Ecommerce in Q2 Requires a (Much) Bigger Share of Total Retail Market

The U.S. Department of Commerce reports that ecommerce for a proportion of retail sales jumped from 11.8 percent in the first quarter of 2020 to 16.1 percent in the second quarter, representing a 31.8 percent increase to $211.5 billion. The data also shows a 44.5-percent bulge in the second quarter of 2019, adjusted for seasonal variations.

The Department estimated all U.S. retail sales for the second quarter of 2020 at $1.3 trillion, a decrease of 3.9 percent in the first quarter of 2020. Brick-and-mortar earnings accounted for the entire reduction.

June 2020 data from the National Retail Federation shows that 45 percent of U.S. Baby Boomers (birthdates 1946 to 1964) are doing more online shopping due to the pandemic. Thirty-one percent tried online grocery shopping for the first time in June and July, according to IRI Worldwide Strategic Analytics, a retail consulting firm.

According to IBM’s U.S. Retail Index, Covid-19 has accelerated the change in physical-store to ecommerce by roughly five years because ecommerce is estimated to rise by nearly 20 percent in 2020, while department store sales are projected to decrease by over 60 percent.

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For the whole year, IBM’s August”Entire Year Retail Forecast Update” projects a net overall U.S. retail decrease of 2.86 percent. Ecommerce will grow by 19.96 percent over 2019. Online sales quickened from 13 percent gain in the first quarter to more than 26 percent in the second. Conversely, department store sales dropped by 25 percent in the first quarter and 75 percent within the next quarter.

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Holiday Shopping

With the uncertainty surrounding the impact of Covid-19, brick-and-mortar retailers will rely on electronic sales. Many chain retailers have already announced their stores will be closed on Thanksgiving Day. They include:

  • Bed Bath & Beyond,
  • Best Buy,
  • Boscov’s,
  • Dick’s Sporting Goods,
  • Foot Locker,
  • Hobby Lobby,
  • Kohl’s,
  • Sam’s Club,
  • Goal,
  • Ulta Beauty,
  • Walmart.

For Black Friday, no significant retailer has announced changes to its in-store app. However, retailers will most likely limit the number of people in the shop at exactly the exact same time to maintain some semblance of social distancing. Many shoppers will most likely forego the crowds and do their shopping online. Black Friday has been losing its significance as many retailers have spread the holiday reductions over several days.

Here is how one important retailer is handling the holidays. In a note to clients, Target CEO Brian Cornell stated:

Let’s face itHistorically, deal hunting and holiday shopping may mean crowded events, and this isn’t a year for crowds. That’s why our primary holiday deals will be available earlier than ever, so you can shop safely and safely without worrying about missing out on deals that usually arrive later in the season. Beginning in October and continuing throughout the season, you may see Target’s lowest prices of the year on items in stores and on line…

Target’s second-quarter 2020 ecommerce sales grew by 195 percent .

Macy’s CEO Jeff Gennette said his company will start its holiday marketing soon after Halloween and will focus on electronic sales and curbside pickup.

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Ecommerce Challenges

Soaring ecommerce sales will tax the supply chain. The announced elimination of overtime for postal workers by new U.S. Postmaster General Louis DeJoy could influence the Postal Service’s ability to deliver gifts in time during the peak holiday season. Many merchants, including Amazon, use the Postal Service for last-mile delivery.

Amazon is in discussions with Simon Property Group, the owner of lots of those malls that J.C. Penney and Sears inhabited, to turn some of the gigantic anchor sites into distribution centers. Simon Property Group’s malls have 11 Sears stores in over two million square feet and 63 J.C. Penney stores with over 10 million square feet. Delivery drivers could unload bundles and, separately, pick them up for last-mile delivery. Other possible uses for these areas include customer product return sites — a logistics component where brick-and-mortar stores like Walmart have an edge — as well as curbside pick-up.

The downside for Simon Property Group is a leasing to Amazon could create problems with retail mall tenants, as distribution centers would not create as much foot traffic as retail stores. Such a move could trigger clauses in lease agreements that enable tenants to reduce their rent or violate their lease.

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