Trends: Clicks Not Bricks – The Rapid Growth of E-Commerce

14-04-2020

 

In just the past few decades, online shopping has gone from non-existent to a multitrillion-dollar industry. Driven by the rapid expansion of internet connectivity and mobile technology, online shopping - in all corners of the world and across all age groups - is increasingly popular.

In the past months, the unfortunate spread of the novel coronavirus has caused governments to introduce social distancing measures and to order physical shops to close. This has been a boom for online purchasing as consumers increasingly rely on online shopping.

A study recently published by IPSOS shows that 50% of Chinese and 31% of Italian consumers are using ecommerce ‘more frequently’ due to coronavirus. Similarly, in the United States the pandemic has prompted retail giant Amazon to seek to recruit an additional 100,000 staff in order to meet the already visible surge in demand. Instacart, an on-demand grocery startup, plans to 300,000 "full-service shoppers" in North America over the next three months, more than doubling the company's current workforce of full-service shoppers.

The Current State of E-Commerce Globally 

Although online shopping has grown rapidly on every continent, leading regions/countries include Asia, North America and Europe. Africa, with 400 million internet users, represents one of the most digitally connected populations in the world, presenting enormous potential for e-commerce which is starting to take hold in the region. 

China represents the largest e-commerce market globally, with online shopping accounting for more than 36% of retail sales in the country. China alone is responsible for more than half of all ecommerce sales worldwide with their $1.934-trillion ecommerce market representing 54.7% of total global ecommerce sales.

 Source: EMarketer.com and Oberlo

 

The Discount Sector Escapes E-Commerce’s Effect on Physical Shops

Although e-commerce has forced many physical stores across the world to permanently shutter their doors (with the US alone announcing more than 9,300 store closings last year), this doesn’t seem to be the case for discount stores. The discount sector is showing signs of growth in physical stores. Big discount retail chains like Dollar General, Aldi and Five Below expanded this year, while their higher-end counterparts continued to close stores.  

According to research carried out by the Pew Research Center in 2018, this is due to the fact that the average wage in the US has about the same purchasing power it did 40 years ago. As a result, this has forced a lot of consumers to become more value-savvy. Beyond money-saving, retail private labels have been prospering — which is another reason why consumers are showing increased interest in discount items. For many consumers, this is also a reaction to the 2008 financial crisis.

Environmental and Social Impact of Online Shopping 

2013 study from MIT suggests that, while dependent on a variety of factors, online shopping can have a lower carbon footprint than traditional, in-store shopping. The main parameter influencing the carbon footprint is the customer’s location (urban vs. suburban) and their choice of transportation (personal car vs. public transport).

Online retailers are coming under increasing scrutiny to monitor and disclose information related to the products they sell. A recent report from Human Rights Watch highlighted that certain online retailers are starting to take responsibility for their own-branded products. However, they only account for a small percentage of sales and the large range of products they sell may make it difficult to extend sustainability requirements.

Besides disclosing more information on the product they sell, online retailers will also be responsible for ensuring proper working conditions in their supply chains, for example in their warehouses.

How Safe Is It to Buy Products Online?

Online shopping is convenient but it poses certain challenges for product safety. Due to the uncontrolled nature of online marketplaces, a wide range of non-compliant and unsafe products are available. To deal with this, a growing number of European and international initiatives will push online retailers to comply with additional rules and guidelines. 

What Does This Trend Mean for amfori Members?

As our members are largely acting within the consumer goods sector, they will be increasingly impacted by this trend. Coronavirus may boost the e-commerce industry further as consumers become accustomed to purchasing goods online. Retailers that want to succeed will need to adapt their online presence and build logistical capacity.

 

Read the other articles in this series: 

Trends: Climate Activism and Green Politics on the Rise

Trends: Financial Sector Shifts to the Climate Crisis