How COVID-19 Catapulted Ecommerce 10 Years Into the Future: What Now?

Newel Cobb

August 31, 2020

If businesses weren’t at least dipping their toes in the world of ecommerce pre-2020, COVID-19 has proven they are dangerously behind the times. Offline the effects of the pandemic have been devastating for many brands. Business Insider reported in August 2020 that more than 6,300 brick and mortar stores will be closing in 2020, including Pier 1 Imports (450 stores), Walgreens (200 stores), and Tailored Brands (500 stores). Brick and mortar retailers across the country are facing bankruptcy and financial uncertainty.

Online, however, there’s a different story being told.

Propelled by massive shifts in consumer behavior due to shelter-in-place and social distancing measures, ecommerce has jetpacked itself into the future, and not just by a few years, but by a decade! McKinsey reports that ecommerce market penetration jumped forward by ten years in the first quarter alone, leaving many brands to quite literally adapt or die.

These changes have revolutionized the market, and they’re also begging the question: where do we go from here? A look at the numbers can give us an idea of the ways COVID-19 is changing the future of ecommerce and if those changes will be sustainable.

How the market has changed during COVID-19

Limited by shelter-in-place orders, shoppers are purchasing products on digital and omnichannel markets in unprecedented numbers—a study by Adobe Analytics found that online spending hit $434.5 billion in July, and 2020’s online sales are expected to surpass the total online sales in 2019 by the start of October. Consumer behaviors have shifted to meet the demands of a crisis economy, and as a result, brands are shifting more attention to the digital space to meet increasing demand for online products.

Consumer behavior changes

According to a study by McKinsey, consumers across the globe have shifted their focus to essential products, like grocery and household supplies, and products with value. Many are battening down the hatches for impending financial uncertainty, so much of the shift has turned away from high-priced and luxury items. It isn’t just durable products like shoes or headphones that consumers are buying, but consumable products (products like sanitizer that you buy more than once) as well.

Something that has noticeably changed due to the COVID-19 crisis is consumer purchasing behavior among 55-74 year olds, or the baby boomer generation, who’ve been most affected by the pandemic. According to the National Retail Federation, baby boomers typically made less than half of their purchases online pre-pandemic. Two thirds now say their shopping experience has been improved by online technology, in-store, and curbside pickup. Baby boomers have also embraced delivery services. Six out of ten baby boomers say they are using services like Amazon Prime or Shipt more often because of COVID-19.

Ecommerce brand growth

Ecommerce brands have seen leaps in traffic and growth across the board during the COVID-19 crisis. According to McKinsey, most categories have seen more than 10 percent growth in their online customer base during the pandemic, and it’s translated into sales in big ways.

In July, Amazon posted second quarter earnings of $88.9 billion, blowing away its expected $81.24 billion. Walmart Marketplace has doubled its pool of sellers to over 50,000 since July 2019, and eBay reported a 26% GMV growth in its second quarter, it’s highest quarterly growth rate in 15 years.

Dotcom sites are also taking a lot of search traffic from sites like Amazon, with websites like Lowe’s, Home Depot, Macy’s, and others seeing big spikes in traffic share. Walmart, Instacart, and Target.com have won many new customers with their online grocery services, and Walmart’s much-anticipated Walmart+ could give unprecedented competition to Amazon’s Prime services in the near future.

According to a study by the Cleveland Research Company, brands expect Amazon to account for 64% of their digital business in 2021 versus 83% in 2019, showing diversification to omnichannel markets is also on the rise. According to CRC, general merchandise categories expect to see a similar concentration with Amazon in 2021, with around 65% of their digital sales flowing through the platform.

CRC found that the COVID-19 crisis has led to an enormous mix shift towards digital commerce (these findings amount to four plus years of mix shift compared to where the market was in the U.S. pre-pandemic). In April, manufacturers expected ecommerce to reach 21% of their U.S. retail sales in 2121. That number is up from 15% in 2019.

Market obstacles

The growth digital channels have seen is exciting, and it indicates that the future is very much now when it comes to ecommerce shopping, but not everyone is optimistic that this unprecedented growth will stick around for digital channels. One case study is the home furnishings retailer Wayfair.

Wayfair is a COVID-19 crisis success story in many ways: they saw their number of shoppers skyrocket during the second quarter. Wayfair revenue jumped nearly 84%, their number of delivered orders went up 106.2%, and they saw five million new customers on their site. Wayfair’s stock has more than tripled (it’s up 246%) this year to date, and Wayfair executives are confident that this trajectory is continuing upward and that new customers will continue to spend money on the site long after the pandemic ends.

Neil Sanders, managing director of GlobalData Retail, is skeptical that Wayfair’s numbers are sustainable. He attributes much of Wayfair’s online sales boom to the fact that many stores were closed during the pandemic, a reality that could slow post-pandemic online growth for thousands other brands that have seen unprecedented success online.

In an interview with MarketWatch, Saunders said, “From our data, consumers have already started to return to physical stores and online penetration levels in furniture and home furnishings have dropped from their peak in April. While we believe online sales will remain elevated in home related categories . . . the trends of this quarter will not be repeated indefinitely.”

Adobe found similar data. While online sales increased 55% year over year in July, Adobe found online sales have begun tapering off in the summer months with the reopening of many brick and mortar stores.

Saunders said that in addition to a recent drop in the number of online sales, competition is also a concern for businesses like Wayfair, especially now that so many other retailers are in the online space and loyalty shock at the start of the pandemic pushed many consumers to new retailers.

“A lot of retailers are now investing more in digital and this inevitably means that online competition in home will rise over the next few years,” Saunders said. “This will place even more pressure on Wayfair to maintain market share which possibly means higher spending on advertising and customer acquisition: the very thing that it can’t afford.”

So what does it all mean?

Ecommerce brands are excited about the success they’ve found online during the pandemic, but there’s also concern from market experts that any gains will be tempered when brick and mortar locations reopen. Regardless, consumer behavior shows that many of the changes made during COVID-19 may be here to stay.

McKinsey estimates over 60% of global consumers have changed their shopping behavior, and of the respondents surveyed in the U.S. and U.K., 73-80% intend to continue their adopted behavior.

Increased Ecommerce Adoption, McKinsey study | Pattern

Brands across the country are re-evaluating personnel, technologies, and capabilities investments to support their businesses when they emerge out of the pandemic. Having a digital presence and an omnichannel presence matters more than ever, especially in times of crisis.

While much of the future of ecommerce is uncertain, shoppers are proving to be more online than ever.

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Global Ecommerce Weekly News: 27th September 2022
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Global Ecommerce Weekly News: 27th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon drives renewable energy push with 71 new projects Amazon is planning to add 2.7 gigawatts of clean energy capacity through a couple of new projects as the company attempts to use 100% renewable energy by 2025. The ecommerce business will soon have a total of 329 renewable energy projects, generating 50,000 gigawatt hours of clean energy, which is equivalent to powering 4.6 million US homes every year. [Read more on Reuters](https://www.reuters.com/business/sustainable-business/amazon-drives-renewable-energy-push-with-71-new-projects-2022-09-21/) Amazon launches Prime Early Access Sale Amazon is launching a new 2-day shopping event for its Prime members only, beginning on the 11th of October. Across 15 countries, Prime customers will have access to the shopping event, with thousands of deals on offer globall, ranging from fashion to electronics to essentials. The event has the purpose of giving Prime users the chance to spread the cost of items over the winter months, 6 weeks ahead of Black Friday. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/26/prime-early-access-sale/) --- Other Marketplace News --- Shopify unveils new localisation tool Shopify is launching a new localisation tool, called Translate & Adapt, which works with Shopify Markets to offer localisation for sellers who are looking to expand into new markets. The tool translates a user’s online store into different languages, including product pages and information pages. Merchants are also able to create different shipping terms for each market using the new tool, which allows international expansion and offers a more localised consumer experience, unveiling new potential. [Read more on Ecommerce News](https://ecommercenews.eu/shopify-launches-new-localisation-tool/) Etsy is set to invest hundreds of millions into its marketing platform Etsy CEO claims that the company is on route to spend more than $570 million USD on marketing this year. Even during a time of macroeconomic pressure, inflation and rising interest rates, the company is preparing itself and its sellers for the upcoming holiday season and is focused on retaining interest from buyers. [Read more on Yahoo News](https://uk.news.yahoo.com/etsy-600-million-on-marketing-ceo-154054219.html) --- Other Ecommerce News --- Meta looks to cut costs by 10% in the coming months Meta employees are facing job redundancies as the company plans to cut its costs by 10% over the next few months. Meta reported a 22% YoY increase in costs and expenses, totalling over $20 billion USD. The cuts are expected to come in the form of job redundancies as a result of department reorganisations rather than formal layoffs. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/22/meta-to-slash-costs-by-10-over-coming-months/) DHL teams up with Quadient to offer smart locker deliveries in the UK DHL and tech company, Quadient, have partnered to offer smart lockers parcel pick-up throughout the UK. The new contactless, secure locker stations will give recipients more choice and flexibility to receive their parcels at a time and location best suited to them. The partnership plans to install 500 locker stations across the country by the end of 2022. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/21/dhl-partners-with-quadient-to-offer-smart-locker-delivery/) The online fashion market is set to be worth nearly $170 billion USD in 2025 The European online fashion retail market is set to grow 50% by 2025, with an online turnover of $170 billion USD, which is 33% of the retail branch’s total. Cross-border marketplaces prove to be the largest drivers of this growth, with online websites and apps like Vinted largely pushing the market’s online growth. Zalando recently became the largest cross-border fashion retailer/marketplace, responsible for 11.7% of the online market’s share. [Read more on Ecommerce News](https://ecommercenews.eu/online-fashion-market-worth-e175-billion-in-2025/)

Global Ecommerce: Weekly News (20th September 2022)
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Global Ecommerce Weekly News: 20th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon to raise pay and add extra work benefits for delivery drivers Following the rise in fuel prices and protests by Amazon workers, the ecommerce giant is raising its delivery drivers’ pay and adding more work benefits. Amazon has mentioned that it will be investing $450 million into rate increases along with an education program and a Delivery Service Partners program. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/14/amazon-to-raise-delivery-drivers-pay-and-add-more-work-benefits/) Amazon announces it will give away shipping software to merchants at no cost Amazon has recently announced that it will be giving ecommerce merchants free software to manage shopper orders on and off its platform as it extends its reach. The ecommerce giant will be ending monthly costs for sellers using Veeqo, a shipping software it recently acquired and instead offer to them a new, free shipping software. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/16/amazon-to-give-away-shipping-software-to-merchants/) --- Other Marketplace News --- Walmart unveils new virtual fitting rooms In an effort to drive clothing sales, Walmart has launched virtual fitting rooms while competitors reduce spending amid the cost of living crisis. The virtual try-on tool can be used by Walmart customers to virtually measure the clothing items and see how the products would look on them. Shoppers will now be able to see how over 270,000 clothing items on Walmart’s ecommerce site would look on their bodies. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/15/walmart-launches-virtual-fitting-rooms-to-drive-clothing-sales/?utmsource=Retail+Gazette+Subscribers&utmcampaign=2da7f0f8f8-EMAILCAMPAIGN202209150742&utmmedium=email&utmterm=0d23e2768b6-2da7f0f8f8-61040615) THG slashes sales and profit expectations The Hut Group has slashed its forecasts for 2022 as rising interest rates, inflation and energy costs take a toll on consumers. Previously, THG estimated its sales growth to be between 22-25% but after a recent evaluation, has lowered this prediction to between 10-15%. Initial predictions did not take into account the negative effects of ceasing sales in Russia and Ukraine along with the impact that the cost-of-living has had on consumer spending. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/15/thg-slashes-forecast-as-cost-of-living-crisis-hits-consumers-wallets/) --- Other Ecommerce News --- DHL and Post Office team up to provide click and collect services Through a partnership between delivery company, DHL and Post Office, a new click and collect service is to be tested at Post Offices before rolling out to over 1000 branches across the UK. Online shoppers will now have the option of choosing their local Post Office as a collection point, and DHL will fulfil the delivery aspect, opening up networks for both parties. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/14/post-office-partners-with-dhl-express-to-provide-click-and-collect-services/) US consumer watchdog plans to further regulate the BNPL sector The US Consumer Financial Protection Bureau (CFPB) has raised concerns regarding the collection of consumer data and the fast-growing nature of the BNPL sector, which includes companies such as Affirm and Klarna. The CFPB is worried that these companies could be negatively impacting consumers’ financial health and aims to put better regulations in place to ensure consumers are safe and empowered. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/16/us-consumer-watchdog-to-start-regulating-bnpl-sector/) Japanese ecommerce market estimated to grow by 6.9% in 2022 The ecommerce market in Japan, largely dominated by domestic online retailers including Reakuten and Mercari, is set to reach $194.3 billion USD in 2022, after seeing an annual compound growth rate of 5.2% between 2018 and 2021. This makes Japan the fourth leading ecommerce market globally, following China, the US, and the UK. [Read more on Charged Retail](https://www.chargedretail.co.uk/2022/09/13/japan-ecommerce-market-to-grow-by-6-9-in-2022/) Ecommerce brands are spending more on TikTok ads TikTok may soon be surpassing Facebook and Google as the most lucrative advertising channel, with ecommerce brands spending 60% more on TikTok ads in Q2. Facebook is still ahead as the top choice for ecommerce advertisers but only grew by 5.6% from Q1, while Google grew 20.5% in Q2, and Snap declined 10.8% in Q2. [Read more on SearchEngineLand](https://searchengineland.com/ecommerce-brands-spent-60-more-on-tiktok-ads-in-q2-387876)

Global Ecommerce: Weekly News (13th September 2022)
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Global Ecommerce Weekly News: 13th September 2022

Get up to date with this week's ecommerce headlines from around the globe. --- Amazon News --- Amazon scales back on US warehouse facilities Amazon is shutting down two facilities with 300 employees, discarding plans for 42 facilities, and delaying plans to open a further 21 buildings across the US. The ecommerce giant is scaling back on hiring as well as the expansion of its vast delivery network, as it was left with an excess of space following its rapid expansion during the pandemic. [Read more on Business Insider](https://www.businessinsider.com/amazon-closes-2-facilities-scraps-plans-42-new-buildings-report-2022-9?r=US&IR=T) --- Other Marketplace News --- JD.com is ‘betting’ on ecommerce grocery market Amidst a slowing economy and a decline in ecommerce, Chinese ecommerce giant JD.com has increased its urgency to seek new growth engines. The company is looking to boost its online grocery business through offline partnerships and expansion into lower-tier cities, where it may be able to unleash more consumption power. [Read more on The Star](https://www.thestar.com.my/tech/tech-news/2022/09/08/chinese-ecommerce-giant-jdcom-bets-big-on-online-grocery-lower-tier-markets-amid-slowing-economy) Shopee shuts operations in Argentina, Chile, Colombia, and Mexico Sea’s ecommerce arm, Shopee, has shut local operations in some LATAM countries but will continue to maintain cross-border operations in a few markets. Latin America is Sea’s most important region following South-east Asia, accounting for close to 19% of its revenue in 2021. The move away from these countries is largely due to increased levels of macro uncertainty and rising interest and inflation rates, and rather putting a focus on its core operations. [Read more on Straits Times](https://www.straitstimes.com/business/companies-markets/seas-shopee-shuts-operations-in-argentina-chile-colombia-mexico-sources) --- Other Ecommerce News --- Instagram scales back in-stream shopping elements Instagram is re-examining its approach as it hasn’t been able to make ‘fetch’ happen. ‘Fetch’ in this context being the online shopping trends which have become all-consuming in China, and what Western social platforms have been hoping to add into their apps to make them more addictive and revenue-generating. Consumers have not been swayed by the latest shopping tools on TikTok and Instagram, leading to Instagram scaling back its in-stream shopping program. [Read more on SocialMediaToday](https://www.socialmediatoday.com/news/instagram-scales-back-in-stream-shopping-elements-as-it-re-examines-its-app/631276/) FedEx Express supporting the growth of cross border ecommerce FedEx express has expanded its international commerce shipping service to four more markets across the Asia Pacific, Middle East and Africa (AMEA) region in an effort to support the strong development of ecommerce in this region. Three of the fastest growing markets, the Philippines, Indonesia and Vietnam are leading Southeast Asia’s ecommerce sales, which is set to reach $100 billion by 2023. [Read more on Post & Parcel](https://postandparcel.info/149889/news/e-commerce/fedex-express-supports-the-growth-of-cross-border-e-commerce-within-the-amea-region/) India ramps up hiring as companies prepare for shoppers Ecommerce companies are getting ready for the festive season by rapidly expanding their temporary workforce. As ecommerce in India grows, the country is predicted to have 372 million online shoppers by the end of 2022. The festive season this year, running from October to December, is expected to see a two-fold increase in logistics and delivery alone. During this period, companies are predicted to add 20% more to their existing workforce base, with a 8-10% higher pay scale compared to last year. [Read more on Business Insider India](https://www.businessinsider.in/business/ecommerce/news/the-great-indian-festival-of-hiring-e-commerce-companies-gear-up-for-indias-shoppers/articleshow/94000346.cms)