As Andy Williams famously sang in his seasonal classic of the same name, the year-end holiday season is considered the “most wonderful time of the year.” However, the year 2020 has sung a different tune thus far from every other year — and as many businesses that closed during the first wave of the pandemic still struggle to recover, it’s yet to be seen if this year-end holiday season lives up to Williams’ iconic lyrics.
The restrictions forcing people to work and shop from the confines of their homes accelerated an already advancing e-commerce market that was years in development. As a result, the pandemic has created a case study for e-commerce and retail of the 21st century. Moving forward, this holiday shopping season will likely witness one of the next major shifts toward a different future in retail.
From the Shop to the Laptop
It’s been well documented in the retail industry that during the last decade e-commerce has encroached on brick-and-mortar sales.
In 2019, for example, consumers spent US$601.75 billion online, compared with $136.4 billion in 2007, according to a Digital Commerce 360 report — a 77 percent increase.
Not only have total sales skyrocketed, but so has the e-commerce share of total retail sales. Brick-and-mortar shops might not be out of the game quite yet, but the evident growing demand for the variety of items and convenience of buying online certainly looms large.
Fast forward to Q1 of 2020. The pandemic created a unique scenario whereby e-commerce sellers sold in record numbers. With much of the population relegated to staying at home during the peak of the first wave, consumers went on their devices at home to shop. During Q2 of 2020, consumers dished out $200.72 billion for online purchases with U.S. retailers, an increase of 44.4 percent from the $138.96 billion spent in Q2 of 2019.
This year, retail e-commerce sales totals will depend largely on the eagerness of shoppers to spend large amounts on gifts if they’re facing reduced disposable income — not to mention fears about being in crowded spaces.
Despite these concerns, Salesforce predicts that up to 30 percent of global retail sales will be made through digital channels this upcoming holiday season. Meanwhile, Deloitte estimates that holiday e-commerce sales will reach between $182 billion and $196 billion, which is a 25 to 35 percent increase from 2019’s $145 billion.
Attention to Logistics
As COVID-19 drives more e-commerce sales, retailers must make new considerations to prepare accordingly, which translates to new logistical considerations, ranging from site infrastructure to last-mile delivery.
For retailers looking to cash in during the opportune holiday shopping season, it’s imperative first to review the existing retail infrastructure and assess its preparedness for a larger volume of consumers.
During the last few years, retailers have invested significantly to improve the customer experience and cater to the growing e-commerce demand. Walmart is one example of a big-box retailer that has successfully expanded an infrastructure now capable of offering quick delivery and a wide variety of products on a platform vying with Amazon.
Although most retailers don’t have the financial capacity to upgrade their e-commerce platforms to the extent that these giants are able to, finding solutions for sustaining uptime, ensuring fast pages load times, and protecting consumers will all be especially critical for the anticipated increase of the 2020 holiday shopping season. Shopify, which saw enormous revenues in Q2 of 2020, remains the e-commerce platform white label leader, and will likely be the crutch on which many proprietors depend in the coming weeks.
Some e-commerce businesses may also consider invisible technologies like virtual reality and automation processes to enhance the online shopping experience. Or consider social commerce to promote their products — a growing e-commerce channel.
On the delivery side of logistics, e-commerce sellers have some considerations to mull over regarding the cost of shipping, which has risen significantly for air and last-mile delivery. While many sellers spent time and money upgrading their last-mile delivery during the last two years, the pandemic has posed some new supply chain challenges.
Last-mile delivery, which is already considered the most inefficient part of the fulfillment process, will see much more demand from consumers this season — and questions remain if the disrupted supply chains will be able to keep up.
The cost of shipping by air and sea rose by several percentage points during the summer. These increased costs could trickle down to the consumer in some cases, but could also end up as costs that sellers will need to absorb in order to appease shoppers.
Looking Beyond the 2020 Holiday Season
How e-commerce sellers respond to the COVID-19 challenges will dictate what’s to come. Because the pandemic could last well into — and perhaps beyond — 2021, the 2020 holiday shopping season will likely set important precedents both in the market and logistically.
Brick-and-mortar stores may not disappear from our lives entirely, but their slow demise could be hastened by the prolonged imposition of social restrictions brought on as a result of the pandemic.
Before COVID-19, brick-and-mortar stores experienced a gradual decline that matched the increase of e-commerce sales. So with a sustained pandemic, we will likely continue to see the sharp acceleration of e-commerce, where consumers of all generations grow more accustomed to online shopping.
Even recurrent shopping for groceries in the U.S. has now become a booming segment in e-commerce. As this trend continues, logistics will have to adjust, which means predominantly brick-and-mortar retailers will shift their real estate holdings from physical shops to distribution centers for their e-commerce infrastructure.
Only time will tell what happens with the 2020 holiday shopping season, but the developments in e-commerce during the last few years are now blossoming to a greater degree because of the conditions forced by the pandemic.
Charles Darwin famously said it best: “Survival of the fittest.” As the limitations we face pave the way for the dominance of e-commerce, it’s the retailers who can best adapt to the changing logistical and consumer demands that will lead the industry this holiday season and for years to come.