COVID-19 Created The Inflection Point Some Categories Needed

 

When the internet opened to the public in 1991, and the first e-commerce sites began to conduct transactions in 1992, it was predicted that brick and mortar retail was dead. Unfortunately, consumers did not flock to e-commerce as predicted. By 2000, e-commerce sales as a percentage of total retail sales in the US were less than 2%.

e-commerce growth

Many categories transitioned from brick and mortar to e-commerce quite successfully. Books, music, electronics, toys, games, sporting goods all have done well over the past 20 years. Other categories have lagged behind and still hold a relatively small share of the total e-commerce channel. By the end of 2019, e-commerce still only represented 16% of all retail sales.

Then COVID-19 hit, and e-commerce is booming. So much so that companies as well established as Amazon and Walmart.com cannot keep up with demand.

 

e-commerce categories

Food and Personal Care

As I said prior, several categories, primarily food, beauty, and personal care items, were still mainly being sold through the brick and mortar retail channel. Social distancing and the need to stay away from crowds have begun this shift that is probably here to stay. Grocery shopping, which has struggled to capture just 5% of e-commerce sales, is now being propelled into the forefront with companies like InstaCart and Amazon Fresh being unable to keep up with demand.

Products like flour, yeast, and frozen food are challenging to get. A run on paper products early on caused panic buying by the consumer. Hand sanitizer, sanitizing wipes, and other PPE products led to hoarding and price gouging. Ultimately, there are shortages of these products and a supply chain that cannot replenish fast enough.

This demand is going to continue into the foreseeable future. This shift is the inflection point that was needed to move food and personal care items into a viable e-commerce category.

Fitness

The fitness equipment category is another area that increased 10x in one month as people realized gyms were closing. Backorders for equipment are stretching out four months and further to meet demand. Products such as Peleton, which already had a cloud-based content distribution system in place for home workouts, are thriving. Competitors in this space are popping up all over. Brands like Orange Theory are now moving to an online model to supplement. This behavior is not going to change in the short term. Consumers will stay away from crowds like those at the gym.

Home Maintenance

Sites from HomeDepot to Lowes saw dramatic increases in their website sales from consumers need to maintain their yards and catch up on home repairs.

Games and Electronics

Tabletop games have also seen a resurgence as consumers sought distractions from staying home. Suddenly tabletop games, toys, and puzzles became popular again.

Digital Streaming

Netflix, Hulu, and other streaming services saw double-digit subscriber growth in each month since the quarantines began. The bandwidth usage increase was so dramatic in some areas that the providers had to throttle down the pipeline until they could reinforce the infrastructure.

The Inflection Point

Most consumers hesitate to buy directly from a website they do not know or have not developed a relationship. That is why Amazon and Walmart.com lead the e-commerce way. Consumers know that they can trust Amazon and Walmart if anything goes wrong and get their money back. However, once Amazon restricted deliveries to only essential items, all bets were off. Consumers were willing to take a risk to get the products they needed.

Until there is a vaccine for COVID-19, which appears to be about 18 months away, social distancing is here to stay. Therefore, e-commerce has hit its inflection point and will overtake brick and mortar retail over the next year. Online food shopping will be the biggest recipient of this shift in behavior. However, Amazon and Walmart have both shown they cannot handle this amount of growth. This leaves an opportunity for all e-commerce players to step up and raise their website performance.