prime two-day and next-day delivery, which continues to detract online sales from many SMBs who cannot replicate the same expedience and convenience.
Both Amazon and Facebook point towards two parts of online operations that will continue to shape and define the eCommerce industry: seamless payment methods and evolving supply chains. While perfecting smooth payment methods should have been at the top of every eCommerce operation’s priorities list months ago — long before the pandemic — supply chains are a much more complex issue that has risen to the surface of eCommerce throughout the pandemic. Bezos is leveraging the crisis to reinvent and improve Amazon’s supply chain, which will only increase the company’s market dominance.
For businesses to move products globally and sell domestically and internationally, navigating broken, adapted, or reinvented supply chains will be a cornerstone of continued success and sales.
Perhaps another issue that becomes equally critical in the current and future eCommerce landscape is the rate of recovery throughout industry-specific microeconomics and regional, country-specific macroeconomics. For example, The United Nations Development Program detailed the severity of the pandemic’s impact on Turkish businesses, particularly those of Syrian ownership. Among those surveyed, 51% say they were unprepared for secondary influxes of COVID-19 rates, and 68% say they now believe that their sectors will significantly change due to the pandemic. Selling to various demographics and regions according to their state of recovery and cultural attitude towards the virus will be paramount in the eCommerce strategy.
COVID-19 has ushered in the age of digital commerce, and the shifts in marketplace terrain have just begun.
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