Last week, the U.S. Commerce Department shocked analysts when it announced overall retail sales rose 0.6% in June, rebounding from a downwardly revised 1.7% drop in May. Excluding auto sales – which are still being hampered by global semiconductor shortages – retail sales climbed 1.3%.
The reopening of many locations in 2021 was expected to boost retail sales, but what may be even more surprising is the continued strength of e-commerce sales. Even as in-store sales have increased, e-commerce sales continue to climb. According to the National Retail Federation, non-store and online sales are expected to grow between 18% and 23% this year over 2020, fueling overall retail sales growth of between 10.5% and 13.5%. NRF said total retail sales could fall between $4.44 trillion and $4.56 trillion in 2021, with non-store and online sales accounting for between $1.09 trillion and $1.13 trillion, up from $920 billion in the COVID-fueled 2020 sales explosion.
"The economy and consumer spending have proven to be much more resilient than initially forecasted," NRF President and CEO Matthew Shay said in a June release announcing the forecast, which was revised upward. "The combination of vaccine distribution, fiscal stimulus and private-sector ingenuity has put millions of Americans back to work. While there are downside risks related to worker shortages, an overheating economy, tax increases, and overregulation, overall households are healthier, and consumers are demonstrating their ability and willingness to spend. The pandemic was a reminder of how essential small, midsize, and large retailers are to the everyday lives of Americans in communities nationwide."
Consumers Embrace E-Commerce
A recent e-commerce report from shipping platform provider Shippo and tech-enabled third-party logistics firm ShipBob found that 29% of U.S. consumers surveyed said they will shop for items online more than they did before the pandemic.
The survey, 2021 E-commerce Shipping & Fulfillment Benchmarks Report, covered the time frame from April 2020 through March 2021. It predicts that between 20% and 30% of the global COVID-related shift to online purchasing would become permanent.
The Shippo/ShipBob survey found the average e-commerce order value was $78.09 and average shipping cost was $9.43. Looking at a longer time frame, the survey found average package deliveries on a year-over-year basis spiked in early 2020, rising 147% in spring 2020 compared to spring 2019 and 130% in the summer of 2020 compared to the summer of 2019. Even the winter of 2020-21 saw continued growth in package deliveries, up 96% compared to winter 2019-20.
"Both order values and package deliveries are trending upwards, even as we move beyond the pandemic-era boom. With e-commerce only continuing to grow, it's important to measure how your business' bottom line is influenced by both customer spend and shipping costs," the survey said.
The data from Shippo and ShipBob about consumer habits are reinforced by reports from ShipStation and Ware2Go, both of which point to continued consumer interest in online shopping even as stores open, and as a result, increasing focus on the last-mile delivery of items.
ShipStation found that 39% of consumers in the U.S., Canada, United Kingdom, and Australia said they spent more on retail in 2020 than they did in 2019, and 37% expect to spend more in 2021 than they did in 2020. More than 55% said they would prefer to shop online rather than in stores.
Ware2Go found similar results with its survey. A majority of Americans (79%) increased their online shopping due to the pandemic, and 89% plan to do as much or more of their shopping online, even as restrictions on in-person shopping ease.
Retail sales at nonstore retails, which includes e-commerce sales, over the past five years, in millions of dollars. (Photo: SONAR) To learn more about FreightWaves SONAR, click here.
"The pandemic pushed people to take more of their business and shopping online, and now that shoppers have had a taste of that convenience, the bar for merchants has again been raised to compete and win," said Ware2Go CEO Steve Denton. "Our research shows that shipping speed directly impacts brand loyalty and that brands have an incentive to prioritize sustainability."
The ShipStation survey had a few other interesting tidbits. Of those responding, 78% said they expect brands to figure out a way to offer the same shipping speeds as they did pre-COVID, and 51% said COVID did not increase their willingness to pay for shipping in exchange for faster delivery.
That means that shipping and visibility remain critical components of the e-commerce experience – and one that brands and retailers must figure out.
Shipping – And We Mean Free Shipping
A majority of survey respondents – 53% – said they expect brands to offer free shipping indefinitely after COVID-19 and provide more visibility into the shipments.
"We found that more than 85% of consumers across the geographical board stated that they want full visibility into expected shipping timelines before making any online purchase," ShipStation noted. "Consumers want to know where their item is and are placing more value on improved visibility into the cost and timelines associated with shipping. By providing real-time shipping rates and delivery estimates during the checkout, retailers can encourage more sales and inspire customer loyalty."
Retail sales year-over-year change at department stores over the past five years. (Photo: SONAR) To learn more about FreightWaves SONAR, click here
Ware2Go also said Americans expect more from their e-commerce shipping experience. According to the survey, 40% of consumers said the pandemic increased their desire for free shipping and few would choose curbside pickup when offered, with 54% saying they would only choose curbside pickup out of immediate necessity or if shipping was too expensive (40%). Twice as many said they preferred one- to two-day shipping in lieu of curbside pickup, the company said.
More than 80% of consumers responding to the Ware2Go survey said they would be more likely to hit the buy button on an online purchase if free shipping is included, with 75% saying shipping within two days would also be an incentive.
ShipBob said that some of its customers have been able to increase average order volume 97% and reduce cart abandonment by 18% by offering free two-day shipping.
In June, commercial real estate firm CBRE released a report on global e-commerce, predicting that U.S. e-commerce sales will comprise more than 25% of total retail sales by 2025. EMarketer predicts e-commerce sales will grow 17.9% this year.
NRF's chief economist Jack Kleinhenz said the U.S. will see its fastest retail sales growth this year since 1984, and e-commerce is a large part of that.
"We are seeing clear signs of a strong and resilient economy," he said. "Incoming data suggests that U.S. economic activity continues to expand rapidly, and we have seen impressive growth. Most indicators point toward an energetic expansion over the upcoming months and through the remainder of the year."
Digital Commerce 360 said that 2021 Q1 showed the strength of e-commerce, with online penetration reaching 19.5%, nearly matching 2020 Q2 and Q3's figures of just over 20% during the height of the pandemic and shutdowns. The quarter also saw a 39% year-over-year growth in online sales, the firm said, noting that Q1 2020 featured just two-and-a-half weeks of retail spending following then-President Donald Trump's state of national emergency.
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