Is e-commerce declining or fitting in the post-pandemic world? The answer might well depend on how the limits of e-commerce are drawn in the “new normal” business world.
E-commerce boomed throughout the pandemic, giving a sharp pivot to a largely virtual world. This shift produced a 55% increase in online spending worth $1.7 trillion.
Now, after a couple of years of relying heavily on online-only operations, the e-commerce industry is at a crossroads, navigating consumer expectations of rapid delivery along with a return to in-person transactions, Ian Televik, vice president of marketing and CX at retail technology firm Fabric, predicted in a discussion with the E-Commerce Times.
With the world “returning to normal,” we are beginning to see another shift, Televik notes, the decline of e-commerce. According to J.P. Morgan, U.S. e-commerce sales made up 13.2% of U.S. retail sales in 2021, down from 13.6% in 2020.
Shopify is also seeing its revenue growth slow as it lays off 10% of its workforce, noting that the pandemic e-commerce surge is a thing of the past. Even Amazon is holding a second Prime Day event to compensate for decreased online sales.
Mobile commerce platform firm Metropolis Technologies connects transportation, payments, and neighborhood commerce, helping people and businesses to transact in the physical world. Its CEO and co-founder Alex Israel argues that this is not a reflection of disillusion with e-commerce. Rather, it is a re-emergence of the fact that people commonly desire to connect with and shop within the communities where they live and work.
Different Views of What Lies Ahead
Metropolis sees healthy signs that e-commerce is integrating into daily routines not directly associated with online shopping.
“As people return to downtowns, they [bring] habits from e-commerce picked up during the pandemic. They expect their transactions to be quick, seamless, and touchless,” Corey Owens, chief communications officer at Metropolis, told the E-Commerce Times.
However, he quipped, buying a pair of socks online is easier than paying for parking or a car wash. That led to a significant burst of interest in e-commerce-like systems for the built environment.
For example, Metropolis serves commercial real estate owners and operators with a touch-free, one-time sign-up payment system for their parking garages. It eliminates tickets, coins, or gates. Once you sign up, you just drive in and drive out, and our computer vision-powered system recognizes you and bills your credit card on file, he explained.
“Think of it as single sign-on for downtowns, like Shop Pay or Amazon Pay. Consumer interest in the seamlessness of e-commerce has exploded post-pandemic, with more than 2.3 million consumers using Metropolis to make e-commerce-like payments all over the country,” Owens said to offer insight into how e-commerce is finding new outlets rather than shrinking in online shopping.
Fabric’s Televik does not disagree, at least fully. He concurs a great deal of demand for e-commerce still exists. “But that demand has lessened since the initial sky-high surges seen at the start of the pandemic,” he countered.
Balance Needed Going Forward
Companies will need to balance their e-commerce focus with the reality that customers likely tend to prefer an in-person shopping experience, according to Televik. Shopping in person is a social experience that people missed at the height of Covid-19.
“Because of the crossroads at which retailers find themselves, companies need to be prepared to operate their in-store operations in a way that can efficiently handle situations like hybrid orders that are placed online and picked up in-store,” he said.
Shoppers are showing a trend of returning to in-person operations at the expense of online shopping. Consumers have returned to a more traditional in-store shopping experience, perhaps even more so than the industry expected, Televik added.
Many companies — including e-commerce giants like Amazon — overreacted to the pandemic and acquired vast amounts of expensive warehouse space as they expected online orders to dominate the market. That has put their operations in a bind.
“Arguably, the most important factor for companies now will be to maximize the space they already have to ensure it is efficient and generating revenue rather than sitting unused,” he said.
How E-Commerce Fits Into a Post-Pandemic World
E-commerce is certainly not dead, Televik asserted, and will continue to be an essential part of consumer experience and retailers’ operations.
“But as we slowly make our way out of the Covid-19 pandemic, e-commerce will work in tandem with traditional operations for an omnichannel experience rather than replacing them. Ultimately, people enjoy the experience of shopping where they want, when they want,” he predicted.
E-commerce offers convenience for the post-pandemic world. But Televik observed that fulfillment technology, perhaps initially intended for e-commerce operations, will really benefit in-store operations to meet rising consumer demand.
At the end of the day, consumers want their products faster than ever. It does not matter if it is in-store or online. Consumers want to know the product they are looking at is available to purchase and available quickly.
Changing Times Cause Redefined Roles
Televik sees the changing economy’s impact as a moving target. It is unclear whether businesses are now more inclined to use e-commerce as a supplement to physical stores or as an alternative.
He noted that difficult financial circumstances could contribute to trouble for the e-commerce industry, and inflation contributes to rising costs across a plethora of industries.
With prices rising for everything from groceries to apparel, brands also face higher carrier delivery fees, making e-commerce less appealing if purchasing items in-store or elsewhere is more affordable.
The pandemic prompted empty retail storefronts, but now traditional brick-and-mortar stores are re-emerging.
More than 4,000 stores have opened in the U.S. this year. Experts have indicated that the majority of retail business in the U.S. still happens in physical stores, according to Televik.
“This tells us that people are happy to return to in-person experiences, but labor shortages, rising prices, and other extenuating circumstances have made it so those physical stores have to get smarter to maximize efficiency,” he offered.
Fluid, Co-Existing Channels
E-commerce is not a guaranteed option for all merchants, and no specific types of e-commerce are overtaking others.
It comes down to a brand’s flexibility to offer the sales channel that its consumers want. The goal is to meet them where their consumers spend their time, Televik observed. That could mean buying directly from the Instagram mobile app or searching a brand’s user app for product information before buying in-store.
“Underpinning all of this, though, is the need to have the inventory visibility to know exactly what is, and is not, available, and locating the inventory close to the consumer so they can receive it quickly,” he said.
The future of retail in general — both in the e-commerce world and in-store operations — is all about efficient and intelligent operations. That should be a top priority for brands looking to succeed in the future of e-commerce, according to Televik.
Need for Speed
The most significant trend Televik sees is the changing consumer expectation for fast and free shipping. Since the dominance of Amazon Prime, fast two-day shipping has become an industry-wide expectation.
An 80% majority of the biggest retailers offer that service, according to a report from Fabric. Some expectations are even more rapid than that, with 61% of consumers expecting free next-day shipping.
“This will change the landscape of the industry as 40% of the top 10 retailers already offer free next-day delivery compared to only 5% of retailers outside of the top 10. To stay competitive, customers will need to get their goods closer to their final destination to aid in making shipping faster and cost-effective,” he concluded.
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