Retail consultants with McKinsey & Co. estimate that e-commerce as a share of U.S. retail spending jumped from about 16 percent in 2019 to more than 30 percent in the first quarter of 2020—a leap equivalent to 10 years’ worth of growth in just three months.
That growth is also upending consumer habits. McKinsey reports that three-quarters of shoppers have sampled new retailers or brands during the pandemic, and 60 percent of those consumers said they would probably stick with those new companies after COVID-19 fades from the scene.
Brick-and-mortar businesses have been forced to adapt quickly. “We saw five years of projected growth in pickup and delivery in five weeks,” Walmart chief customer officer Janey Whiteside told the National Retail Federation (NRF).
Some businesses had to stand up new e-commerce operations seemingly overnight. NRF reports that Tractor Supply Co., a supplier of home and agricultural goods, launched its first mobile app, curbside pickup, and delivery during the pandemic.
Others sped up existing plans: Gap Inc. opened a new distribution center two months sooner than expected, while Lowe’s implemented curbside pickup almost a year early.
“The time horizon in which we make decisions, act, take risks and launch products to market has shrunk from months to weeks now,” said Farhan Siddiqi, chief digital officer of grocery operator Ahold Delhaize.
Remaking physical retail brings a long list of logistics challenges as well. According to commercial real estate firm CBRE, 2020 holiday spending is expected to result in more than $70 billion worth of returns, about three-quarters higher than the average of the previous five years. That translates into dramatically increased reliance on third-party shipping and logistics companies, squeezing their capacity.
Underlying all this change is a dramatic reduction in foot traffic to storefronts: Analysts estimate that Black Friday visits by in-store shoppers were down more than 50 percent compared to the year before. That leaves retailers wondering how to best position their real-estate footprints, or whether to keep them at all.