Author: Vignesh Sivaprakasam
The BRB Bottomline
Ecommerce and online retailers have capitalized on the COVID-19 pandemic by providing convenience and cleanliness. However, the rise of ecommerce has consequently led to the decrease of consumers purchasing products from smaller retailers.
The COVID-19 pandemic has been a defining moment of 2020 by changing multiple industries, but the hardest hit sector has been brick and mortar stores, retailers, and wholesalers. The situation is rapidly changing. As more cities are going under lockdowns, nonessential businesses are being ordered to close, and customers are generally avoiding public places. Limiting shopping for all but necessary essentials is becoming a new normal. Brands are having to adapt and be flexible to meet changing needs. The change in retail commerce and shopping has dramatically changed the ecommerce industry.
The Impact of COVID – 19 on Ecommerce
Humans respond to crises in different ways. When faced with an uncertain, risky situation over which we have no control, we tend to try whatever we can to feel like we have some control.
Paul Marsden, a consumer psychologist at the University of the Arts London, was quoted by CNBC as saying: “Panic buying can be understood as playing to our three fundamental psychology needs.” As people have embraced social distancing as a way to slow the spread of the pandemic, there has naturally been a drop-off in brick-and-mortar shopping. That would seem to mean there would likely be an increase in online shopping as people turn to ecommerce to purchase the items they might have otherwise purchased in person.
Grocery ecommerce soared in the second week of March after shoppers turned online to find the goods they needed that weren’t available at their local grocery stores. The graph, with data from Rakuten Intelligence, shows a huge spike in grocery-related ecommerce. The rest of ecommerce has seen more shallow growth compared to the grocery industry.
As people are making buying choices based on new and ever-changing global and local circumstances, the product categories that are being purchased are also changing. Consumers who have faced empty shelves or seen price gouging online know that health and safety products are being purchased far faster than they can be produced and restocked.
Another category of consumer packaged goods that is booming is shelf-stable items, which includes the primary demographic of people planning for long-term quarantine and bulk buying. According to Nielsen, products like shelf-stable milk and milk substitutes (particularly oat milk) are up by more than 300% in dollar growth. Other items seeing increases are those like dried beans and fruit snacks that have a long shelf life. In addition to long-term quarantine type items, for groceries in general, sales are up. However, there are some behavioral changes around the way people are buying groceries. For example, in an effort to avoid crowds at supermarkets, many people are choosing BOPIS (buy-online-pick-up-in-store) or delivery options. Downloads of apps like Instacart and Shipt that allow people to hire personal shoppers to prepare and in some cases deliver their grocery orders; these orders have increased by between 124% (for Shipt) and 218% (for Instacart). People are also choosing to buy these items from online stores more than they did prior.
The Fall of Brick and Mortar Stores
There is little doubt that the novel coronavirus has changed our lives in many ways. One obvious effect is on how we shop. Traditional brick & mortar stores have been struggling for years against the rise of online shopping like giant Amazon, but the pandemic has really decimated traditional stores. Business Insider reports that in the United States over 12,000 stores will be closing this year not including small businesses like restaurants which will amount to even more total closures.
Countless obituaries had been written for traditional shopping venues like mega malls, brick and mortar retailers, and mom and pop shops, but according to a new survey of United States shoppers by TopData, the ongoing global pandemic is on track to all but eliminate retail and commerce as we once knew it. The large department stores who have become the victims of the pandemic were already suffering losses beforehand, and so COVID-19 isn’t the sole cause of their demise. There’s the opportunity to reshape the bricks-and-mortar infrastructure, but this will take time and there will likely be growing pains. The industry now needs future-focused visionaries who are able to provide fresh perspective and reinvigorate bricks-and-mortar retail in the years to come.
Vignesh is a sophomore studying Economics interested in the intersection of business and technology. Dabbling in various industries, Vignesh enjoys exploring innovation and business creation. Having experience in public speaking, he enjoys sharing his thoughts on economic issues through BRB. In his spare time, he hikes with his friends and plays basketball.