As Covid-19 kept consumers around the world at home, nearly everything from groceries to gardening supplies was purchased through e-commerce channels.
According to Mastercard’s latest Recovery Insights report, this amounted to an additional $900 billion being spent in retail online around the world in 2020. Put another way: in 2020, e-commerce made up roughly £1.50 out of every £5 spent on retail, up from about £1 out of every £5 spent in 2019.
For retailers, restaurants and other businesses large and small, being able to sell online provided a much-needed lifeline as in-person consumer spending was disrupted.
Roughly 20-30% of the Covid-related shift to digital globally is expected to be permanent, according to the report, which draws on anonymised and aggregated sales activity in the Mastercard network and proprietary analysis by the Mastercard Economics Institute. The analysis dives into what this means by country and by sector, for goods and services, and within countries and across borders.
“While consumers were stuck at home, their dollars travelled far and wide thanks to e-commerce,” says Bricklin Dwyer, Mastercard chief economist and head of the Mastercard Economics Institute. “This has significant implications, with the countries and companies that have prioritized digital continuing to reap the benefits. Our analysis shows that even the smallest businesses see gains when they shift to digital.”
While the digital transformation has been neither universal nor consistent – due to geographical, economic, and household differences – the report uncovers several key overarching trends:
- Early digital adopters go into overdrive: Economies that were more digital before the crisis—such as the UK and US —saw larger gains in the domestic shift to digital that look more permanent than the countries that had a smaller share of e-commerce before the crisis. In the UK, the e-commerce share of retail sales pre-crisis was 22%, rising to 31% at the peak of the crisis. The current level stands at 24% and we expect this shift of 2 percentage points to be permanent.
- Grocery and discount store digital gains look sticky: Essential retail sectors, which had the smallest digital share before the crisis, saw some of the biggest gains as consumers adapted. With new consumer habits forming and given the low pre-Covid user base, we anticipate 70-80% of the grocery e-commerce surge to stick around for good. As an example, as a result of the lockdowns in the UK, roughly one-fifth of all grocery shopping is now done online.
- Consumers increase their e-commerce footprints, buying from up to 30% more online retailers: Reflecting expanded consumer choice, our analysis shows that consumers worldwide are making purchases at a greater number of websites and online marketplaces than before. In the UK, people are buying from 22% more online stores, on average.
- International e-commerce rose 25-30% during the pandemic: International e-commerce got a boost both in sales volume and the number of different countries where shoppers placed orders. With infinitely more choices at their fingertips, consumer spending on international e-commerce grew around 25-30% year over year from March 2020 through February 2021.
Covid accelerated the shift to e-commerce spending already well underway in certain markets, such as the UAE and the US, but also for countries that were in the early stages of their digital retail shift, such as Egypt and Brazil.
“The pandemic may be the purest test of the world’s progress towards digitalization to date,” says Bhaskar Chakravorti, Dean of Global Business, The Fletcher School at Tufts University. “Proving in the starkest possible terms how dynamic digital economies have been most resilient to the economic turmoil and are best positioned for future growth.”
Not surprisingly, the digital retail journey also accelerated for more populated, urban areas. City dwellers were less willing than exurb dwellers to take public transport and venture out to stores to avoid contact with potentially infected people.
Density also makes the delivery logistics for restaurants and grocery—two of the biggest e-commerce growth drivers—more feasible. The convenience factor is a better sell for car-free city dwellers, especially for grocery and household essentials. Countries such as Singapore, Malaysia and the UK, with high levels of urbanisation, showed some of the largest gains in retail e-commerce.
Digital trust is also an important factor for e-commerce growth and sustainability. The report found that countries such as Canada, with a strong rule of law and ease of doing business, have seen bigger gains in e-commerce over the longer term.
The post Additional $900 billion spent on e-commerce at retailers globally in 2020 appeared first on Payments Cards & Mobile.
