The numbers are (finally!) here, and they are a little different than expected. As you are probably aware by now, e-commerce in 2020 exploded. From unprecedented growth to a massive rift in the supply chain, the retail space went through what we can only describe as being flipped on its head and then asked to walk backward, blindfolded through a blizzard. Though possibly a dramatic statement, it is also very accurate. Due to worldwide lockdown and brick-and-mortar temporary closures, the pandemic forced consumers to buy their goods online. As parts of the world begin opening up, it is essential to monitor if e-commerce will slow down or if there are permanent changes in consumer behaviors?
Looking Back: Q4 2020
The US Census Bureau of the Department of Commerce reported on Friday, Feb 19th, the total stats for Q4 2020 e-commerce and retail sales, and how unexpectedly these numbers are down 1.2% from Q3 2020. Despite the month-to-month deficit, fourth-quarter e-commerce sales topped out at almost $207 billion, and Q4 overall sales were up by 32.1% compared to Q4 2019 sales. Additionally, the US Census reported that more than $1 in every $5 spent on retail purchases came from online orders in Q4.
Despite nationwide unemployment highs, retail sales continue to grow. In March, when the United States declared a state of emergency, retail sales increased 44.4% in a matter of days. Now that retail stores are more seasoned in e-commerce growth, arming themselves with faster delivery times and less overall supply chain delay, consumers continue to change their spending tune. Though originally companies were concerned that consumer spending overall went down, it increased overall in the fourth quarter year-over-year. Consumer spending, also known as personal consumption expenditures (PCE), increased by 2.5%, following an increase of 41% in the third quarter of 2020.
According to CNBC, online shopping in the US grew 32.2% YOY in 2020 -- a total of $188.2 billion, according to Adobe analytics. For the first time in history, e-commerce sales during November, due to Black Friday and Cyber Monday, reached $100 billion. Despite these vast numbers, spending was still down in Q4. So, if more people are buying online than ever, why did we see a slowdown in e-commerce sales over what historically is the busiest shopping season of the year?
The best look into the decrease in online shopping for Q4 is to concentrate on December. Retail spending in December dropped -0.7%. Two significant factors could have contributed to the reduction of e-commerce spending:
- Brick and Mortar Reopening
After quarantining for so long, consumers return to their regular habits when given the opportunity, choosing to shop in stores rather than online now that brick and mortar has opened its doors.
- Holiday Shopping in Stores is Tradition
For many families around the United States, holiday shopping is a tradition done in person, in stores, and with the whole family. While it’s not that way for everyone, spending time amongst the sparkly lights is a tradition that even a pandemic couldn’t stop.
Additionally, The Balance surmises that since COVID-cases were on the rise in December, that led to more shutdowns and higher than expected unemployment - which could have also had an enormous impact on holiday online shopping.
Yet, despite the mild hiccup in December, January is looking up!
Looking Forward: January 2021
Retail sales jumped 5.3% to start 2021. According to experts at CNBC, the massive boost in spending is due to the government providing stimulus checks to many Americans near the end of December to early January. Economists surveyed by Dow Jones were only expecting a rise of 1.2% when retail sales grew 5.3% in January YOY. Online spending is the biggest gainer since January 2020, up by 28.7%.
Retail sales expect a continuous increase in sales with the possibility of more stimulus checks rolling out within the next month or two. Despite the possibility of more stimulus checks, unemployment rates continue to rise at 6.3%, with the rollout of COVID-19 vaccinations and the possibility of more of the nation opening up, more consumer spending, and low unemployment. Though we don’t exactly know what the future holds, business owners can always invest more in e-commerce and help drive consumers online.