For years, retail spending online rose slowly but steadily. From 2010 to 2019, e-commerce’s share of spending in the US grew from 4% to 12%, about a one percentage point increase each year.
Then Covid-19 happened. From the first quarter of 2020 to the second, the US Census found e-commerce increased from 11.8% of all sales to 16.1%. So in just one quarter, e-commerce grew as much as it had in the past four years. People are buying a lot more from Amazon, but it’s not just that. Stores like Best Buy, Target, and Home Depot reported huge increases in their online sales this year. The department store Macy’s even announced it was converting one of its brick and mortar stores into a fulfillment center to process all of its orders.
The spending categories with the largest e-commerce increases were building and gardening supplies, food and beverage, and health and personal care products. Online building and gardening supply purchases more than doubled from $4 billion in the first quarter to $8.2 billion in the second, spurred by a home improvement spending spree. If you have to be at home all the time, why not make it nicer? Frequently purchased items like food and health products were much less likely to be purchased online before Covid-19, compared to periodic purchases like clothing and electronics. Yet more shoppers, concerned about the health risks of heading to stores, finally took the plunge and went online for their daily needs.
Gallery: Retailers like Ikea, Aldi, and Tractor Supply will open dozens of new stores in 2020 while others frantically shutter locations (Business Insider)
Motor vehicle spending is one area that hasn’t seen much of an online jump. It’s an important reason online spending hasn’t surged even more during the pandemic. Over one fifth of all retail spending goes toward vehicles, but less than 4% of those purchases are made online. Revenues for online used car retailer Carvana did shoot up 25%, but in general, for such a large purchase, most people want to see a car before they buy it.
Will online retail ever return to its previous levels? While it’s likely to moderate some, experts believe more e-commerce is just part of the new normal. Retail analysts believe the pandemic has sped the rate at which shoppers would have moved online by a few years, and CEOs are saying it has fundamentally changed the way Americans shop. After stores started to reopen, online shopping remained strong. Even categories like groceries, where e-commerce was slow to catch on, expect to see a large portion continuing to buy online.
In China, where online shopping is even more popular than in the US, online purchases also increased during the early stages of the pandemic. Online spending continued to accelerate even after lockdown restrictions eased. The sales of e-commerce giant Alibaba soared 34% in the second quarter compared to the previous year, even larger rate than the 22% growth of the first quarter.
A lot of aspects of life will go back to normal after the pandemic ends, but how we make purchases doesn’t seem like one of them.