E-commerce is seeing “unprecedented” gains due to the coronavirus pandemic, according to an eMarketer report.
The market research company forecasts that online retail sales will climb 18% for the year to top $700 billion, representing 14.5% of overall U.S. retail sales.
“Everything we’re seeing with e-commerce is unprecedented, with growth rates expected to surpass anything we’ve seen since the Great Recession,” said eMarketer principal analyst at Insider Intelligence Andrew Lipsman. “Certain e-commerce behaviors like online grocery shopping and click-and-collect have permanently catapulted three or four years into the future in just three or four months.”
eMarketer predicts that Amazon will account for 38% of overall e-tail sales in the U.S, while Walmart will come in a distant second with a 5.8% market share. While apparel and accessories are the second-largest e-commerce category in overall sales, eMarketer forecasts the sector will rise just 8.6% year-on-year — in contrast, food and beverage is expected to grow 58.5% — as customers shift spending away from discretionary categories.
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Despite the growth in e-commerce, retail is expected to have a tough year due to months-long store closures and decreased consumer demand for nonessentials, according to eMarketer. The firm forecasts overall retail sales for 2020 to fall 10.5% to $4.894 trillion — a level not seen since 2016. Total retail sales are not forecasted to return to pre-coronavirus levels until 2022. And although states have started to loosen restrictions and allow nonessential stores to reopen their doors, in-store sales could take up to five years to bounce back, eMarketer predicts. The firm forecasts brick-and-mortar retail sales will drop 14% to $4.184 trillion in 2020.
Prior to the coronavirus crisis, brick-and-mortar retailers had already been contending with challenges, such as waning foot traffic and the growth of digital shopping. With stores closed for months during the pandemic, companies took a number of steps such as aggressively slashing operating expenses, furloughing workers and tapping revolving credit lines. Scores of retailers have ceased paying rent, and some are trimming their fleets. What’s more, several retailers, many of which had been struggling pre-coronavirus, have filed for bankruptcy in recent weeks, including JCPenney, Neiman Marcus Group and J.Crew.
Although e-commerce has helped mitigate some effects of store closures, digital sales bring a different set of challenges for retailers compared with brick-and-mortar. For one, online sales are known to result in a higher volume of returns. According to industry estimates, e-commerce return rates can be as high as 30%. Additionally, the coronavirus crisis saw companies shouldering shipping slowdowns from March to May, with many retailers forced to notify shoppers that they should expect delays. A number of factors led to the delays: Most companies had to implement safety measures at their warehouses, reducing the number of workers in a facility at one time and reducing their capacity to quickly fulfill orders. Retailers also had to grapple with potentially overwhelmed shipping services — for instance, FedEx placed a cap on orders shipped from some locations.