The 2020s will be a digital decade for retail. That’s because this year’s COVID-19 pandemic catapulted global e-commerce into the future to bring the shopping mall to us.
E-commerce sales soared 55% year-over-year for January to July, reaching $434.5 billion, after brick-and-mortar stores and shopping malls stayed shut for months. 1 Crets, Stephanie. Online sales taper off in July as retail stores reopen. Digital Commerce 360. August 11, 2020. In May alone, total online spending hit $82.5 billion, up 77% year-over-year.2Koetsier, John. COVID-19 Accelerated E-Commerce Growth ‘4 To 6 Years’. Forbes. June 12, 2020. According to Adobe, it normally would have taken four to six years to earn May’s figures if e-commerce had remained at its comparatively sluggish pre-pandemic growth rate.3Koetsier, John. COVID-19 Accelerated E-Commerce Growth ‘4 To 6 Years’. Forbes. June 12, 2020.
The e-commerce boom has forced retail and consumer packaged goods (CPG) companies to rethink how to move forward. For many of them, adopting e-commerce best practices will influence whether their business survives by staying relevant.
Let’s see how e-commerce is shaping the retail supply chain and how retail companies can adapt, and how buyers can discover in-demand products and e-commerce capable brands.
COVID-19 ignites e-commerce growth
This year e-commerce evolved into a more familiar habit, as 58% of shoppers reported shopping online for products they would usually buy in-store.4Haggerty, Maria. 6 Things Retailers Need to Know About How COVID-19 Has Impacted Consumers’ Online Shopping Behavior. Total Retail. August 3, 2020. Also, 31% of shoppers bought directly from brands in the spring when Amazon reduced its shipment of non-essential products pushing many consumers to seek online alternatives.5Haggerty, Maria. 6 Things Retailers Need to Know About How COVID-19 Has Impacted Consumers’ Online Shopping Behavior. Total Retail. August 3, 2020.
During the pandemic, consumers made more online purchases in these top categories:
- Home goods (45%)
- Clothing (29%)
- Electronics (25%)
- Beauty/cosmetics (22%)
- Accessories (20%)6Haggerty, Maria. 6 Things Retailers Need to Know About How COVID-19 Has Impacted Consumers’ Online Shopping Behavior. Total Retail. August 3, 2020.
E-grocery also jumped forward. U.S. online sales of groceries for delivery and pickup hit a record $7.2 billion in June, up 9% over May.7 The coronavirus pandemic lifts global online grocery sales. Digital Commerce 360. July 20, 2020. Due to the pandemic, more U.S. households ordered groceries online and the e-grocery order frequency rose.8 Online grocery sales keep growing as the coronavirus pandemic continues. Digital Commerce 360. July 8, 2020. Tech-savvy grocer Kroger’s online sales grew 92% year-over-year in its fiscal first quarter 2020 ended May 23.9 The coronavirus pandemic lifts global online grocery sales. Digital Commerce 360. July 20, 2020.
E-commerce shows no signs of slowing down
Consumers appear to value the convenience, time savings, and ease of e-commerce. Studies found that, over the long term, 45% of online shoppers don’t expect their shopping habits to change and 31% expect to make more online purchases than they did before COVID-19.10Haggerty, Maria. 6 Things Retailers Need to Know About How COVID-19 Has Impacted Consumers’ Online Shopping Behavior. Total Retail. August 3, 2020. In response to e-commerce demand, the level of buy online, pick-up in store (BOPIS) service grew by 195% year-over-year in May.11 Koetsier, John. COVID-19 Accelerated E-Commerce Growth ‘4 To 6 Years’. Forbes. June 12, 2020. Curbside pickup at stores rose 208% between April 1 and 20 compared to the same period in 2019.12 Curbside Pickup at Retail Stores Increase 208% During Coronavirus Pandemic. Supply & Demand Chain Executive. May 1, 2020.
While BOPIS was a niche delivery option pre-pandemic, it is fast becoming the delivery method of choice.13 Koetsier, John. COVID-19 Accelerated E-Commerce Growth ‘4 To 6 Years’. Forbes. June 12, 2020.
Forbes
Some retailers have turned to micro-fulfillment. Whole Foods and Kroger temporarily shut key urban store locations to boost e-commerce efficiency. Only employees are allowed in these dark stores, which the retailers strategically use for faster digital product picking and fulfillment.14 Weissman, Cale Guthrie. Inside grocery’s big transformation. Modern Retail. April 30, 2020.
To manage a marked increase in online returns, cosmetics giant Sephora doubled its returns period to 60 days, and promised to destroy all returned merchandise to keep employees and consumers safe.15 Perez, US e-commerce sales to jump 18% in 2020, but not enough to offset retail’s decline. TechCrunch. June 8, 2020. 16 Greene, Jay and Abha Bhattarai. Amazon’s virus stumbles have been a boon for Walmart and Target. The Washington Post. July 30, 2020.
Given e-commerce’s remarkable momentum, Adobe predicts 2020 online sales will surpass 2019 total online sales by October 5 – ahead of the 2020 holiday sales season.17 Crets, Stephanie. Online sales taper off in July as retail stores reopen. Digital Commerce 360. August 11, 2020.
Retailers transform their e-commerce strategies
The pandemic has pressured retailers to invest in e-commerce to satisfy consumers’ expectations of omnichannel options, convenience, and speed. Here are some examples of how retailers have changed.
Amazon
The e-commerce leader currently holds 38% market share by US e-commerce sales and it earned a 40% jump in Q2 revenue.18 Perez, US e-commerce sales to jump 18% in 2020, but not enough to offset retail’s decline. TechCrunch. June 8, 2020.19 Greene, Jay and Abha Bhattarai. Amazon’s virus stumbles have been a boon for Walmart and Target. The Washington Post. July 30, 2020. By mid-April, Amazon announced it was hiring 175,000 workers to keep up with heightened demand.20 Welch, Chris. Amazon puts new Amazon Fresh and Whole Foods delivery customers on waitlist amid surging demand. The Verge. April 13, 2020. Its pandemic response plan included a $4 billion reinvestment of its operating profit and 150 process changes to boost supply chain safety and efficiency.21Nickelsburg, Monica. Amazon will pay $500M in bonuses to workers powering the company through the pandemic. GeekWire. June 29, 2020. Vertical integration helped Amazon deliver 66% of its own packages in July (vs 54% in July 2019), giving the company more control over its end-to-end e-commerce strategy.22Holland, Frank. Amazon is delivering nearly two-thirds of its own packages as e-commerce continues pandemic boom. CNBC. August 13, 2020.
Walmart
The retail giant is poised to surpass eBay as the second largest e-commerce retailer in the U.S., behind Amazon, as its e-commerce sales will rise by more than 35% in 2020.23 Perez, US e-commerce sales to jump 18% in 2020, but not enough to offset retail’s decline. TechCrunch. June 8, 2020. Walmart partnered with e-commerce shopping platform Shopify to boost its reach and online variety by adding 1,200 Shopify sellers to Walmart’s marketplace this year.24 Perez, Sarah. Walmart partners with Shopify to expand its online marketplace. TechCrunch. June 15, 2020. The new Walmart+ subscription service will launch soon, which will include benefits like same-day delivery and early access to product deals.25 Del Rey, Jason. Walmart has again delayed the launch of its Amazon Prime competitor Walmart+. Vox. August 4, 2020. Walmart also collaborates with RangeMe to source products Made in the USA to support domestic suppliers and local communities, and give online shoppers more choice.
Target
Target earned digital sales growth that the chain didn’t expect until three years from now. The retailer efficiently ships goods directly from its retail outlets, boosting agility and the speed of online fulfillment. During the quarter ended May 3, 80% of digital sales were fulfilled from Target stores.26 Back, Aaron. Target Hits on Winning Formula Amid Covid Pandemic. The Wall Street Journal. August 10, 2020.
Home Depot
To boost e-commerce speed, the home renovation retailer will open three new distribution centers in Georgia, as “customers expect to shop whenever, wherever and however they want.” The warehouses will help the chain expand same-day and next-day delivery capabilities to 90% of the U.S. population.27Anderson, George. Home Depot and Lowe’s are in a race against time and each other. RetailWire. August 14, 2020.
E-commerce’s transformation of the CPG industry
The e-commerce boom has inspired tech titans Facebook and Google to get in on the online shopping action. The launch of social commerce platforms like Facebook Shop, Instagram Shop and Google’s Shoploop proves the future of retail is digital, as consumers spend more time and money online.
More retail buyers are now using online retail industry solutions to discover popular and innovative products, and connect with online-ready suppliers.
Overall, e-commerce has evolved into a retail essential. Consumers now expect safe, reliable and convenient shopping options, especially in a pandemic. In response, more retail companies are investing in e-commerce to deliver more robust, efficient service and earn shoppers’ loyalty. To improve speed-to-market, retail buyers can use digital solutions to efficiently discover in-demand products, delight consumers and gain an edge as the retail industry evolves online.