Is it time to return to the trend line?

Ecommerce Penetration: Temporary Surge or Long-term Trend?

Temporary Growth During Covid Rotation

When the Covid-19 pandemic forced people to stay indoors, ecommerce penetration experienced an unprecedented surge. Reports indicated that the surge had sped up a few years of growth in just a couple of months. However, once restrictions eased, people returned to physical stores and offices, and the trend line started to revert to its original position.

Current State of US Ecommerce

To determine if the “reversion to the trend line” theory is true, we have to understand the absolute numbers of US ecommerce sales. The trend line appears more evident when we analyze the data based on the total retail sales trend. However, this method overlooks the fact that retail sales are volatile, making the data unreliable to track ecommerce trends accurately.

The issue of what to use as the denominator in calculating ecommerce penetration makes it even more complex. For instance, some analysts contend that including sales like gasoline and car repairs that cannot take place online skews results. Therefore, it is better to look at ecommerce penetration numbers in “addressable retail”, which eliminates gas stations, car dealerships, and repair shops. For US statistics, bars and restaurants are also not included. This chart illustrates three different ways of adding “retail” and determining online sales as a percentage of them.

UK Ecommerce Numbers

The UK had a more extensive lockdown, resulting in more dramatic fluctuation in ecommerce penetration, indicating that the denominator variable affects the results. As a result, different analysts emphasize different data points when analyzing trends, as the situation can be quite complex.

Is Addressable Retail Data Becoming Inadequate?

As Tesla and other car companies sell vehicles online, “addressable retail” is becoming less useful. Also, almost half of US restaurant spending has involved off-premise collection and delivery even before e-commerce. As such, categorizing offline and online sales can be tricky depending on the perspective. Retailers are now reporting that sales begin, continue, and end online or offline, and even retailers’ marketing budgets are now considering both online and offline strategies.

Looking into Logistics Models

As ecommerce becomes a permanent fixture, logistics models will differ. Businesses must determine how items can be delivered, considering the type of delivery method required, whether it’s through the mail, collection, a bike, or a cold chain. As a result, sales may not be exclusively online or offline, but rather they would vary depending on the delivery needs.

The Long-term Trend

Eventually, ecommerce will no longer be a separate sector; rather, it will be part of all businesses. It’s essential to note that Walmart, for instance, is considered a regular retailer, with no category restrictions. The converse may apply when rent, advertising, and marketing need to be accounted for in one budget and one question: “How do you reach your customer?”

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Principal Associate at Breega Capital, Isabelle Gallo

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