One of the byproducts of the coronavirus pandemic has been a remarkable surge in e-commerce volumes. By late April, many carriers were seeing peak-like weekly volumes more than 50% higher than those in February.
The growth is ongoing, resulting in record business-to-consumer volumes for carriers throughout the United States. Here are five reasons why this may be the new normal.
1. Brick-and-mortar stores will be slow to reopen. Prior to the pandemic, e-commerce had a share of overall retail of around 14% to 15%. Over a period of a few weeks, the U.S. retail realities were turned upside down. Malls across the country closed, and anything not deemed an “essential business” was put on lockdown. Retail storefronts of all types were forced to shutter. Overnight, e-commerce became one of the only channels to buy items from toys to kitchen appliances. This has been the primary driver for this remarkable surge in volumes.
As the brick-and-mortar retail establishment starts to reopen, they will surely take back some share. However, it will be slow. Storefronts will reopen unevenly across the country. There is also the risk of further flare ups in infection forcing certain locations to go back on lockdown. Also, the shoppers will be cautious in returning to public places, and this could remain a reality until a vaccine is broadly available.
Unfortunately, this may also be the end for many brick-and-mortar stores across the country. We are already seeing the news of retail bankruptcies emerging. Things were difficult for stores before all of this started, and the coronavirus has potentially inflicted a fatal blow for many.
2. Brands and retailers have reconsidered their omnichannel mix. As e-commerce is the only game in town right now, it has been a wakeup call for many to reconsider their channel mix, and this will have a long lasting impact. Whether it’s a small brick-and-mortar forced to open an online store for the first time to offset the damage, or large global brands forced to accelerate investments in their e-commerce capabilities, volume growth in e-commerce as a result of these efforts will be sticky.
Are they likely to abandon these efforts over the next months? No. Some have been caught flat footed with legacy channels and their fight through this will be difficult, but they will likely hedge their bets with e-commerce moving forward. Others have actively made these changes some time ago and they are paying dividends today, and it could even accelerate the transformation that was already underway. This black swan event has been the catalyst for permanent change.
3. Buying habits have changed, and consumer trust is at an all-time high. Many consumers were still a little cautious with online channels, particularly for certain categories. Many people still like the personal touch and feel that brick-and-mortar retail brings. Others go to the grocery store or local mall out of habit for specific purchases.
The coronavirus has forced many to venture outside of their comfort zone, and try e-commerce for purchases that traditionally were out of scope for the channel.
4. Virus-inspired products will remain strong. This pandemic has forced us to look closely at some of the habits we have in our daily life. Let’s start with sanitation: We’re all religiously washing our hands, applying hand sanitizer and wiping down frequently touched surfaces. The coronavirus has forced us to change our habits in this regard, and these habits will stay for a while, or at least until there is a proven and broadly administered vaccine. Volumes for sanitizer, Clorox wipes, and hand soap have surged and these volumes will likely stay strong.
Another example is personal protective equipment — was there even a PPE category a few months ago? People will be living with face masks and disposable gloves for the foreseeable future. This is often a disposable category that requires replenishment, and as such we expect robust volumes to stay for a while.
5. Consumer-spending declines won’t offset progress. The fallout of the shutdown from this pandemic has been horrific. The economy has taken a huge hit, and unemployment levels are near record highs. This will undoubtedly impact consumer spending across all channels. In this regard, the size of the retail pie will shrink as people buy less stuff.
However, the size of the e-commerce slice has grown so much it will likely more than offset the overall decline of retail. While there may be some pull back over time, the new normal is dramatically different than it was a few months ago. This has been a catalyst to push e-commerce share to new levels, and has simply accelerated the shift that has been plodding along for well over a decade.
Looking forward, given that volumes are at peak like levels today — and capacity across the supply chain is already stretched — how does this capacity scale even further this peak? Is there the infrastructure in place to support the holiday season?
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