How Coronavirus Will Affect the eCommerce Industry

This is the Coronavirus Case Studies series. Every post in this series will talk about how the coronavirus pandemic of 2020 will affect different businesses for years to come. We’re all still processing this massive, life-changing event. This week, we talk about how coronavirus will affect the eCommerce industry.

What is the eCommerce Industry?

When talking about how the coronavirus affects different industries, it’s inevitable that you will end up describing a lot of sad stories. After all, if you’ve read other posts in this series, you know that our outlooks for the aviation, hospitality, and restaurant industries are not so good. Ecommerce, however, has been experiencing a period of unprecedented growth.

But first, what exactly is the eCommerce industry? Ecommerce is the buying and selling of products and services over the Internet. It’s very broad and incorporates a massive variety of different industries. Ecommerce is often compared to brick-and-mortar sales, which is the buying and selling of products and services in-person.

Big players in the eCommerce world include Amazon, eBay, Alibaba, and Shopify. More recently, grocery delivery services such as Instant Cart have also made a name for themselves within the eCommerce industry.

Ecommerce Was Already Growing Quickly Before the Coronavirus

In 2018, eCommerce sales grew 22.9% and represented 12.2% of all global retail sales. Ecommerce has been growing steadily for a long time and up until the coronavirus pandemic occurred, it was expected to keep growing 15-20% each year.

Then the coronavirus happened. Let this sentence sink in for a minute:

Ecommerce sales are about 40% higher for the week of May 26-June 1, compared with its pre-pandemic benchmark week Feb. 24-March 1

Shoppers buy more online compared with before the pandemic, Digital Commerce 360

Instead of growing 15 or 20% in a year, eCommerce grew 40% in a three-month period. Based on this data, we feel that it is reasonable to conclude that the coronavirus rapidly accelerated underlying trends, facilitating an extremely rapid shift from brick-and-mortar retail to eCommerce.

The Coronavirus Changed Consumer Behavior & eCommerce Benefited Directly

There has been a massive increase in demand for eCommerce, with some products and services seeing an unprecedented surge in growth. We’ve all heard about the toilet paper shortages, but did you know that baby product demand increased by thirteen-fold? The list of items selling out online because of the pandemic is a long one.

These dramatic changes in demand and the rapid migration to eCommerce was caused by changes in consumer behavior due to the pandemic. There is no alternative explanation. Many people were either forced to stay in by their local government or otherwise discouraged from going out because of safety concerns. Instead of shopping offline, people shopped online.

Bored at home and scared for the future, people panic-purchased food, baby products, and cheap entertainment. Even with record-breaking job losses, household income went up because of economic stimulus checks sent to private citizens. That same money ended up going into the pocket of eCommerce as people bought what they needed.

The Pandemic Created New Risks for eCommerce

It’s tempting to think that the massive surge in eCommerce would be nothing but good. After all, the eCommerce industry is faring better than most others right now, including the normally recession-proof hospital industry. Yet scaling extremely quickly comes with baggage.

First things first, the economy right now is pretty bad. This depresses consumer spending, and that’s bad news since a lot of the most profitable eCommerce items are luxury goods.

Second, a handful of other large companies like Amazon and Walmart are using this moment to gain market share. After all, they have more access to financial resources needed to stay solvent during a crisis. It’s easier for them to take advantage of the coming eCommerce golden age. This might end up being bad news for smaller competitors, though.

Next, we have no idea what is going to happen with holiday sales this year. A lot of online stores depend upon surges in sales around the holidays, but the coronavirus makes it borderline impossible to predict what the holidays are going to look like this year.

On top of all this, brick-and-mortar stores are trying to elbow their way into eCommerce to survive. This represents a threat to existing eCommerce businesses that started shortly before the pandemic began.

We’ve seen all sorts of supply chain issues lately as well. International shipping is becoming more expensive. Domestic and international shipping is currently slower than usual because of restrictions and cancellations of air travel.

On top of that, massive demands spikes have forced companies like Amazon to stagger orders, shipping essential items first and non-essential items second. Slow shipping is irritating customers.

The Long-Term Outlook for eCommerce

Ecommerce as an industry is undergoing a lot of growing pains right now. It’s only natural considering just how much demand has changed in the last few months. Yet the reasons for this recent upheaval are goods ones, and I believe wholeheartedly that the future of eCommerce is bright.

Ecommerce has been growing steadily for decades. People’s shopping habits have slowly been changing over time for a long time. Many people would not have tried grocery delivery or online clothing shopping without the pandemic. After having experienced different kinds of shopping for the first time out of necessity while under quarantine, how many people will continue to take those habits with them after the pandemic ends? I tend to think many will.

Whereas the pandemic showed the underlying weaknesses of the restaurant, hospitality, and aviation industries; it showed the strengths of eCommerce. Many other industries are old and well-understood. Ecommerce was still in the process of converting non-believers. The pandemic created the perfect conditions to do five years of convincing in three months.

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What do you think the future holds for the eCommerce industry? Do you think this article is spot-on or off-base?

Let me know in the comments below. I’d love to hear what you have to say so we can process this together.