Did COVID-19 Change the Retail Industry?
When the pandemic broke out, I was asked how the coronavirus would disrupt the retail market, especially when it comes to physical retail stores. I believed that the dip in shopping in physical stores would just be a phase, and that brick & mortar would get back to business as usual once the pandemic was over. However, others argued that I was misreading the industry map as the conventional prediction was: “The retail industry will never be the same.”
The belief was that with frequent or ongoing lockdowns and stores having to remain closed for prolonged periods of time, consumers would turn to online shopping – and once they did – they’d have no reason to go back and shop in physical stores. With that assumption, companies like Shopify, Asos, Amazon, Boohoo, and more spent tons of resources on scaling their operations and providing more products and better services.
In recent years, online sales (AKA eCommerce sales) rose year-to-year. Once the COVID-19 pandemic broke out, there was a jump in online sales from 10% to 16.5%, which was the forecasted growth for the next 5 years. So, at first, it looked as if all predictions were right (where as I, was wrong.)
The Long Leg of COVID – The Stock Market and Current eCommerce Performance
Over the past year (2022), the stock market went out of balance –
While it can be argued that the drop was caused by inflation (and we can’t deny that it has had an impact), based on the latest reports the private sector still spends almost 1% on non-essential products, which means inflation isn’t the only reason for the drop in these stocks.
Tobias Lütke, CEO at Shopify, wrote about the changes the company is facing:
“Before the pandemic, e-commerce growth had been steady and predictable. Was this surge to be a temporary effect or a new normal? And so, given what we saw, we placed another bet: We bet that the channel mix – the share of dollars that travel through e-commerce rather than physical retail – would permanently leap ahead by 5 or even 10 years……. It’s now clear that bet didn’t pay off.”
It’s worth noting that eCommerce in some parts of the industry is stable and growingGroceries eCommerce, for example, saw an increase of 2.5%. The reason for that might be that groceries shopping is a frequently reoccurring purchase where consumers already know which products they want to buy, and with quick deliveries and low shipment fees, alongside the advantages of saving the hassle of having to carry shopping bags and waiting in line, there is no reason to buy the same milk carton from the brand of your choice in the physical store.
So, How Come Brick-and-Mortar Stores Are Still Popular?
Some experts claim that “Old habits die hard” to justify why consumers are back shopping at brick & mortar stores and haven’t shifted to 100% eCommerce shopping, but I don’t believe that’s the main reason.
I believe that some in-store businesses and brick-and-mortar stores are thriving because it’s still an irreplaceable experience – smelling, seeing, holding, wearing, and touching new products – using our senses, is still something we long for, something we trust, and something we look for. And, as of now, it’s still irreplaceable.
Will the Metaverse Change the Retail Industry?
About a year ago, I wrote about the Metaverse as I believe it’s going to play a crucial part in the future of our shopping experiences. I still believe that, but for now, the Metaverse for retail is still a gimmick. It’ll get there in the sense of recreating the missing experience of in-store shopping online. But it will take time, and for now, brick & mortar businesses are still growing and expanding regularly.
So if you’re a retailer, invest in eCommerce, but do so not at the expense of your physical presence and customer experience. We won’t give up on that experience so fast.
Shai Raiten is the CEO and Founder of Weezmo, part of Nayax’s commerce solutions. Shai enjoys gourmet food and fine wine but, most of all – he loves taking his son to soccer games.