COVID-19: A Year in Review for eCommerce
Around a year ago, many businesses like yourself were unexpectedly forced to sell in a new reality. You had to learn on the fly how to adapt to the unique challenges of selling online amidst a global pandemic. And while the shift to online shopping has been underway for years, the pandemic accelerated these trends, some even by a whole decade!
Throughout 2020, you learned to serve customers through digital-first touchpoints, overcome supply chain disruptions, and provide your customers with transparency during all the uncertainty.
Looking back, here’s how eCommerce fared during the pandemic— and where it’s heading in 2021 and beyond!
10 Years of Growth in 3 Months
In case you missed it, 10 years of eCommerce growth happened in just 3 months at the height of the pandemic. Buying online became a necessity for many consumers forced to stay in their homes. [McKinsey]
In 2020, U.S. Consumers spent $861.12 billion online, up 44.0% year over year — the highest annual U.S. eCommerce growth in at least two decades. COVID-19-related shopping alone added $174.87 billion to this revenue. [Digital Commerce 360]
More Shoppers Tried eCommerce
Considering online sales growth, it’s no surprise then that more shoppers than ever turned to online shopping in 2020.
85% of consumers have shopped online since the pandemic, compared to 65% who have shopped in-store.
But, it was young consumers who made a noticeable shift to spending online. 67% of them shifted more of their spending to online shopping compared to earlier this year, ahead of older age groups (57% for consumers 35-54, and 41% for 55+). [Shopify Future of Commerce]
While many SMBs saw exponential eCommerce growth, many traditional retailers failed to pivot fast enough. Legacy retail brands like Brooks Brothers and Guitar Center declared bankruptcy amid COVID-19. [Digital Commerce 360]
eCommerce Growth = More Online Competition
Last year, more people than ever turned to online channels to sell. In fact, Shopify reported that new stores created on their platform grew 71% in Q2 2020 compared to Q1 2020, with a record number of merchants added in Q3. [Shopify Future of Commerce]
The result? It’s never been more competitive to sell online, no matter what category you’re in. Everyone from traditional retailers and wholesalers to local businesses is competing for a share of the consumer’s digital wallet.
Amazon Faced Stiffer Competition
Sales on Amazon alone represented nearly a third—31.4%—of all U.S. eCommerce sales growth in 2020.
But, even Amazon is feeling the heat of competition. For instance, the top 100 retailers (minus Amazon) had a striking 74.1% share of eCommerce growth in 2020, up significantly from a 49.4% share in 2019. This includes notable retailers like Walmart, Apple, Dell, Best Buy, Home Depot, and Target. [Digital Commerce 360]
These top retailers upped their eCommerce initiatives in the last several months. And, they found ways to stand out against Amazon through services like Buy Online, Pick up In Store. On average, from May to August 2020, when choosing local pickup or delivery, online shoppers spent 23% more and had a 25% higher cart size. [Shopify Future of Commerce]
Dealing with Supply Chain Disruptions
75% of 628 businesses surveyed experience supply chain disruptions as a result of COVID-19. [Institute of Supply Management]
These disruptions caused all sorts of problems — inventory shortages, product quality issues, surging prices and costs, delayed deliveries, and even cyber attacks. And overall, many merchants were unprepared to deal with these at scale.
Going forward, you need to evaluate and strengthen your supply chain’s weakest links and put in an emergency plan for future disruptions. In global commerce, there can be a number of disruptions that can happen at any given time.
And, sellers are realizing how important their supply chain is for creating better customer experiences. Fast and free delivery, guaranteed stock, and multiple shipping options all depend on it.
83% of consumers are less likely to re-purchase from a retailer after a negative delivery or shipping experience. [Shipstation Last Touch Report]
Shoppers Consciously Spend Their Money
Over the last several years, consumers have increasingly spent their money more consciously. They’re not always looking for the lowest price or best quality. Instead, they’re choosing brands that share their values or provide the best overall shopping experience.
In 2020, those same trends increased, especially for sustainable products and support for independent businesses.
62% of younger consumers prefer to shop for sustainable and green products compared to 53% of middle aged consumers and 44% for older consumers.
50% of consumers look for independently owned businesses to support.
57% of consumers are willing to shop at new brands or stores for the first time, demonstrating openness to supporting lesser-known, independent businesses.
Merchants Realize Lack of Financial Options
While some are coming out ahead in 2021, it doesn’t mean that many didn’t struggle financially during the past several months.
So far, the Paycheck Protection Program issued 5.2 million loans worth $525 billion to small businesses and even opened a second round of loans earlier this year. But, these loans and other traditional financing were not enough to cover all endured expenses and setbacks during the pandemic.
In fact, 36% Of merchants facing COVID-19 related challenges stated that “My bank or financial institution doesn’t understand the needs of my business.” [Shopify Future of Commerce]
Underserved by many traditional institutions, merchants can look to alternative financing solutions for access to capital.
For example, Payability offers cash advances and daily marketplace payout programs designed for online sellers and their unique challenges. Their financing amounts (not a loan or debt) are based on the current health of your eCommerce business, not credit history or other outdated measures. Sellers can receive up to $250K in as little as 24-hours. Since 2016, we’ve provided over $3.5 billion in financing to help sellers scale their eCommerce businesses. Apply here.
Digital Advertisers Faced Rising Costs
Another challenge that eCommerce sellers face is the rising costs (and complications) of digital advertising. With more online sellers, there’s also more competition than ever for digital ad space on sites like Facebook, Instagram and Google. More competition leads to higher costs.
Average CPM costs on Instagram and Facebook rose from $8.59 to $16.27 from January to December 2020. [Revelbot]
These rising costs are making sellers rethink their marketing strategies. Are the rising costs worth it? Are your paid customers becoming loyal customers? Sellers are starting to scrutinize their customer lifetime value (CLV) measures and doubling-down on retention rates.
Recently, there’s also been a lot of uncertainty for digital marketers and paid ads due to significant changes to data privacy and tracking online (like Apple’s privacy update). Time will tell how it all pays out.
Keep Moving Forward in 2021
While 2020 is now behind us, the impact of it (bad and good) will be felt for years. Now, merchants are thinking differently and anticipating the evolving habits of consumers who’ve fully embraced digital experiences. Here’s more trends to look for in 2021 and beyond for eCommerce.
Find out how the Payability team stays together while apart.