It would be an understatement to say that 2020 was an unpredictable, tumultuous year, unlike any we’ve ever seen before; with uncertainty for individuals and businesses alike. But now we are well into 2021, and with a roadmap out of the pandemic, it’s time to take a look at how the eCommerce and online retail industry fared during 2020. We’ve already delved into the data of peak 2020 and how the pandemic impacted eCommerce, but how did market trends and consumer behaviour differ in 2020 compared to previous years, what was the pandemic’s role within that and what does it mean for eCommerce in 2021? Let’s take a look.
As you can see from the graph, the first 3 months of 2020 reported a fairly low year-on-year (YoY) growth for all online retail. With a 5.94% increase in January, 6.21% in February and 3.01% in March [1]; 2020 began with a relatively low growth percentage compared to 2018 and 2019.
Trending below the last year two years, particularly in January, 2020’s slow growth start could be associated with a post-peak dip and restricted finances that many consumers experience after the festive months; choosing only to purchase essentials items during that time. It could also be associated with a consumer effort to support highstreet and local businesses. With highstreet stores facing pressure about their future – even back in early 2020, consumers may have chosen to purchase from smaller companies in person rather than online giants.
As you are well aware, the whole world underwent a huge shift at the end of March and beginning of April when the global coronavirus pandemic took hold; and online retail was no exception. With the closure of non-essential retail, government guidelines urging the public to stay at home, and the widespread panic that occurred throughout the country, not to mention the entire world, consumer behaviour and purchasing habits changed. As you can see from the graph below, April 2020 reported an incredibly high YoY growth percentage for all online retail; 43.37% in comparison to 13.34% in April 2018 and 5.2% in April 2019[1]. It’s safe to say that this unseasonal peak – often referred to as 2020’s first peak – was directly impacted by Covid-19 and the economic, social and commercial changes it created.
As the restrictions remained in place and became more severe over the following months, the first peak of 2020 continued throughout May and into June. Consumers continuing to purchase their essential and non-essential goods online due to highstreet retail being shut is likely responsible for the high growth percentage, along with the closure of the hospitality sector and inability to travel safely for trips and holidays, freeing up more disposable income.
Q2 of 2020 saw a slight and steady decline in YoY growth percentage figures compared to previous months, with July reporting a 50.53% increase in July, 48.47% in August and 46.87% in September[1]. Of course, these growth figures are still exceptionally high considering the usual decline in the summer months, and the unmatched YoY growth recorded within these months compared to previous years is likely due to the new purchasing habits that consumers formed during the previous quarter. However, the figures are slightly lower than that of the previous months; this could be due to restrictions being eased slightly, allowing for retail to open back up, the Eat Out To Help Out scheme that was introduced in August, and the ability for consumers to go on holiday, be that in the UK or abroad.
November is the first instance since March that the 2020 YoY growth figures drop below that of the YoY growth percentage of previous years, despite still reporting a 20.97% growth[1].
2019 saw a significant uplift in online sales growth due to the success of Black Friday and Cyber Monday sales and promotions, with particular growth within the Electrical sector reporting a 42.58% YoY growth[2]. The Black Friday success continued in November 2020 and was even boosted by the new-found online buying habits of consumers thanks to the pandemic; reporting a 32.17% growth in the Electricals sector[3].
So, what does this mean for 2021?
The pandemic has caused a huge shift in consumer purchasing behaviour, with 46% of UK consumers reporting to have purchased a product online in 2020 that previously they had only purchased in store. But is it here to stay? 32% of consumers expect to continue to purchase online after lockdown restrictions, and that number rises to 40% for consumers in the age bracket 45-55[4]. So it is safe to conclude that at least a third of all UK consumers are likely to continue their new online buying habits long after the pandemic has gone.
Online retail saw exponential growth throughout 2020, with some categories reporting growth as high as 140%. This, of course, is unlikely to allow for sustainable growth at that level in the long run, however the start of 2021 is showing great promise for Q4 to be a profitable, high growth quarter for the eCommerce industry.
When discussing how eCommerce will be impacted by the Covid-19 pandemic in 2021, Andy Mulcahy, Strategy and Insight Director at IMRG posed the idea that many retailers are likely to prioritise ‘digital transformation’ in 2021 to cater for the changing consumer behaviours[5]. So, although it’s difficult to predict what the rest of the year will look like for the eCommerce sector, and YoY comparisons are likely to become difficult and problematic as we begin comparing ‘lockdown data’ to ‘normal data’, it’s safe to assume that online retail will still be at the forefront of both consumers and retailers minds.
Ecommerce has been adopted by more people than ever in 2020 and it’s likely that a large percentage of those new consumers will continue to purchase that way, even after the pandemic subsides. Ecommerce has taken a great leap forward in it’s inevitable journey towards taking more and more market share of retail spend from the high street, and we predict that a good percentage of that is here to stay. As you can see from the graph above[6], internet sales as a percentage of total retail sales has been reporting an upward trend over the last 5 years with a considerable jump in 2020, and we expect that consumer buying behaviour will continue to push that trend higher and higher. To echo Andy’s comments, now is the time to embrace digitally focused retail experiences and capitalise on the progress that has been driven by the coronavirus pandemic.
What are your thoughts on where eCommerce is going in 2021, how has your business been impacted, and do you think the growth is here to stay? Comment below, we’d love to hear your thoughts.
References
[1] – IMRG Capgemini Digital Dashboard
[2] – IMRG Capgemini ‘Sales Index – November 2020‘
[3] – IMRG Capgemini Digital Dashboard
[4] – Retail Economics ‘Outlook For UK Retail and Leisure‘
[5] – Andy Mulcahy, Strategy and Insight Director, IMRG ‘Retail Data Show Webinar 18/03/2021’
[6] – Office For National Statistics ‘Internet Sales as a Percentage of Total Retail‘
