The Pandemic Holiday Shopping Season Showed Us What The Future Of Retail Looks Like
As more shoppers were forced online in 2020, the retailers who benefited the most from the transition were those with the most adaptable real estate.
Retailers that offered curbside pickup saw a 40% increase in demand for the service during the holiday season, according to a recent Adobe Analytics study. Already the pandemic was pumping up online sales for brick-and-mortar retailers that had curbside services, from 15% of all online sales at the onset of the pandemic to 25%, according to Adobe.
Retailers, particularly some of the nation’s largest, like Dick’s Sporting Goods and Target, especially benefited from retrofitting stores to offer options like curbside pickups, drive-thru and in-store pickups with online sales.
Between Dec. 1 and 14, year-over-year digital sales for retailers with those options surged 52% compared to 36% for retailers without those options, according to data compiled by Salesforce.
“You have to actually invest in the shopping experience while also being there to capture the online sale,” said Brian McGough, the managing director for Hedgeye Risk Management, an economic research firm out of Connecticut. “But for the most part, 90% of retailers don't get it.”
The 2020 holiday shopping season was primarily fueled by consumers shopping online, a habit that many picked up throughout the coronavirus pandemic. Online shopping during the holiday season exceeded $188B, a 32% growth over the holiday season in 2019, according to Adobe. And every day, including Christmas Eve, saw online sales break the $1B ceiling, with consumers spending more than $10B on Cyber Monday alone.
Total e-commerce sales in 2020 tallied $749.5B, a 32.4% jump from 2019, according to eMarketer, a financial services industry research firm. The country’s largest retailers benefitted the most. Retailers with $1B or more in sales grew their holiday revenues over smaller retail competitors, according to Adobe.
Of all the retail categories, e-commerce retailers saw the biggest year-over-year December sales gains of 19%, Hedgeye reported, citing U.S. Census Bureau data, followed by building and garden supply stores at 17% and sporting goods, book, hobby and music retailers at 15%.
“We believe consumer shopping behaviors will permanently change. Many consumers have either shopped online for the first time or shopped in new categories,” eMarketer Senior Forecasting Analyst Cindy Liu said in a company report. “Both the increase in new users and frequency of purchasing will have a lasting impact on retail.”
Fetch CEO Michael Patton is seeing increased business in online delivery stick into the new year. Fetch, which delivers packages to apartment residents in 15 major metro markets, including Atlanta, Washington, D.C., Houston, Chicago and Seattle, saw a 320% jump in package deliveries in December from the same time in 2019.
While that has much to do with the holiday shopping season, Patton told Bisnow package deliveries in January have simmered down some, but are still well above what the firm was delivering last year.
“The new floor of e-commerce volume is here to stay,” Patton said. “We haven't seen it go back to pre-COVID numbers.”
Retail already was experiencing major weaknesses from a paradigm shift prior to COVID, with sales shifting in increments toward online transactions. But many have been slow to update their stores to reflect this new dynamic, which has been partly to blame for a wave of defaults among many of the mainstay retailers of yesteryear. Since 2015, 117 retailers have filed for bankruptcy — 46 just in 2020, such as JCPenney, Neiman Marcus Group, Stein Mart and Lord & Taylor.
While COVID-19 vaccines are rolling out, experts say further retail bankruptcies are inevitable, especially those that failed to more deeply penetrate the online sales market, Landini & Associates Creative Director Mark Landini said.
“I don't think retailers are the quickest people on the planet to change,” Landini said. “They're all kind of navel-gazing at the moment. I don't think a year has really been enough for them.”
Some caution that the gains in online sales made by retailers may regress some this year as consumers return to more normal habits as the pandemic eases with the rollout of vaccines.
As of January, consumers began to return to shopping in apparel and grocery stores more than buying those items online, according to a survey by Coresight Research. Twenty-three percent of consumers surveyed said they purchased clothing and shoes in a brick-and-mortar setting, a 6% increase since December. At the same time, online purchases of those goods remained stagnant at 24%.
More shoppers returned to grocery stores and restaurants in-person, with online sales dropping from 28% in December to 24% in January, Coresight's survey found.
“At some level, people still want to go to the grocery store to pick out their vegetables or look at the meat counter,” National Retail Federation Senior Director Katherine Cullen said.
“I don’t know after the pandemic how much will stick. I have to believe, like much of the rest of the world, that we’re burned out,” said Brett Rose, the founder of United National Consumer Suppliers, a wholesaler that provides products to such retail giants as Macy’s, Ross Stores, TJX Cos. and Amazon resellers. “Consumer items like clothing, basics, picture frames — people want to touch those things."
Still, some retailers aren’t relying on a return of shoppers to brick-and-mortar stores en masse, which is adding pressure to retrofit stores with omnichannel features or get left behind, Cullen said.
“As people go back to the store with all these options you have online, the pressure you have in the store to make it more engaging is higher,” she said.
Retailers are scrambling to find a footing online, especially as the pandemic forced them to do so. The number of businesses that added an e-commerce shopping cart during the pandemic to their websites increased 32%, according to a study by ZoomInfo.
JOI CEO Hector Gutierrez has seen the e-commerce benefit so far this year. JOI sells plant-based milk concentrates and natural ingredients. Initially, when he launched the company in 2018, JOI sold directly to retailers and other wholesale suppliers.
Then when the pandemic hit, and those orders dropped, Gutierrez said orders by individuals on Amazon began to take off — a 300% increase in what he called a “pantry stocking-up mood” during those first weeks of the pandemic — prompting JOI to pivot its entire marketing strategy.
Prior to the pandemic, 40% of JOI sales were direct to the consumer with the rest to retailers and wholesalers and food makers. Today, consumer sales account for 50% of JOI's business, Gutierrez said.
“We've always believed that online sales were the way for us. It just happened that the pandemic accelerated that,” he said, adding that JOI's entire marketing budget is now focused on individual consumers. “We're really bullish about the consumer side. We think there's tremendous opportunity there.”
Still, shifting to online sales for smaller retailers, particularly local boutiques, can be a gargantuan challenge, especially if only done a little at a time, McGough said.
“If you're a little regional retailer, and you're incrementally shifting online, your margins are getting crushed,” McGough said. “But if executed brilliantly, it could be the mother of all marketing opportunities."