Future-Proof: How COVID-19 is Changing the Way We Shop
Online Retail Soars As Consumers Stay Home
In this latest edition of Future Proof, we tackle the most obvious business benefactor of the COVID-19 pandemic: E-commerce. With more people working from home and fewer shopping in person, e-commerce retail sales are soaring.
It’s clear that the COVID-19 pandemic is changing the way we shop. An overwhelming number of U.S. consumers are avoiding in-store shopping, as seen in the following chart from Statista.
A Gradual Shift Accelerates
But even before COVID-19, consumers were shifting their purchases from brick-and-mortar to online retail. The E-Commerce & Online Auctions industry grew by 12.7% between 2015 and 2020 and is now worth an estimated $596.2 billion. Market research firm IBISWorld projects that industry revenue will grow by 15.2% in 2020 alone due to the impact of the COVID-19 pandemic. The industry is expected to continue growing, and the greatest opportunities will come from product categories that were traditionally dominated by brick-and-mortar stores: groceries, major appliances, and clothing. The following chart from market research firm Statista shows the steady growth in U.S. e-commerce sales over the past decade, with a surge of growth in Q2 of 2020.
The pandemic has been good for Amazon, and every “click to purchase” nudges the company closer to total domination of the e-commerce industry. Market research firm eMarketer forecasts that Amazon’s 2020 U.S. retail e-commerce sales will rise 17.2% to $260.8 billion — and by 2021, it will have nearly 40% market share. Although it might seem impossible to stop the “Amazonification” of the world, there’s still room for small business owners in the e-commerce marketplace.
E-Commerce & Small Business
Let’s face it. A lot of us want to support small businesses, but it’s getting more difficult to get out and go shopping in a traditional retail setting. Instead of just blindly ordering goods from industry leader Amazon, we can support artisans and small business owners by ordering handmade goods from sites such as Etsy — and it seems that many consumers are doing just that. The COVID-19 pandemic is fueling growth for Etsy, with merchandise sales increasing by 125% in Q2 2020, year-over-year. There were 3.1 million active sellers on Etsy in Q2, up 34.6% from a year ago. Etsy is proving that small business owners can not only exist, but thrive, by offering unique and custom items — something that Amazon has been unable to do at scale. The following chart from Statista shows the worldwide gross merchandise sales of Etsy from Q1 2017 to Q2 2020.
Small retail businesses that operate primarily through brick-and-mortar locations face significant challenges, but they can adapt by opening robust e-commerce platforms and migrating to online sales. GoDaddy, the market leader of web hosting platforms, has seen a significant rise in the company’s e-commerce products. Between February and April of 2020, GoDaddy had a 48% increase in new paying subscribers, as many small businesses tried to replicate their in-person sales with digital storefronts. In a recent article from Fortune, Heidi Gibson, senior director of product management at GoDaddy, is quoted as saying, “There’s a huge entrepreneurial spirit happening right now.”
Shopify is another platform that is helping small business owners get in on the COVID-19 e-commerce boom. Shopify provides a no-code solution to create an online store, and also includes the tools to accept online payments, track orders, manage inventory, and market your business. And unlike becoming a third-party seller on Amazon, Shopify users keep virtually all of the sales they make while paying a low monthly fee. In the six weeks between the start of the lockdowns and April 24, the number of new stores using the company’s e-commerce platform grew by 62 percent.
Over the past year, retailers across all categories have had to adapt and change the way they operate. A recent survey by Chase Ink found that 35% of small business owners said they would have gone under without e-commerce, and 19% said they began selling products online for the first time due to the pandemic. In this rapid shift toward becoming more digital, the majority of small business owners increased spending on social media advertising, e-commerce platforms, search engine advertising, and shipping.
E-commerce is a big part of the “new normal,” and the pandemic has created an emotional bookmark that is shifting mindsets, values, and behaviors. A report by Capgemini Research found that consumers’ appetite for online shopping will only continue to grow — even after the pandemic comes to an end. According to this report, 59% of consumers worldwide had high levels of interaction with physical stores before COVID-19, but only 24% expect to ever return to that level. In an article from CIO.com, Wineth Malvar, Global Marketing Director at Sherwin-Williams, says that “COVID-19 has created a sense of urgency in fully embracing digital transformation and not just talking about it, but acting on it … We’ve shown how quickly we can set things in motion when absolutely necessary. Imagine if we keep that mindset in everything we do?”
Now is the time for small retail business owners to embrace e-commerce and shift away from a solely brick-and-mortar business model. The disruption is already here. Change is often scary, but e-commerce provides a way for businesses of all sizes to effectively reach their customers — and even compete with Amazon.