COVID-19 accelerating the growth of e-commerce

e-commerce acceleration

The outbreak of COVID-19 around the world has brought many retailers to an abrupt standstill. Retail supply chains have been left in disarray following a mass cancellation of orders. While brick-and-mortar retailers come to terms with some hard truths that stores may not be able to financially recover from the pandemic. e-retailers are witnessing a surge in sales as people turn to them to fulfil their shopping needs while brick-and-mortar stores remain closed.

Even before the COVID-19 outbreak e-commerce has been gathering pace. In 2019 e-commerce sales represented the bulk of overall retail sales growth in the US accounting for 56% of overall retail growth, according to emarketer. COVID-19 simply appears to have escalated the transition to online. According to Covid-19 Commerce Insights, US retailers experienced a year-on-year increase of 68% of revenue growth in online sales in mid-April.

Despite Next CEO Simon Wolfson stating “people do not buy a new outfit to stay at home” this does not seem to have been the case. Loungewear sales are seeing record breaking sales numbers. In April demand for loungewear rocketed 322% in the UK. It is not only loungewear sales that are on the rise, but home and athletic goods are also experiencing record breaking sales. With the closure of brick-and-mortar stores encouraging those who are ‘tech-phobic’ to learn some new skills.

e-commerce giant, Amazon has reaped the rewards of non-essential retail closing as consumers turned to the website to fulfil their shopping needs. When lockdown measures were implemented in early March the demand was so great it overwhelmed the company’s fulfilment and delivery capabilities. In response the company went on a hiring spree, employing 100,000 additional members of staff to help manage demand.

Canada-based e-commerce platform, Shopify, has also benefitted from the crisis, during the first quarter revenues jumped 47% to $470m. The company is assisting retailers’ transition to an online platform. Shopify will organise delivery to local areas on behalf of small shops and restaurants. Though the company does not yet carry out the deliveries itself it is developing a warehouse and logistics network that will enable it to do so.  

However, the dramatic spike in demand is likely to be short-lived. e-commerce sales have already dipped in countries where lockdown measures have been lifted. Though retailers should not expect consumers to flock to brick-and-mortar stores anytime soon. Shopping malls and stores in China reopened following the government’s instructions to return to business, as usual, to see consumers continue to stay at home. Electronics retailer has stated that some of its brick-and-mortar stores are only seeing approximately half of its usual customer footfall.

In the long-run e-retailers are still likely to benefit from the crisis. Many brick-and-mortar stores were already facing administration before the crisis took hold and it is doubtful many will recover from it. Swedish retailer H&M announced plans in February 2020 to ‘power up’ its 5,000 stores, using them more as logistical hubs to focus more on digital growth. With COVID-19 accelerating the closure of the high street stores it may be only a matter of time before other retailers switch to digital.

Has COVID-19 changed anything fundamentally? No. Instead, the virus has simply sped up the timeline, spurring a new generation into the era of online shopping. The real test will come over the festive period, albeit brick-and-mortar stores survive the crisis, to see whether those who have previously shunned online shopping turn to it to carry out the bulk of their Christmas shopping.

 Source: Transport Intelligence, May 21, 2020.

Author: Beth Poole