Digital Evolution of Retail Is Now a Revolution

Industry transformation is typically an evolutionary process. That is not the case for the U.S. retail industry in 2020.

The COVID-19 pandemic transformed U.S. retail practically overnight, as non-essential businesses were forced to shutter their doors and consumers flocked to online shopping channels at unprecedented rates. Online growth that was predicted to take years occurred in just a matter of weeks, with Amazon and Walmart being among the biggest beneficiaries.


According to Feedvisor customer data, predominantly across the U.S. Amazon and Walmart marketplaces, sales of essential and nonessential product categories combined were up 30% in March compared to February*, and have shown a sustained increase of 9% through May. Even with panic-buying now subsided, e-commerce continues to grow, as consumer shopping behavior adjusts to new, digital-first habits.

How did such unprecedented change happen — virtually in real time? With physical store shelves low on stock, and consumers avoiding in-person interactions, COVID-19 expedited consumers’ adoption of and comfortability with online shopping, particularly on e-marketplaces like Amazon and Walmart, where consumers flocked for essential items including hand sanitizer, food, and electronics in preparation of social distancing and working from home.

While unprecedented demand during the early days of the COVID-19 crisis put considerable strain on e-commerce supply chains, it also opened the door for many consumers to a new, convenient and personalized way of shopping. As a result, U.S. e-commerce sales may grow as high as $6.5 trillion by 2023, according to eMarketer.

This rare and unpredictable “black swan” event has now put into motion a disruptive series of events that no one saw coming, and no one can stop. Consumers quickly adapted to a low-touch, digital-first economy, and now there is no looking back. The pandemic will clearly disrupt retail and e-commerce for years to come. However, it is what happens in the next six to 12 months that will set the stage for what will become our “new normal.”

New Foundational Realities

We have been thrown headfirst into the next evolutionary stage of retail — but are consumers, brands, and retailers ready? Will consumer behavior continue its rapid shift to online? Are brands and retailers prepared to react and adapt? Many questions remain to be answered, but several foundational realities have come into focus:

  • E-commerce will move to center stage for many more products and categories
  • Brick-and-mortar retail will undergo a painful reinvention
  • The biggest beneficiaries will be the leading e-marketplaces, Amazon and Walmart, which will become even more dominant than they already are today
  • One key result will be a new online growth curve by category — a new waterline — far higher than pre-pandemic levels, that will reset expectations and forecasts for what can be achieved online

These realities have become the bedrock of the new normal in U.S. retail for 2020 and beyond. They were once forecasted to occur over years, but are now realities to be dealt with in the present.

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Are You Ready for the ‘New Normal’?

To explain the “new normal,” a perhaps unexpected but telling example is the meteoric rise of online food retail.

Before the pandemic, the grocery category was one of the slowest-moving categories to shift online, with e-commerce sales accounting for just 2% of the overall category. After years of innovation and attempts to appeal to consumer behavior, online grocery was showing growth, though on a very small base, and was basically running in place.

That is no longer the case.

Post-COVID-19, sales of essential categories Grocery and Gourmet and Beauty and Personal Care — the latter of which includes health and wellness— were up 91% and 59%, respectively, over the month of March compared to February. Despite panic-buying subsiding, sales of these categories continue to grow, up 36% and 14% in Grocery and Gourmet and Beauty and Personal Care, respectively, in May compared with February — indicating an extended effect on consumer shopping behavior.

This is the new normal, where shoppers have a newfound appreciation and reliance on e-commerce — and not just for essential products but across many categories, from groceries to home goods to electronics and office supplies.

This new normal is built on the presumption that consumers will continue to expand their usage of e-commerce while approaching in-store shopping with skepticism and caution. Recent studies back this up. An analysis by Morning Consult found that nearly a quarter (24%) of consumers said they would not feel comfortable shopping in a mall for more than six months and, according to Technomic, 52% of consumers are avoiding crowds, while 32% are leaving their house less often because of COVID-19. This trend may or may not continue in perpetuity, but the increased reliance on online channels is here to stay.

Establishing the New Waterline for Online Retail

They say, “a rising tide lifts all boats,” and the tide is clearly rising for U.S. e-commerce, as consumers continue to flock online post-pandemic. When we look at recent Feedvisor customer data, we see that total sales across e-marketplaces were up 9% when comparing post-pandemic (May) to pre-pandemic behavior (February). When we look more closely by category, we see how, for example, Clothing, Shoes, and Jewelry sales rebounded, after an initial downward shock, to be up 9% in May versus February. Similarly, sales of Electronics were up 19% over the same period after seeing 0% growth in early April, the last weeks of Amazon’s FBA inventory restriction on nonessential products.

Sales growth in these categories were driven by multiple simultaneous events: easing pressure on the overburdened supply chain; a shift in the consumer mindset, as panic-buying and hoarding abated; unemployment benefits and stimulus checks being distributed; and shoppers pivoting toward nonessential items, like clothing and entertainment.

This 16-week period may not represent a clear trend just yet, but we believe it is setting up a new baseline for what can be achieved online in various, high-demand categories.

If we project the above curves forward for full-year 2020, we predict what is likely to occur, as new baselines are established by category on e-marketplaces. Specifically, we anticipate overall growth of e-marketplace sales in 2020 to increase about 15% in Q3 and between 32%–35% in Q4 compared to the same period in 2019.

  • Without COVID-19, 2020 year-over-year e-marketplace growth was projected to be 17%, based on our historical data and 2020 January and February sales trends — the original waterline
  • With COVID-19, we project year-over-year growth will be between 21%–29%, based on the lasting growth trends we are seeing as a result of the pandemic.

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Welcome to the New Normal: Final Thoughts

There is no longer a debate over whether or not a brand or retailer should sell online. There is no longer a debate over whether or not a brand or retailer should sell via the major e-marketplaces. Rather, the debate lies on which specific strategies and tactics to deploy, how much budget to allocate, which products to offer, how to price competitively, and how to operationalize for success.

Welcome to the new normal: a world where shoppers have a newfound appreciation and reliance on e-commerce; a world where consumer behavior is rapidly adjusting to new, digital-first habits; a world where a new waterline is being established for each category on what can and will be achievable online.