- Market News
Author: Michelle Evans
The most important retail trend fueled by COVID-19 was the continued rise of e-commerce. This growth is likely to continue even as vaccine distribution provides hope for a return to normalcy. In fact, 74% of global retail and consumer brand professionals said they expect the crisis-led rise in online shopping to become permanent in an October survey fielded by Euromonitor International.
E-commerce has been the fastest-growing channel over the last decade, with the crisis accelerating such shifts. Euromonitor International projects that half of the absolute value growth for the global retail sector over the 2020-2025 period will be digital. That equates to USD1.4 trillion in absolute value growth as more goods are sold online. To put that projected e-commerce growth in context, that would be roughly the size of the total value of products sold across all retail channels just five years ago.
China and the US will account for 55% of that value growth in e-commerce opportunities, which is to be expected from the largest e-commerce markets globally. From a percentage growth perspective, Latin America, an emerging e-commerce region, saw e-commerce adoption accelerated due to the crisis as more consumers shopped online to obtain necessities.
E-commerce in Latin America has long lagged behind other regions due to its large unbanked population, weak postal systems and consumer distrust of the channel, as well as other factors. COVID-19 led companies to make bigger investments in digital, including developing the website experience, adding direct-to-consumer operations and partnering with delivery services. Many turned to social media platforms like Instagram, Facebook and WhatsApp to facilitate interactions. For example, Walmart WMT +0.3% now allows consumers in Mexico to order products via WhatsApp.
These efforts helped Latin America post the strongest growth of any region with a 60% jump in goods sold online in 2020. MercadoLibre was one of the biggest corporate beneficiaries of the digital shift in Latin America. Euromonitor expects Latin America to continue growing during the forecast period, propelled by Mexico, which is narrowing the gap between itself and the region’s largest e-commerce market, Brazil. Traditionally, spend in the travel sector drove e-commerce in Mexico, but the desire to shop online out of safety concerns led consumers to overlook some of the hurdles like fraud and logistics that had previously dampened online sales.
Apparel and footwear is expected to drive the greatest absolute value growth over the 2020-2025 period, followed closely by food and drink, according to Euromonitor. The former has felt the dramatic impact of the digital revolution over the last decade whereas the latter truly came into its own in 2020, posting the strongest growth rate of any category. Homebound consumers turned to the digital channel out of necessity to obtain groceries during lockdowns, helping the industry overcome barriers that previously held it back.
Digital sales in the fashion industry are expected to continue their growth trajectory post-pandemic, increasing in both percentage share and actual terms, though slower than anticipated due to COVID-19. The apparel and footwear industry was hit particularly hard during the pandemic. The overall industry declined by 19% in 2020, with growth in the fast-expanding e-commerce channel slowing to 3% in 2021, down 20% from the previous year, according to Euromonitor. Although e-commerce will outpace the growth of other channels, its continued ascension will be dampened by the industry’s overall decline, which is not expected to reach pre-pandemic sales until 2024.
The digitally inspired changes that are rewiring retail go beyond just channel shift, though. New business models have gained steam and commerce ecosystems have emerged, forever changing how retailers and brands reach and engage this digitally connected consumer base. Over the last decade, the digital revolution has given way to a more complicated and fragmented retail landscape. Marketplaces, direct-to-consumer brands, social commerce, live selling and voice commerce are some examples that speak to this diversification of paths to reach the end-consumer.
Retailers and consumer brands now compete on their digital capabilities. Many in the industry have accepted this reality. Of those working at retailers and consumer brands, 68% expect consumers will judge them more on their digital prowess post-pandemic, according to a survey fielded by Euromonitor International in November 2020. Being evaluated on their digital resume means that retailers and consumer brands who were not investing in new technologies or adopting a digital-first mindset pre-crisis, have fallen further behind their peers. Do nothing and they risk alienating their consumer base, which has likely become more digital-savvy during this period of rapid digital transformation.