Retail Trend to Watch: eComm Surges But is a Distant 2nd to Brick & Mortar
There is no doubt that the COVID-19 pandemic has caused a permanent shift in consumer behaviour. Many people who were reluctant to buy their groceries online because they wanted to see and touch their produce before buying it were forced to give grocery delivery a chance. If grocery delivery was not available during the pandemic many consumers tried curbside pickup for the first time. Target is one of several beneficiaries of this trend. In the first quarter of 2020 Target’s digital sales increased by a whopping 141% and it fulfilled close to 80% of those online orders in its stores. Target also had five million new customers during the first quarter of 2020 and over two million of them tried store pickup for the first time. “Certain ecommerce behaviors like online grocery shopping and click-and-collect have permanently catapulted three or four years into the future in just three or four months,” said eMarketer Principal Analyst Andrew Lipsman.
While there is a lot of discussion about the surge of eCommerce sales during the pandemic overall eCommerce sales are not expected to grow dramatically faster in 2020. Overall eCommerce sales are expected to increase by 18% in the United States this year up four percentage points from last year. eCommerce sales of food and beverage and health/personal care/beauty will see huge spikes, growing at 58.5% and 32.4% respectively but the majority of retail sales still take place in stores and will continue to do so as the pandemic fades in the distance.
Exactly what is the expected volume of brick and mortar sales in the United States in 2020? Brick and mortar sales in the United States are expected to hit $4.184 trillion in 2020 while online sales are expected to reach $709.78 billion.
That means that 14.5% of retail sales are expected to take place online in 2020 even with the crisis shifting behaviour. What does this mean? Even with high expected numbers of store closures don’t count out brick and mortar retail sales. The pandemic has shown how much consumers who have been stuck at home have missed being able to shop freely in retail stores. Expect the most successful retailers to continue to focus on their multichannel strategies. Walmart, the number one retailer in the United States, now has the second largest eCommerce business in America. One of the reasons for this is its large network of 4,600 stores that it has used to fulfill the demand of eCommerce orders during the pandemic.
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The other reality is that eCommerce is expensive. “Having a wide range of fulfillment options, including delivery to home, collection from store – and by using stores for fulfillment – allowed Walmart to ramp up capacity in a way that many other players struggled to do. We also believe that by using stores effectively, Walmart mitigated some of the higher costs associated with the online channel” said Neil Saunders, Managing Director at GlobalData Retail. That sentiment was echoed when Walmart CFO Brett Briggs said: “it is a big advantage being an omnichannel retailer and I think that is showing right now. We were able to quickly use stores to fill online orders.” Echoing this sentiment Jill Standish, Accenture’s Global Head of Retail has said: “if you had done 15% of your business online and now all of a sudden you’re doing 50% of your business online, boy, that’s a cost of doing business that you didn’t plan for. You might see a lot of volume, but you’re not going to see a lot of profitability.”