Under stringent new rules, COVID-19 forced stores around the world to shut down for months and reopen recently. The lockdown duration has triggered an e-commerce boom, with the pandemic accelerating the change by around five years from physical stores. Although department stores are expected to decrease by more than 60%, in 2020, e-commerce is expected to rise by almost 20%.
As our world is reshaped by the COVID-19 pandemic, more customers have started shopping online in greater numbers and frequency. The pandemic has accelerated the move away from physical stores to digital shopping by nearly five years, according to new data from IBM’s U.S. Retail Index. As a consequence, department stores are experiencing substantial declines. Department store revenues and those from other “non-essential” stores dropped by 25 per cent in the first quarter of 2020. In the second quarter, this grew to a 75% decline.
The study found that the pandemic has also helped refine which categories of goods consumers feel are vital. For example, as more customers started working and schooling from home, as well as social distancing under government lockdowns, clothing declined insignificance. Nonetheless, other categories, including groceries, alcohol and home improvement products, increased by 12%, 16% and 14%, respectively. With its recent record quarterly profit and 40 per cent sales growth, Amazon, naturally, has also benefited from the shift to digital.
Because of the pandemic, e-commerce growth has set a high standard for what is now called baseline growth. According to the U.S. report for Q2 2020 U.S. retail e-commerce reached $211.5 billion, up 31.8% from the first quarter, and 44.5% year-over-year, by the Census Bureau. In Q2, e-commerce also accounted for 16.1% of overall retail revenue, up from 11.8% in the first quarter of 2020. How much of this pandemic-fueled online spending is a temporary shift and to what extent does it impact longer-term forecasts are the questions that IBM’s report aims to answer? The response, at least in this estimation, is that the industry was moved ahead by this pandemic by about five years. The move away from physical stores was already underway, so now we have jumped ahead in time as to where we’d be if there hadn’t been a health crisis.
Setting up a new e-commerce business is no easy task, but the prospect of having one is more attainable than ever. With so many businesses going online to satisfy their wants and needs during the year, the focus on digitalization and innovation has taken centre stage and is expected to do so for years to come. Get started with creating and managing your e-commerce platform with ITConnectUS today.