In 2011 Marc Andreessenfamously said that “Software is eating the world” (https://a16z.com/2011/08/20/why-software-is-eating-the-world/). He was referring to the fact that every company needs to become a software company in order to prosper in the world.
After Covid 19, we can rephrase Marc Andrressen words in “E-Commerce is eating the world”.
In May 2020 in the UK internet sales represented 32.8% of the total retail sales, compared to 18.8% of May 2019 and 21.4% of December 2019 (peak period for the e-commerce).
The lockdown has exposed to the e-commerce categories of people that were somehow sceptical about the advantage of the Internet commerce, including people over 50s and 60s.
A “tsunami” of first time buyers is a sign that long term behaviour could be changing.
And in addition, sectors (like groceries) that have been behind the trend for the internet sales for the last 5 years have been flourishing.
Online groceries represented in May 11.3% of the total groceries sale, compared to 5.3% in January 2020 and 5.4% in May 20019. “Older customers really did not want to shop for groceries online", Bouyrdcard Nesin, an analyst at Rabobank, wrote in a recent research paper. “It really took a pandemic to get them to start ordering groceries online”.
For household goods, the Internet penetration was 41.6%, compared to 13.7% in December 2019 and 13.7% in May 2019.
Now the big question is: what will happen when life will become normal?
In June, the non-essential shops have been allowed to re-open, but so far, the statistics show a level of footfall around 50%-60% compared to the pre Covid time.
The high street was already struggling before the Covid 19 and the only success stories were about stores able to create an experience for customers. With the new rules about social distancing it will become harder and harder for shop keepers to create the experience that customers are looking for in a day out.
An interesting example is about garden centres. Forward Partners reported in a recent article how visiting a garden centre, a typical day out of London for a family, is now a challenging experience:
Whilst many garden centres have reopened, they are not the same as they were. These changes include:
queues to enter,
social distancing measures between customers and staff,
closure of concessions such as café's,
and stores encouraging customers to make quick purchasing decisions and leave.
Or as one North London garden centre sign put it: "PLEASE BE EFFECTIVE AND DECISIVE WITH YOUR SHOPPING. REMEMBER – WE ARE NOT OPEN FOR A ‘DAY OUT’".
E-commerce players have benefit in the last 3 months not just of an extraordinary increase of revenues (some of them experienced a 500% growth rate compared to the same period of 2019) but also an improvement in the bottom line thanks to a spike of organic growth and a dramatic decline of marketing spending.
However, the most interesting aspect of those companies have bene their ability to manage efficiently the increase in traffic and customers, improve the delivery and hiring massively in a short-term period.
And a flurry of new players is entering in the retail tech. About two third more new stores were created using Shopify in the six weeks to April 24 than in the previous 6 weeks period.
The competition between new entrants in the e-commerce space and established D2C companies could lead to a marketing war that will make Instagram, YouTube and FB richer than ever, but the big winner will be the customers, that will be able to chose among a bunch of amazing e-tailers.