The explosion of eCommerce during the pandemic has been breathtaking:
- It took 10 years for the share of eCommerce in retail sales to grow 10 percentage points, from 5.6% to 16.0%.
- It took just 8 weeks during the pandemic for the eCommerce share to grow another 11 percentage points, to 27.0% of retail sales.
The eCommerce explosion has huge implications for all providers of products and services to small businesses. This sea change is just as significant for small businesses as to giants like Amazon or Walmart.
Sources: Digital Commerce 360 (formerly Internet Retailer) analysis of U.S. Department of Commerce data.
Total retail figures exclude sales of items not normally purchased online such as spending at restaurants, bars, automobile dealers, gas stations and fuel dealers.
Total retail figures exclude sales of items not normally purchased online such as spending at restaurants, bars, automobile dealers, gas stations and fuel dealers.
What Does this Mean for Small Businesses and the Providers That Serve Them?
- Small businesses will be forced to speed up their adoption of eCommerce and the technologies that go with it. Robust eCommerce capabilities will be imperative for small businesses in retail, to stay competitive with larger retailers and control costs in the post-pandemic environment.
- This transition will create broad opportunities for providers of digital platforms and technologies. We expect big gains in the small business space by providers of:
- Digital advertising and marketing
- Technology infrastructure and cloud-based services
- Operations platforms that smoothly integrate multiple functions
- Interfaces to complex, redundant supply and distribution chains
- The just-announced Facebook Shops! program is a harbinger of the eCommerce wave that will sweep small businesses.
What About Services?
- While most of the attention so far has been on retail sales, there are equally significant changes taking place in the purchase and delivery of services offered by small businesses.
- We believe that most services, from basic to sophisticated, will be profoundly impacted by the pandemic. Key changes will be:
- Heavier online advertising and marketing by small businesses
- Greater use of self-serve for consumers (e.g. online do-it-yourself scheduling; chatbots to screen and route customers)
- Transition to online fulfillment. Many professional services can be fulfilled digitally (legal, financial, design, counseling, and some medical). We estimate that at least 25% of the value of all services can be fulfilled online.
- Overall, a greater use of digital platforms and cloud-based services, for both internal operations and externally-facing functions
We estimate that at least 25% of the value of all services can be fulfilled online.
- The just-announced Facebook Shops! program is a harbinger of the eCommerce wave that will sweep small businesses.
What Happens Next?
- We believe that when the economy returns to a more “normal” condition, the share of retail sales done via eCommerce will drop slightly, perhaps to a share in the 23-25% range.
- The die is now cast for a permanently higher trendline in eCommerce retail sales, with annual share increases in the 3-4% range.
- The “hybrid” model, in which an online purchase is picked up in person, will also gain traction. This model is helping to prop up restaurants and storefront businesses right now. The economics are often compelling: it’s a win-win for both the business and the consumer.
- Longer term, many small businesses may scale back their physical footprint, or move to lower-cost premises, as in-person shopping is likely to become less attractive to consumers.
