September 16, 2020

September 2020 Ecommerce Trend Analysis: Omnichannel Is Here to Stay

By Newel Cobb / Ecommerce Trends

It’s incredible how quickly ecommerce has evolved in just a few weeks. Last month we reported that COVID-19 has pushed ecommerce forward by a whopping 10 years and changed the way key consumers shop. This month we’re seeing exciting updates about how big brands are adapting to these changes and making the playing field more competitive. Let’s talk about it.

Brick-and-mortar Q2 earnings are out, and they’re killing it

Walmart’s U.S. ecommerce sales grew 97% in the second quarter with a 9.3% growth in brick and mortar same-store sales, due in no small part to their grocery services, which have been thriving during COVID-19. Target has done even better: the retail giant saw 60% growth in in-store pickup, 700% growth in drive-in pickup, and an incredible 195% growth in digital sales. Target reports that 92% of their Q2 growth (dotcom and brick-and-mortar) involved a brick-and-mortar location.

US Ecommerce Growth Q2 2020 | Pattern via MarketplacePulse

Screenshot via MarketplacePulse

Similar trends can be seen in the home improvement sector, which has grown robust with consumers spending more time at home. Chain Store Age reports that Lowe’s Q2 same-store sales rose 35.1%, and the Home Depot pulled better-than-expected numbers.

According to CSA, this year marks the first time The Home Depot has posted double-digit comps in seven years, and about 60% of customers’ online orders are being picked up in-store.

More and more retailers are integrating their supply chain, delivery, and ecommerce with their brick-and-mortar stores, and it’s paying off. U.S. ecommerce grew 44.5% in the second quarter—the fastest it's grown in over two decades—and big-box retailers who incorporated curbside pickup and delivery with their dotcom sales grew the fastest.

While we saw a big push for online groceries at the start of the year, we expect to see more brands leveraging their stores as warehouses where customers can purchase products across all categories.

Omnichannel is diversifying

Last month, we predicted that Kroger was cueing up to enter the omnichannel space. Sure enough, Kroger Co. announced mid-August that they’re launching their own dotcom marketplace that will be open to third-party vendors. Kroger is expected “to offer tens of thousands of additional goods, including housewares and toys,” Bloomberg reports.

Kroger isn’t the only company that’s diversifying the omnichannel space. Best Buy announced last month that they’re piloting a new ship-from-store model (similar to that of Walmart and Target) where 250 of their brick-and-mortar locations will be remodeled as “hubs” to ship out more online orders.

More retailers are realizing that to go into the retail war without a dotcom is like trying to win a boxing match without your right or left hand. We expect even more brands to be entering the omnichannel space in the near future.

DoorDash and Uber are pivoting to grocery

Omnichannel is growing so rapidly that brands like Uber and DoorDash, which are not traditionally grocery, are pivoting to dotcom brick-and-mortar pickup to keep up. DoorDash recently entered the on-demand grocery delivery space with its new DashPass service, which allows customers to place orders with participating grocery retailers (i.e. Albertson’s and Walmart) at DoorDash.com or on the app and have their groceries delivered directly to their homes without the need for scheduling.

Uber has seen its food delivery service Uber Eats outpace its core ride-hailing division in growth this year, and they, too, are looking to shift toward that space, showing how lucrative a market it is.

Walmart is making big leaps and changes

Walmart is one of the biggest brands to watch in the grocery pickup space. Last month, Walmart partnered with Instacart to offer same-day delivery in a few U.S. markets, positioning it as a top competitor to Amazon and Whole Foods. Walmart has been in active talks with Uber and Uber-like companies for years to transition to grocery delivery, and this new partnership with Instacart has closed the last mile for Walmart in a way that Amazon has yet to achieve.

Walmart has already overtaken Amazon in the grocery market share by transaction count, according to the TABS Analytics’ 8th Annual Food and Beverage Consumables Study. Walmart snagged a 30% share of online food and beverage transactions this year, pushing it ahead of Amazon for the first time in the study.

Another big thing to watch from Walmart is their platform Walmart+, which just went live this month. Walmart+ is a membership service offering free, unlimited-same day delivery on groceries, fuel discounts, and access to Walmart’s new Scan & Go service for $98 a year. While Walmart claims Walmart+ is not an Amazon Prime rival, its same-day delivery services and cheaper yearly subscription may prove to be a force to reckon with for Amazon.

The biggest surprise coming from Walmart this month is that they’ve teamed up with Microsoft in a joint bid to acquire TikTok. Ecommerce giants are increasingly looking to video streaming as a powerful force in online retail, and Walmart appears driven to get ahead of the trend. It also signals Walmart’s desire to reach younger consumers and make them comfortable with the brand.

Amazon will not be left behind

While Walmart is making big gains in the ecommerce space, Amazon is coming in swinging. Last month we learned Amazon is in talks with Simon Property Group Inc., the biggest mall owner in the United States, to convert anchor department store spaces (former J.C. Penney’s and Sears) into Amazon fulfillment centers. We predict many of these mall locations may house Amazon’s newest grocery label Fresh in an attempt to close the last mile in grocery pickup services and compete with Walmart.

Amazon Fresh stores will streamline the grocery shopping experience with features like Alexa aisle navigation and the Amazon Dash Cart, which allows customers to skip the checkout line and purchase their items simply by placing in their cart. It’s evident Amazon is working hard to increase their presence in the grocery space.

Meanwhile, Amazon’s dotcom offerings continue to expand. ShipMatrix reports Amazon shipped 66% of its own packages in July compared to 61% between April and June. It’s estimated they’ll potentially reach 80% by next year, giving Amazon a logistical edge to companies like Walmart that have yet to incorporate self-shipping.

Ecommerce growth is great right now, but many fear it won’t last

Retailers are reporting some of the biggest ecommerce gains in their history—Best Buy, for example, saw online sales grow by 242% during Q2—but there are concerns that when the pandemic comes to an end, the bubble will burst.

Walmart and Target largely attributed boosts in online sales to the 160 million stimulus checks distributed during COVID-19. Without the passage of a second stimulus, retailers like Walmart believe their sales will drop (they’ve already seen sales decrease as checks have tapered out).

That said, we’ve hit the point of no return for ecommerce

Ecommerce is a thing of the now, not the future, and its target demographic is growing along with the brands using it.

One example is baby boomers. Pre-COVID, boomers made less than 50% of their purchases online. Now 2/3 buy online via in-store pickup or curbside pickup, and more than 1/4 use Amazon Prime or another ecommerce delivery service. The biggest reason is convenience. Boomers are expected to continue using ecommerce long after the pandemic ends, giving brands one more reason to invest in it.

How will the holidays be affected this year?

UPS and USPS shipping rates are expected to increase later this fall as the pandemic stretches onward, but more customers than ever are anticipated to make online purchases. 44% plan on shopping online more during this year’s Black Friday, Cyber Monday, and Christmas holidays compared to last year’s holiday season. Fluent projects we’ll see a 73% increase in those who shop exclusively online.

The biggest takeaway from the last few months is that ecommerce isn’t just a phase for the U.S. economy. It’s here to stay. If your brand isn’t already looking at omnichannel and dotcom sales, yesterday was the time to get on top of it.

Reach out to us today to get a free demo of our services and see how Pattern can help you launch a successful omnichannel ecommerce strategy.

More Resources
The Great Debate: Is Revenue More Important Than Profit?
Amazon Benchmarking Report 2020