How the Pandemic Is Deepening Consumer Ecommerce Habits

Ecommerce's share of US retail sales is up 50%. Delivery and curbside pickup are becoming the preferred method of shopping for many. Most analysts predict this will become the new normal. 

Interestingly, this may help halt the decline in retail jobs. JL

Harriet Torry reports in the Wall Street Journal:

The pandemic collapsed into three months a process of adopting e-commerce that otherwise would have taken 10 years. E-commerce’s share of U.S. retail sales rose to 16.1% in the second quarter of this year, from 10.8% a year earlier. Three out of four people have tried a new shopping method due to the coronavirus and more than half of all consumers intend to continue using curbside pickup and grocery-delivery services after the pandemic is over. 70% of consumers surveyed intend to continue buying online for store pickup.

Brooke Mallers recently bought a used car online, she uses food and grocery delivery services more and she makes telehealth appointments—new habits that she expects to last long after the coronavirus pandemic is over.

“I’m not sure I’ll ever go into a car dealership again,” said the 58-year-old retired investor in Boulder, Colo. “It was fun to have an experience that’s new and the internet enables.”

The pandemic’s disruptions have transformed how American consumers behave by accelerating their embrace of digital commerce, and the changes are likely to prove permanent, according to businesses studying and adapting to the changes.

A recent survey by consulting firm McKinsey & Co. found that about three out of four people have tried a new shopping method due to the coronavirus and that more than half of all consumers intend to continue using curbside pickup and grocery-delivery services after the pandemic is over. Nearly 70% of consumers surveyed intend to continue buying online for store pickup.

The pandemic collapsed into three months a process of adopting e-commerce that otherwise would have taken 10 years in the U.S., the firm concluded.

The lockdowns, social distancing and other effects of the crisis forced many consumers to try online shopping, medical appointments, yoga classes and tutoring services. And people new to the e-commerce game are “finding out it’s pretty useful,” said Brian Ruwadi, a senior partner at McKinsey.

This spurred businesses to step up their digital services. “You see significant movement on both sides, and that has to result in a significant increase, a fundamental shift in acceleration,” he said of the changes in business and consumer behavior.

“Consumers won’t go back to shopping the way they did before the pandemic,” said Stefan Larsson, the president of Calvin Klein and Tommy Hilfiger parent PVH Corp. “They will go forward into the new normal.”

Mr. Larsson, who takes over as CEO early next year, said that means a continued push into e-commerce. As a result, PVH is speeding up digital investments, including building new data systems and warehouses, he said.

The rapid transition has positioned some businesses to thrive and grow, while others struggle or fail, reflecting the broader economy’s K-shaped recovery. Among the winners are those facilitating the shifts, including online retailers and service providers, technology firms and companies delivering the goods people are buying online. Peloton Interactive Inc. said its revenue more than tripled to $757.9 million in the September quarter. The company is capitalizing on surging demand for at-home fitness equipment, much of it internet-connected like its exercise bikes.

Faltering businesses include those unable to make the transition, such as many restaurants and bricks-and-mortar stores. Retail-store closings in the U.S. reached a record in the first half of 2020, and the year is on pace for record bankruptcies and liquidations, according to a report on the downturn’s severity.

Some pandemic-driven changes in what people spend money on may prove temporary, such as the shift away from activities requiring proximity to other people. With many Americans still shunning air travel and indoor dining, and with entertainment ticket windows still dark from Disneyland Park to Broadway, consumers spent 7.2% less on services in the third quarter than a year before. That left money to boost purchases of goods by 6.9% over the same period. But much of this could reverse once the virus is subdued.

Meantime, the change in how they buy things looks more lasting and spans generations.

“I will never go to a grocery store again in my life because it’s just so convenient and easy” to shop online, said Allan Schilter, an 81-year-old retired accountant in Springfield, Mo.

Mr. Schilter picks up his groceries curbside at Walmart, after ordering them online. “It’s safer; you don’t have to go into the store.”

E-commerce’s share of U.S. retail sales rose to 16.1% in the second quarter of this year, from 10.8% a year earlier and 0.9% of total retail sales two decades ago, according to the Commerce Department.

At Macy’s Inc., e-commerce now accounts for roughly 43% of sales, up from 25% before the pandemic. To meet the increased demand, the retailer has joined with Google Inc. to improve its search-engine results and added same-day delivery for online orders.

“These are new muscles we’ve developed over the last several months,” said Matt Baer, Macy’s chief digital officer.

Emily Kennedy said she is glad the pandemic prompted her to start ordering groceries.

“Being forced into that situation made me realize how much time I was spending every week walking those aisles,” said Ms. Kennedy, president of Marinus Analytics, an artificial-intelligence company. “People are realizing the time they save and the money they save,” said the 30-year old, who lives near Denver. “Once they get it, they’re reluctant to give it back later on.”

Shifts in consumer behavior are driving development of new distribution methods, such as online-only stores, or “dark stores,” where online purchases are gathered by workers for distribution to customers. Shoppers aren’t allowed in to browse the shelves or squeeze the fruit.

Whole Foods Market Inc., which is owned by Amazon.com Inc., opened its first online-only store in Brooklyn, N.Y., in September, part of a strategy to meet increased demand for food delivery. The grocery-store chain and delivery service AmazonFresh have increased overall delivery capacity by more than 160% since March. Whole Foods has increased its pickup locations to all its 500 U.S. stores. The pandemic halted in-store dining, so some stores have repurposed parts of their dining areas as spaces to pack pickup and delivery orders.

The way people pay for things is also shifting in ways likely to last.

A July survey by the Federal Reserve Bank of San Francisco found that 28% of respondents said they are avoiding using cash and using card payments instead due to the pandemic.

The pandemic has spurred the more widespread use of contactless payment methods that eliminate the need to even swipe or insert a credit card. Visa and Mastercard both reported global growth in tap-to-pay or contactless transactions this year. In Mastercard’s third quarter, the company said contactless represented 41% of in-person purchase transactions globally, up from 37% in the second quarter and 30% a year ago.

Consumer habits can change after someone tries a new way of doing things two or three times out of necessity, said Jonathan Silver, CEO of Affinity Solutions, a firm that aggregates consumer credit- and debit-card spending data. And the pandemic triggered dramatic shifts, he said.

One is the move from bricks-and-mortar gyms to home workouts. Beyond buying treadmills and rowing machines, many consumers are also using internet-connected equipment and apps to enjoy online classes and live-streamed group activities.

“I don’t anticipate going back to a gym for years after a vaccine is available,” said Matt Bertenthal, age 37, an attorney at software company Atlassian in San Francisco. Before the pandemic, he used a local gym once or twice a week, spending $110 a month on membership. He stopped going in mid-February amid concerns about the coronavirus.

Now he surfs, uses apps for fitness workouts and rides his bike on his deck using a stationary digital training device three to five days a week. He also uses an app to take virtual bike rides with other people.

“It’s a really fantastic escape,” he said.