Consumers around the world spent $ 900 billion more on online retailers in 2020 compared to the previous two-year trend, according to a report released by the Mastercard Economics Institute on Tuesday.
Customers return to restaurants and return to stores to buy clothes and shoes in person. Yet they will continue to replenish their refrigerators and search online for great deals – a tough habit that was reportedly developed during the pandemic.
Almost every retailer’s online sales have risen as buyers sit at home. While consumers have been picking up online purchases in the parking lot and dropping packages or pick-ups at their front porches, e-commerce makes up about $ 1 out of every $ 5 spent on retail worldwide. That’s an increase of about $ 1 from every $ 7 spent in 2019, the report said.
In an interview on CNBC’s global exchange with Frank Holland, Mastercard chief economist Bricklin Dwyer said that about 20% to 30% of the additional digital spending of $ 900 billion will continue until 2021 and the next few years.
However, the long-term e-commerce profits will be unequal and depend on what a retailer sells, how they have adapted their business model and how consumers prefer to buy. For some merchandise, such as clothing, the retailer may prefer to go back to brick-and-mortar stores where they can try on an outfit before buying it. In certain retail categories, such as electronics, online shopping has already led to a larger share of total sales, leaving less room for growth.
Grocery stores and discount stores will see the most dramatic and lasting shift to e-commerce, according to the report. Discount stores include dollar stores, wholesale clubs and other retailers that sell close to wholesale prices to customers. Grocers are likely to retain about 70 to 80% of the digital sales profits they saw during the peak of the pandemic, and discount stores will retain about 40 to 50% of that, the report said.
For both sectors, online sales accounted for only a single-digit share of total sales before the pandemic, creating an opportunity for more striking growth.
However, clothing stores, restaurants and sports / toy stores had the largest initial increase during the pandemic, but according to the report, it achieved only 10% to 20% of sales.
Electronics and department stores had the largest penetration of online sales before the pandemic, with e-commerce accounting for about 55% to 60% and 40% to 50% of their total sales, respectively, according to Mastercard. For the two sectors, their expected permanent shift will be around 20% to 30% of their peak jumps.
Dwyer said groceries face unique barriers – although more consumers are buying products, meat and other ingredients online. Only about 10% of total grocery spending is through e-commerce, he said.
“You have to trust someone else to pick your peaches,” he said. “You have to trust that someone else can deliver your goods and still have it good when it arrives. So these are some of the obstacles we overcome.”