Retail's Online Future Brighter After Pandemic Bump

E-commerce sales' strong growth is expected to continue long after the virus subsides.

In this file photo, an Amazon Prime logo appears on the side of a delivery van as it departs an Amazon Warehouse. Online shopping has been a lifeline for many as the virus pandemic shuttered stores and kept people at home.
In this file photo, an Amazon Prime logo appears on the side of a delivery van as it departs an Amazon Warehouse. Online shopping has been a lifeline for many as the virus pandemic shuttered stores and kept people at home.
AP

Online shopping has been a lifeline for many as the virus pandemic shuttered stores and kept people at home. The COVID-19 pandemic has accelerated the change in how people shop in a world growing more comfortable and savvier with technology.

E-commerce sales' strong growth is expected to continue long after the virus subsides. More importantly, online sales are likely going to take up a progressively bigger portion of all retail sales in coming years. E-commerce sales are forecast to account for just over 15 percent of all retail sales in the fourth quarter of last year, according to Refinitiv, and the share is likely to reach nearly 17 percent by the end of this year.

The clear winner in this shift has been Amazon. The online retailer's sales jumped 37 percent during the third quarter of 2020 and it forecasts growth of between 28 percent and 38 percent in the fourth quarter.

Traditional brick-and-mortar chains have gotten the message, ramping up their online sales as more and more people shop remotely rather than in stores. Walmart CEO C. Douglas McMillon said recently that upward trends for online sales accelerated by "two to three years in some cases" because of the virus, and that change will persist beyond the pandemic. "With the outbreak of COVID-19, the retail world clicked to a fast-forward and our ability to adapt quickly has been crucial," he said.

Walmart introduced its "Walmart Plus" subscription option in September, giving members unlimited free delivery along with other mobile friendly shopping features that allow customers to scan and pay for items while they shop.

Some large retailers started looking ahead well before the pandemic accelerated the change in consumer habits.

Home Depot started integrating its in-store and online shopping options in 2017 to take advantage of people shifting to online ordering for both delivery and pickup. Target started bolstering its online ordering and store pickup system several years ago. Both chains were punished by investors early on for higher expenses as they pushed into e-commerce, but that investment is now translating into very strong results, said Jharonne Martis, director of consumer research at Refinitiv.

"A lot of these retailers are now building customer loyalty and that will translate into ongoing sales," Martis said.

Convenience is a key driver for online growth, and more companies are rolling out or improving their mobile apps. Purchases made through mobile devices reached $434.1 billion in 2019, according to J.P. Morgan, and could hit $729 billion by 2023.

"This is an ever evolving challenge for retailers if they want to stay competitive," Martis said. "Having an e-commerce strategy is crucial for retailers right now."


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