E-Commerce as the Cake, Not the Cherry on the Cake

The pandemic changed many long-established habits of consumers, most of all, their shopping habits. For instance, as Statista records, global retail e-commerce sales in 2020 were close to $4.3 trillion, compared to $3.35 trillion in 2019. In the U.S., in 2021, e-commerce sales would probably end up increasing $147 billion more than they would have during pre-pandemic times.

As it happened, many offline stores that had never engaged in e-commerce were compelled to do so during the pandemic lockdowns, for the sake of survival. In the process, some small businesses excelled and prospered, other struggled to keep afloat.   

Moreover, the EY Future Consumer Index, that has analyzed the behavior of thousands of consumers since the start of the pandemic, is discovering that 80% of consumers in the U.S. are still modifying the way they shop; 60% of consumers have reduced their in-store shopping compared to pre-pandemic levels, and 43% are buying online more often, products they used by to earlier buy in-store.

In fact, as the latest research by PwC finds, there appears to be a “historic and dramatic shift in consumer behavior” because of the pandemic. With most people working remotely as the pandemic escalated, and many continuing to still work remotely, they moved to a trend of shopping around online for the best deals. The report also says that consumers believe their newly-created habits are not likely to disappear when the pandemic is done. For instance, studies by the management consulting firm McKinsey found that product categories like over-the-counter (OTC) medications, groceries, household supplies, and personal-care products anticipate over 35% increase in online shoppers.  Furthermore, more selective personal purchases like beauty products, perfumes and jewelry also expect to see over 15% increase in online purchases. As McKinsey observed, “consumer intent to shop online [post-pandemic] continues to increase, especially in essentials and home-entertainment categories.”

Meanwhile, studies by McKinsey found that the shift in online shopping was mainly seen in the categories of high-income earners and millennials, as they make online purchases on essential as well as non-essential items. Gen X is also purchasing more online with the advent of the pandemic, but not to the degree of millennials. On the other hand, Gen Z has shifted to online purchases on specific categories such as clothes and shoes, takeout/delivery of food and home entertainment.

Moreover, through their studies, McKinsey saw another dramatic departure from existing and well-understood consumer behavior; there is an unmistakable decline in brand loyalty today. Research indicates that 75% of consumers in the U.S. have experimented with a new shopping behavior, while over a third of them have tried new products. So, it appears that 36% of coupon users will purchase elsewhere. This trend of declining brand loyalty is partly due to supply chain problems leading to many popular items being out of stock.  Another reason that online shoppers give to excuse their decline in brand loyalty, is the degree to which the products they seek are available online and in-store.   As the EY Future Consumer Index discovered, only 21% of consumers in the U.S. are ready to forgive brands and retailers for supply problems during the pandemic. From a marketing perspective, this situation emphasizes the urgency of being sensitive and alert when shoppers seek out new brands or retailers; marketers are thus compelled to manage the logistics and to make sure the product or service is available to the Millennials. In other words, 79% of consumers are unwilling to accept the pandemic as a good enough reason for delayed orders. Moreover, having tasted the liberation of trying new products, 73% of consumers who did try new products say they will continue trying new products in the future.

Also, as the pandemic progressed, e-commerce transformed from an eternal top priority in retailers’ three-year plans, to an urgent lifeline to stay in business beyond the pandemic. Furthermore, from May-July 2020, retailers made e-commerce investments, acquisitions and partnerships worth about $10 billion. Some of these investments were for “ghost-kitchens” which were restaurants with an area to house kitchen equipment, with no space for having in-dining facilities. Others included “dark stores” which were spaces that converted to distribution centers facilitating online purchases.   

From another perspective, e-commerce thrived with the realization that came with the pandemic, that the geographical location is less consequential than having Internet access. As this reality sank in, more and more people who lived in urban centers, moved to less urbanized areas with more space and less congestion. The ease of contagion of Covid-19 in densely populated cities led to this trend to move away from perpetual crowds. As survey results showed 22% of people were planning to live away from crowded urban areas in April 2020, while the percentage increased to 26% in the most recent Index data.  

As is apparent from research studies, the pandemic has led to a significant rise in e-commerce, which is spiraling even further as the pandemic continues to challenge consumers with the need for safe shopping, away from people. This situation keeps pushing consumers to continue with online shopping rather than visit stores and expose themselves to the virus. What is more, this e-commerce trend is unlikely to recede anytime soon.

So, what to expect in 2022?

It is going to be the new normal in e-commerce too.

The businesses that can thrive are those willing to adapt to the monumental change in shopping perception.

As Jean-Paul Agon, Chairman and CEO of international cosmetic company, L'Oréal, said, “E-commerce isn’t the cherry on the cake, it’s the new cake.”