COVID Has Changed Online Shopping Forever, and the E-Commerce Industry Is Booming

Wayfair, the home furnishing giant, has seen a 66.5% boom in its sales number and turned profitable again earlier this month, according to Digital Commerce 360. Since March, Wayfair’s stock price increased steadily, from around $30 to well above $250. In fact, their annual sales on September 23-24 drove the two largest sales days in online-only retailer’s history [1]. Wayfair is one of the many e-commerce companies that have benefited from the pandemic, since more consumers are pivoting to online platforms for a safer shopping experience. Meanwhile, the e-commerce industry is growing at an unprecedented speed, and we foresee this rapid growth will persist in the post-pandemic era.


The E-Commerce Market Sees A Steady Increase before the Pandemic


Even prior to the pandemic, the growth of the sector mainly relies on the rapid technology development, strong and steady increase of internet users, lower price in general, and the rising awareness of online shopping. In fact, Asia—led by India, Philippines, and China—holds the largest e-commerce growth across all regions in the world. On the other hand, the United States online spending only accounts for 16% of all total retail sales in 2019, a data according to the Digital Commerce 360 analysis of the Commerce Department. Growing 14.9% from the previous year, consumers spent $601.75 billion online with US merchants in 2019. Four major companies dominate approximately 50% of the market share; tech giant Amazon accounted for more than one third of all US e-commerce sales; Walmart, Ebay and Apple combined make up approximately 20% of the market share [2].

Figure 1 US Ecommerce VS. Total Retail Sales [2]

The online's share of growth in total retail sales also increased significantly last year, accounting for more than half of all gains in the retail industry in 2019, as demonstrated in the graph below. More specifically, e-commerce growth was much higher in the second half of 2019 from Q3, with Amazon dominating the industry.


Figure 2 Online's Share of Growth in Total Retail Sales [2]

COVID-19 Furthers the Growth of the E-Commerce Industry


COVID-19 started to kick in earlier this year. With the impact of the pandemic, there has been a significant change in people’s shopping behaviors—from offline bulk-buying to online shopping. As cities are going under constant lockdowns and non-essential businesses are shutting down, customers have been avoiding going to public places, which limited the shopping options available; people are more lenient towards online shopping as a safer alternative under this extreme circumstance [3].

According to a report published by Orion Market Research, the pandemic has affected big merchants like Walmart due to the uncertainty of supply and demand. We are witnessing a significant drop in casual shopping, supply chain disruptions, and an increasing demand in essential products including groceries and toiletries.

Nonetheless, ecommerce giants like Amazon, JD, and Alibaba have been performing exceptionally well under the pandemic. Amazon alone spent approximately $4 billion in response to COVID-19. In fact, the online unit sales surged by 32% in the first quarter of this year, which is a major hike since 2012 [4].

E-Commerce Will Be the “New Normal”

Our online shopping behavior is gradually becoming a “new normal” for many customers. Many e-commerce platforms have been innovating its products and services, including no-contact-deliveries, making it more convenient for consumers and thus propelling the overall development of the industry. In addition, these companies have also been leveraging its brand image through donations to support Covid-19-related causes [5]. For instance, Amazon donated $10 million in critically-needed personal protective equipment (PPE) back in July 2020 [4].

Figure 3: Ecommerce Market Size Estimate [6]

Looking ahead, according to Meticulous Research, the global e-commerce market is projected to grow at a CAGR of 11.1% from 2018 to 2025, reaching $24 trillion by the end of 2025 [7].

All in all, the pandemic is giving the booming e-commerce market another strong push, incentivizing existing businesses to further develop a more convenient online shopping experience for their consumers. With the external factors pushing the development of the industry, we believe the e-commerce market will increase exponentially within the next following years as consumers and businesses adapt to this “new normal.”


References:

[1] April Berthene | Nov 5, 2020, et al. “Wayfair's Sales Boom 67%, Turns Profit Again.” Digital Commerce 360, 5 Nov. 2020, www.digitalcommerce360.com/2020/11/05/wayfairs-sales-boom-67-turns-profit-again/.

[2] Jessica Young | Feb 19, 2020, et al. “US Ecommerce Sales Grow 14.9% in 2019.” Digital Commerce 360, 11 Aug. 2020, www.digitalcommerce360.com/article/us-ecommerce-sales/.

[3] Meyer , Susan. “Understanding the COVID-19 Effect on Ecommerce.” The BigCommerce Blog, 28 July 2020, www.bigcommerce.com/blog/covid-19-ecommerce/#understanding-panic-buying-and-coronavirus.

[4] Mukati, Mahesh. “US E-Commerce Market Size, Industry Trends, Share and Forecast 2019-2025 Edited by Leading Research Firm.” WhaTech, 29 Oct. 2020, www.whatech.com/markets-research/it/671265-us-e-commerce-market-size-industry-trends-share-and-forecast-2019-2025.

[5] “疫情对跨境电商影响几何.” 中国服务贸易指南网, 中国经济时报, 7 Feb. 2020, tradeinservices.mofcom.gov.cn/article/yanjiu/pinglun/202002/98065.html.

[6] “Ecommerce Market Size Estimate.” Pitchbook.

[7] “The Global E-Commerce Market Is Expected to Grow at a CAGR of 11.1% from 2018 to 2025 to Reach $24.3 Trillion by 2025.” Benzinga, Benzinga, 9 Mar. 2020, www.benzinga.com/press-releases/20/03/wr15504908/the-global-e-eommerce-market-is-expected-to-grow-at-a-cagr-of-11-1-from-2018-to-2025-to-reach-24.