Retail Sales via physical stores are negatively impacted while eCommerce has strong growth rates.
As physical stores are slowly beginning to open up in some areas of the country, the heavy hitter of the retail industry continues to be eCommerce. According to ACI Worldwide, an electronic payment software solutions provider, online retail purchases increased 81% in May. The leading contender was sportswear and sporting goods at 216%, followed by housewares and DIY supplies at 190%, and finally gaming at 84%.
The effect of brick and mortar stores reopenings is already having an impact on certain sectors. Gaming purchases remain high, but they dropped dramatically from April’s 126% “year-over-year” growth. Electronic sales also saw a drop from a 55% increase in April down to 32% in the month of May.
Easing Restrictions Has Shifted Consumer Purchasing Behavior
According to Debbie Guerra, EVP at ACI Worldwide, she states:
“While many of the trends in eCommerce purchasing behavior that emerged in March and April have continued, we are starting to see the impact that the gradual easing of restrictions is having on retail activity.
People working from home are now set up, and we see spending shifting from home office supplies back toward consumer goods like sporting goods and home improvements.”
Unfortunately, retail’s brick and mortar comeback will not be enough to counteract the devastating losses that retail has suffered during the COVID-19 outbreak. This will be especially true as it moves forward into a significantly compromised economy.
eMarketer, a New York-based market research company, is predicting that total retail sales for the year 2020 will reach just under $5 trillion. This will be the lowest amount since 2016. The research company also foresees that sales from brick and mortar businesses will drop 14% to $4.2 trillion. Furthermore, it is expected that sales from physical stores stand to return to “pre-pandemic levels” in up to five years.
Almost every category, save two, will experience sales decline this year. The two that are holding steady include food and beverage which is up 12.5% ($1.1 trillion) and health and beauty which is up 6.9% ($556.3 billion).
Online sales are the main drivers behind the growth of the food and beverage and health/beauty sales. Food and beverage sales are expected to increase 58.5% and the health and beauty sales will increase 32.4%.
Still, the overall growth experienced by eCommerce will not compensate for the immense decline in purchases experienced by brick and mortar businesses. Online sales will only reach $709.78 billion in this year alone. That makes up only 14.5% of all U.S. retail sales.
eCommerce behemoth, Amazon, is the leader in overall online sales. It currently has 38% of the market share, according to eMarketer. Those that follow include Walmart (5.8%), eBay (4.5%), Apple (3.5%), and finally Home Depot at (1.9%).
Looking Ahead
The outbreak of COVID-19 and the subsequent lockdown has had devastating financial consequences for physical retailers. As mentioned, it could take several years to reach the level of profitability it once enjoyed. And although eCommerce has experienced the most explosive growth, it is still a small portion of the overall retail industry.
How the retail sector bounces back after tremendous loss post-pandemic remains to be seen.