Global retail experiencing major shift post Covid

E Retail

The growth of e-commerce industry in size and reach has been steadily rising over the past two decades. Statista’s market outlook estimates that this year, more than 250 million Americans will purchase goods online. Retail sales via e-commerce platforms has surged considerably all across the world, as the pandemic confined consumers within their homes with nation-wide lockdowns spanning weeks.

As per the data published by US Census Bureau, online shopping accounted for a small portion of total retail sales in US. In the first three months of 2020, only 11.8% of total retail sales happened online (seasonally adjusted, excluding food services). This was the highest sales share till date as per the records. However, post the outbreak of Covid-19 the share of online sales in total retail sales increased drastically by 4.3 points.

As evident in the above chart, Covid-19 has accelerated consumers’ shift to online retail at an extraordinary pace. Online retail sales totaling $212 billion in value and amounting to 16.1% of total retail sales unfolded in April-May-June quarter. As the depiction shows that’s a growth of 7.2% from the second quarter of 2019.

Online retail share of 16.1% might still appear small, considering the increased significance being placed on the sector, but we must not forget that total retail sales also include categories like motor vehicles, gas stations, parts dealers, etc. where e-commerce is still very weak.

The Role of Covid in Decline of the Retail Industry

Brick and mortar retail stores continue to be among the worst-hit sector by the impact of Covid-19. US witnessed major retail players like J.C. Penney, J. Crew and Neiman Marcus declare bankruptcy in just one month’s time. New data suggests the trend will continue for the next five years, forcing a huge number of American stores to shut shop.

Data from UBS collected by the Wall Street Journal has made analysts forecast closure of 100,000 stores by 2025, due to consumers shifting to online mode for retail shopping. Office supplies stores are expected to be majorly hit by this shift and experts predict only half of the stores will remain open in the next half a decade.

Currently most retail corporations are struggling to stay afloat due to declining revenue and increasing debts and interest payments. Considering the negative industry outlook, no definitive time line for a vaccine or cure, many brick and mortar stores are expected to close down sooner rather than enhance their burden of losses.

The US scene resonates with the global conditions; however, the predictions differ from regionally. In India, it is estimated that more than 7 lakh small retail stores may have been forced to shut down because of the lockdown and most of them might not reopen. All India Mobile Retail Association estimates that 60% of the 1.5 lakh mobile handset selling stores have not opened after lockdown. About 10% of small kirana stores selling tea, cigarette, paan and candies have closed down permanently.

Retail e-commerce in India, like US has received a boost. Over 5000 new online stores have been added during the lockdown period. Given the public apprehension to avoid physical outings as far as possible, even after the lockdown have been lifted, retail stores have not seen much footfall.

In US many specialists predict that the pandemic will ultimately force shutting down of malls and physical retail outlets, sighting that the industry was already witnessing a decline pre-pandemic with consumers increasingly shopping online for shoes, apparel, furniture, etc.

In India, however, a large number of experts feel that many retailers can save themselves by shifting to omnichannel. As for the large malls, experts opine that these are not just about shopping but about the complete experience that consumers love about shopping, something that can never be replaced by online portals.


Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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