How Covid-19 changed e-commerce: sales growth and irreversible dependence
The global pandemic has completely solidified the need for e-commerce. Where it used to be just one of many options we had when it came to making a purchase, e-commerce instead became the primary method of shopping.
Relevance considers how COVID-19 has changed e-commerce across different industries including luxury and what impact it's had.
With all non-essential shops closed across the world for large swathes of 2020, and an increasing number of us concerned about social distancing, shopping online became the norm and we saw dramatic e-commerce sales growth. However, this affected e-commerce differently across the world, with different nationalities, genders, ages and wealth groups spending and shopping differently during the pandemic and some industries much better prepared to extend their digital offering than others.
Below, we’ll look at how Covid-19 changed mass-market and luxury e-commerce, and whether its impact is here to stay.
E-commerce sales growth across different countries
Consumers in emerging economies have made the greatest shift to online shopping during the pandemic, a survey by the United Nations Conference on Trade and Development (UNCTAD) has found. Looking at 3,700 consumers in nine emerging and developed economies, including Brazil, China, Germany, Italy, the Republic of Korea, Russian Federation, South Africa, Switzerland and Turkey, more than half of the survey’s overall respondents shop online more frequently and rely on the internet more for news, health-related information and digital entertainment since the pandemic started. However, the places which saw e-commerce increasing in popularity the most were China and Turkey, with the weakest rise in Switzerland and Germany, where more consumers were already shopping online.
The UNCTAD survey found small merchants in China to be the most equipped to sell their products online, while those in South Africa were least prepared. As Deloitte notes, the SARS crisis in 2003 is known for kickstarting Alibaba, JD.com and other Chinese companies’ e-commerce successes in Asia, launching their online services at a time when many were stuck at home quarantining. So, it makes sense that China was prepared this time round, while some businesses in less-well-equipped nations will have seen the Covid-19 pandemic as an opportunity to elevate their digital offering and grow their business exponentially, and others will have been left behind.
Even in highly developed countries, e-commerce sales grew at an unprecedented rate during the pandemic. Forbes reported in April 2020 that US retailers' online year-over-year (YoY) revenue growth was up 68% from 2019, surpassing an earlier peak of 49% in early January. What’s more, there was a 129% year-over-year growth in U.S. & Canadian e-commerce orders from April 2019 to April 2020. Deloitte also noted that the pandemic had sparked a growing dependence on e-commerce in Denmark.
Online shopping increase by demographic
Software producer BigCommerce shows that COVID-19 has seen different genders and age groups adopt e-commerce to varying degrees.
A survey of US and UK consumers found that 96% of Millenials and Gen Zs are concerned about the pandemic and its effects on the economy. This widespread worry has seen this age group alter their behaviour more noticeably than other generations, with Agility PR reporting that 30% of millennials are shopping more frequently online, in contrast to 24% of Gen Z, 20% of Gen X and just 8% of Baby Boomers. More data shows that 24% of Boomers and 34% of Gen X are finding that Covid-19 impacts what items they purchase, compared to nearly half of Millennials. These effects may include cutting back on spending, bulk buying certain items, and spending less on experiences.
There is also a disparity between genders, with 24% men found to be shopping online more frequently during the pandemic, compared to 18% of women. One third of men, compared to 25% of women, said that Covid-19 was impacting how much they spend on products.
Overall, the UNCTAD report shows that despite e-commerce increasing in popularity and overall e-commerce sales growth, average online monthly spending per shopper has dropped as a result of Covid-19. This is likely because the uncertainty of the pandemic saw consumers in both emerging and developed economies delaying the purchase of more expensive items where possible, with those in emerging economies focusing on affording essential products and those in developed nations saving for any future financial hardships.
Looking specifically at a UHNW audience, Nedbank points to the 2020 Wealth X report, which shows that high-net-worth individuals have embraced online shopping for luxury services during the pandemic. The Financial Times reports that the wealthy have become more accustomed to purchasing online and having high levels of luxury delivered to their door. This has seen businesses adapt fast, with some of the world’s finest restaurants now offering dine-at-home options and home delivery of their high-quality ingredients, for example.
Across demographics, Forbes found that mobile devices have been by far the most popular device for online shopping during the pandemic, with 72% of consumers using mobile devices to shop.
Winners and losers of the e-commerce shift
The survey conducted by UNCTAD shows that online purchases have risen by 6-10% across most product categories, with the biggest increase seen across sectors such as IT and electronics, gardening and DIY, pharmaceuticals, education, household products and personal care products.
BigCommerce reports that month-over-month from February to March 2020 saw food and beverage e-commerce sales grow by 18.8%, also showing a big rise in downloads of apps that allow people to hire personal shoppers to prepare and in some cases deliver their grocery orders - for example, Shipt’s downloads rose by 124% and Instacart’s by 218% from March 2019 to March 2020. Digital streaming rose in popularity as so many of us were quarantined at home, with Netflix, Amazon, Hulu, and Disney+ all gaining subscribers at an unprecedented rate in Q1 2020.
The travel sector was unsurprisingly found by UNCTAD to have been impacted the most, with average online shopper expenditure falling by 75% from 2019 to the outbreak of the pandemic. And although many fashion retailers were digitally prepared, with a rising number being online only, BigCommerce states that online apparel sales still fell 20% from February to March 2020, as people put more of their budgets into necessities.
Despite UNHWIs embracing online shopping during Covid-19, The Financial Times reports that the overall sale of personal luxury goods such as handbags and clothing was estimated to fall 25-45% in 2020, while spending on experiences like Michelin-star restaurants declined at 40-60%. This is likely because while the ultra-rich continued to spend, the luxury sector relies on a wider client base who treat themselves to high-value goods when they can afford it - those who would be less willing to make aspirational purchases in the midst of a pandemic.
However, there are some winners in the luxury sector. Auction houses such as Christie’s and Sotheby’s have quickly pivoted towards online auctions and private sales. This has allowed them to reach a new, younger audience of buyers, and to realise that a larger range of goods can be sold in online auctions than previously thought, and at higher price points. Some private jet agencies have also seen a sharp rise in bookings thanks to being seen as a Covid-safe way of travelling - Silver Air, a private jet company in California, has seen demand jump by 40% in June 2020 compared with a year earlier. A similar phenomena has been seen in ‘local’ vacation areas such as the Hamptons (by New York), with Hamptons rental broker Compass reporting transactions had risen by as much as two-thirds for some agents.
Will e-commerce’s popularity continue into a post-Covid world?
I believe that the pandemic has encouraged irreversible changes in shopping behaviour - a firm move towards e-commerce that is likely to continue in the post-Covid world.
The study by Deloitte backs this up, stating that COVID-19 has highlighted the risk of picking up germs while shopping, meaning that fear of another health crisis may well drive behavioral change in the longer term. What’s more, the pandemic has made it necessary for even those who may have previously preferred to buy in-store to do their shopping online, and many of those people have realised the benefits of e-commerce. Boasting convenience and low prices driven by high competition, it seems likely that e-commerce’s increasing popularity will continue long after memories of the pandemic have faded.
This is why brands that still prioritise in-store shopping and lack a comprehensive online experience must adapt or become obsolete. As Yomi Kastro, founder, and CEO of e-commerce service Inveon, points out, there is now an enormous opportunity within industries that are still more used to physical shopping, such as fast-moving consumer goods and pharmaceuticals, for brands able to set up pioneering platforms that can garner widespread use. However, across all industries, there is room for improvement when it comes to the digital experience. Smart businesses will focus efforts on ensuring that their online offering is always best-in-class, recognising that e-commerce’s strength is only set to grow.