Today, we address the most obvious business beneficiary of the COVID-19 pandemic: e-commerce. Online retail sales are soaring as more people work remotely and shop less in person.
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It's clear that COVID-19 is revolutionizing the way we shop. An enormous number of U.S. consumers, as seen in the following chart from Statista, are trying to avoid in-store retail.
Prior to COVID-19, consumers were migrating away from shopping at brick and mortars towards shopping on the internet. E-Commerce & Online Auctions industry revenue increased by 12.7% between 2015 and 2020 and is currently worth $596.2 billion. Market research firm IBISWorld forecasts that sales volume will expand by 15.2% in 2020 alone mainly as a result of the COVID-19 epidemic. The industry is projected to rise on the back of this dramatic growth, and the biggest changes will arrive for markets traditionally dominated by brick and mortar stores: groceries, major appliances, and clothing. The following chart from Statista shows the steady growth in U.S. e-commerce sales over the last decade followed by a jump in quarter two of 2020 when the pandemic hit:
The epidemic has been great for Amazon, and every "click to buy" moves the company closer to the overall dominance, not only in e-commerce but in retail overall. Market research firm eMarketer predicts that Amazon's 2020 U.S. sales will rise by 17.2 percent to $260.8 billion—and by 2021, it will have a nearly 40 percent share of the e-commerce marketplace. While it may seem impossible to prevent the "Amazonification" of the global economy, there is still space for small businesses.
Many shoppers want to support small businesses, but it's getting harder to get out and go shopping in a physical retail environment. Rather than blindly buying products from Amazon's, shoppers can support artisans and small business owners by purchasing handmade goods from platforms likeEtsy—and many customers are doing just that. The COVID-19 outbreak is spurring expansion for Etsy, with goods sold expected to increase by 125 percent in Q2 2020 when compared to Q2 2019. There are now 3.1 million active vendors on Etsy, up 34.6 percent from a year earlier. Etsy indicates that small businesses can not only exist, but thrive, by offering unique and customized items—which Amazon has yet to do on scale. The following Statista chart shows Etsy's worldwide gross sales from 2017 to 2020.
Small retailers operating solely through brick-and-mortar locations continue to strugglen the light of the pandemic , but can adapt by launching robust e-commerce websites. GoDaddy, the market leader in domain registration, has shown a substantial increase in the company's e-commerce products. Between February and April, GoDaddy saw subscribers of its pay-as-you-go service increase by 48%, as many small businesses were looking to mimic their in-person revenue with virtual storefronts. In a recent article in Fortune, Heidi Gibson, Senior Director of Product Management at GoDaddy, said "There's a huge entrepreneurial spirit going on right now."
Shopify is another platform that helps small business owners get a grasp with the COVID-19 e-commerce surge. Shopify offers a no-code solution for developing an online store, and also accepts online payments, tracks orders, managesinventory, and markets your business. Unlike being a third-party seller on Amazon, Shopify businesses keep nearly all revenues they make while paying the platform a monthly subscription. During the six weeks between the beginning of the lockdown and April 24, the number of new retailers using the Shopify's e-commerce platform increased by 62 percent.
Retailers across all segments have had to evolve and adjust operations over the past year. A recent survey by Chase Ink discovered that 35 percent of small businesses would have failed without e-commerce, and 19 percent said they started to sell products online for the first time as a result of COVID-19. In this rapid shift, the majority of small business owners increased their budgets for social media advertising and search engine advertising, and saw higher website hosting and shipping expenditures.
Infographic courtesy of Chase Ink via WWD.com
The pandemic has created an emotional bookmark that is shifting perception and behavior, and consequently, e-commerced is expected to be a major part of the "new normal." Capgemini Research recently reported that consumers' desire for internet shopping will continue to grow after a vaccine is widely distributed. Per this report, 59 percent of global consumers claimed to have a "high level of interaction" with physical stores prior to COVID-19, but of those avid retail shoppers, only 24 percent intend to return at the same level. Quoted in an article from CIO.com, Wineth Malvar, Global Marketing Director at Sherwin-Williams, states:
"COVID-19 has created a sense of urgency to fully embrace digital transformation, not just to talk about it but to act 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?”
It is time for small business owners to adopt e-commerce retail and break away from a wholly brick-and-mortar business model. This doesn't mean traditional retail won't recover, but the disruption is here to stay. Change is often scary, but online retail offers businesses of all sizes a way to directly capture new customers—and start competing with Amazon.
John Prindle is a Writer/Researcher for Masterplans