Early indications are that retail sales across the world have been hard hit by consumers reducing their spending in 2020 due to the unparalleled economic uncertainty caused by the onset of the Coronavirus pandemic. But the headline figures mask a sizeable shift from physical in-store purchases to online transactions in almost every geography as more people worked, studied and shopped from their homes.
Overall growth rates may not reach 2019 levels but indeed haven’t stalled. Statistics compiled by eMarketer and Insider Intelligence in June 2020 suggest that global retail eCommerce sales growth will decelerate to 16.5% in 2020, down from 20.2% the year before. Before the onset of COVID-19 eMarketer estimated that global eCommerce would expand 18.4% YoY to reach US$4.1tn of sales, but later cut its forecast by 2% points and US$191bn. The shortfall attributed to consumers in two large markets (India and China) which already supported a large proportion of online sales, reducing their overall eCommerce spend.
Pandemic fuelled online spending has seen the volume and value of certain categories of online sales rocket in 2020 despite consumer confidence dampened by fears around job security, incomes and national economic outlooks. With many shops and supermarkets closed or limited by restricted capacity due to social distancing rules, online sales of cleaning supplies, personal hygiene, and food (both groceries and takeaways), consumer electronics and appliances, toys, books, games, footwear and clothing have surged over the last 12 months, alongside those of fitness and wellness goods, furniture and home décor products.
The US witnesses a 40% growth
While China and India may have slowed, eCommerce activity in other parts of the world appears to have picked up markedly. Digital Commerce 360 forecasts suggest the value of online transactions in the US alone has grown over 40% year on year to reach US$839bn in 2020, with COVID-19 related shifts in buying patterns estimated to have added an extra US$153bn. Digital sales in the country grew to account for 21% of total retail sales, up from around 16% in 2019 and 14% in 2018. The company has predicted that US retailers will end the year with a collective 77% growth in eCommerce transaction value. Of that pie, Amazon alone will account for almost a third, but the fact that its market share is down nearly 44% on 2019 indicates just how much other retailers have increased their online sales to meet a surge in demand.
IBM’s US Retail Index too indicates that the pandemic has accelerated the shift away from physical stores to digital shopping by roughly five years. It estimates that the first quarter of 2020 saw department store and other non-essential retail sales declining by 25% YoY in the first quarter of 2020 and 75% in the second (a 60% decline expected over the full course of 2020). But whereas online sales of items such as clothing fell, those of groceries, alcohol and home improvement materials grew by 12%, 16% and 14% respectively estimated the company.
Online retail growth in APAC remains strong
Forrester forecasts came to much the same conclusion for the Asia Pacific region, estimating that new buyers have boosted eCommerce sales there due to COVID-19 whilst overall retail values have declined. China’s online retail market predicted to grow 12% during the year, while total sales across online and offline channels will fall by 6%. In Japan, online retail spending is forecast to expand by 19%, South Korea 20%, Australia 13% and India 7% – all offset against falling turnover from bricks and mortar retail outlets. The balance is especially marked in the Asia Pacific because it already has some of the largest proportions of online to physical retail sales in the world. Online spending in China accounts for 24% of total retail sales in the country, according to Statista, ahead of Taiwan (17%) and South Korea (16%).
Newly developed online shopping habits will persist post-pandemic
Evidence suggests that a percentage of consumers who have started shopping online for the first time – and particularly the older generations – will maintain the habit once the pandemic subsides. The Influential Shopper research programme led the Economic Intelligence Unit (EIU), and sponsored SAP examines consumer spending patterns since the start of the Coronavirus pandemic, identifying trends in online spending between different generations and assessing whether those habits will continue once the pandemic subsides.
Based on a survey of over 4,000 consumers in the US, Germany, the UK, Italy and Spain, it found that while overall retail expenditure declined by 9% between the first and second calendar quarters of 2020, online spending increased by 15% on average. Amongst those surveyed, online shopping for essential products such as groceries and cleaning products grew by 78% and 49% respectively, with clothing and consumer electronics up 11% and 10%. The increase in online shopping was most notable amongst the older generations such as Baby Boomers born between 1946 and 1964 (who increased their share online spending as a percentage of the total from 25% to 37%) and Gen X (born 1965 to 1980, up 39% to 47%).
Though those levels are expected to decrease again by 9% and 6% respectively once restrictions on visiting physical stores are eased, online spending levels are nevertheless forecast to remain higher than they were before the pandemic. For many consumers, the shift to digital shopping will prove permanent, found the EIU with six out of ten (61%) respondents agreeing they would maintain some of their online shopping habits after the pandemic ends.
Smartphones support an increasingly large share of eCommerce transactions
A significant portion of those online eCommerce transactions, if not the majority, have been undertaken on mobile devices as smartphone penetration across the globe has continued to expand in parallel with reliable data network coverage and a rise in mobile payment apps and services.
Forrester estimates that over 75% of online retail sales in Asia will be made on smartphones in 2020, for example. The firm also forecasts that smartphone purchases will grow at a CAGR of 13.6% to reach US$2tn by 2024, 80% of the US$2.5tn total. Elsewhere Juniper Research has predicted that the total global value of mobile commerce payments will reach US$3.1tn in 2025, up from US$2.1tn in 2020 after a massive pandemic-driven boost to electronic wallet (eWallet services).
Consumers undertaking those smartphone purchases will use a wide range of different digital payment mechanisms to fund them, and online merchants will need to offer flexible billing options that accommodate all segments of the population. That includes younger people without access to credit/debit cards, and older citizens in emerging markets that don’t have bank accounts and have historically relied predominantly on cash transactions.
To increase the revenue, they make from those hard to reach customers; merchants can use direct carrier billing (DCB) to fund purchases from the buyer’s mobile phone account, for example. DCB offers a fast, convenient digital payment method backed by trusted telcos and mobile network operators (MNOs) with access to millions of subscribers. And working with a specialist payment service provider like DOCOMO Digital helps online sellers quickly establish those telco billing relationships leaving them free to concentrate on delivering online products and services to match growing customer demand.
 IBM’s 2020 U.S. Retail Index Shows Rapid Acceleration of Retail Trends, Yahoo Finance, 25th August 2020
 Groceries and electronics will drive APAC’s online retail rebound, WARC, 22nd September 2020