If any retailers were still in denial about the shift toward e-commerce, the coronavirus pandemic took care of that in dramatically swift fashion.
At the end of Q2 2019, e-commerce represented 10.8% of U.S. retail spend. In Q2 2020, amid the height of pandemic lockdowns, e-commerce spending surged 44.5% — its biggest quarterly growth in 20 years.
As of Q3, e-commerce is now nearly 20% of all U.S. retail spending, according to Digital Commerce 360.
The surge has been driven not just by Americans staying at home but also retailers ramping up their BOPIS options (buy online, pick up in store). BOPIS encompasses curbside pickup and also “ship from store,” a relatively new option that gets items to you faster by shipping from your nearest store rather than from a warehouse. Amid the pandemic, many stores that were closed to in-person shoppers still had employees inside, packaging and shipping orders from the store.
Big brick-and-mortar chains like Walmart (WMT), Target (TGT), Best Buy (BBY), Urban Outfitters (URBN), and Dick’s Sporting Goods (DKS) have all cited BOPIS as a game-changer on recent earnings calls—and they don’t expect the trend to slow after the pandemic.
Dick’s launched curbside pickup early in the pandemic and said 75% of its online orders in Q2 were fulfilled by stores (shipped to the customer from their nearest store, or picked up curbside). In Q3, even after Dick’s reopened stores, curbside kept growing.
“We anticipated originally that we would see a large drop-off when the stores reopened, but that is not the case,” Dick’s president Lauren Hobart noted on the company’s Q2 earnings call. (Hobart will be the next CEO of Dick’s, effective Feb. 1, the company announced this week.) Dick’s CEO Ed Stack added: “It started off as a safety piece... It's now becoming a convenience piece.”
Walmart CEO Doug McMillion expressed similar conviction on Walmart’s Q3 earnings call: “Our e-commerce and omni-channel penetration continue to rise, accelerating trends by two to three years in some cases. We're convinced that most of the behavior change will persist beyond the pandemic.”
The new retail trend drove Thanksgiving Day 2020 online sales up 21.5% this year to a new record $5.1 billion, according to Adobe Analytics—but that still missed Adobe’s prediction of $6 billion.
The culprit for that miss is e-commerce itself. The behavior shift from earlier in the pandemic, along with Amazon running Prime Days in October this year, created a pull-forward in demand that likely detracted from the bonanza of Black Friday and Cyber Monday.
Moving forward, a more muted Black Friday could become the norm.
“It’s an early, longer season, and it’s a less promotional season than we’ve seen in the past,” Mastercard (MA) retail advisor Steve Sadove, who is also the former CEO of Saks, said on Yahoo Finance Live this week (video above). “The consumer wants to stay close to home, they see that the local retailers have been suffering so they want to support them, but on the other hand, if you look at the data, they’re also supporting the big-box retailers where it’s all-in-one shopping.”
Mastercard’s latest SpendingPulse survey, Sadove added, found that “the consumer wants product anywhere, any time that they can get it... Now they know how to do curbside pickup, they’re going to continue to want that.”
Macy’s (M) has even experimented with turning some of its stores into pure fulfillment centers, which some see as an embrace of its own demise.
But Sadove also cautions that brick-and-mortar shopping is hardly dead, given that 80% of spending still occurs in a physical store.
“We can’t look at this as being online-only — it’s omnichannel,” Sadove said. “You have to be able to do buy online, pick up in store. None of that’s going to go away. Having said that, as soon as we feel comfortable with the vaccines, you’re going to see people going back into stores. The DTC [direct-to-consumer] brands will open up more stores because of the interplay between people wanting to shop online and in a physical store. All of these trends are going to be accelerated. The winners that were winning beforehand and the losers that were losing, that trend is going to continue, and be accelerated.”
Daniel Roberts is an editor-at-large at Yahoo Finance. Follow him on Twitter at @readDanwrite.