Shoppers may be back at the mall, but e-commerce providers are betting consumers will keep a firm grip on their digital shopping carts as pandemic restrictions ease.
Logistics operators whose businesses boomed during the Covid-19 online-ordering surge say they are maintaining their investments and upbeat outlooks. They expect the rush to online commerce that came at the start of the pandemic has altered buying habits long-term.
“There may be some adjustment, but overall … that leap we took from the pandemic is here to stay,” said
president of e-commerce for DHL Supply Chain North America, a unit of Deutsche Post AG.
The push to online shopping has fueled strong growth at retailers like e-commerce behemoth Amazon.com Inc. as well as bricks-and-mortar store owners like
that have extensive digital capabilities.
U.S. e-commerce sales rose 42% last year to $813 billion from 2019, according to Adobe Analytics, which tracks activity on thousands of websites. The explosion in digital business drove robust growth in distribution operations and spurred millions of dollars of investments in supply-chain technology and businesses like
Radial Inc. and ShipBob Inc. that offer services aimed at meeting online shopping demand.
The growth of last year has moderated, however, and recent reports suggest business is returning to physical stores and restaurants as states lift lockdown restrictions.
Sales in April at nonstore retailers, a category that includes online merchants, fell to $87.72 billion, a 0.6% drop from March on an adjusted basis, but were 14.5% above year-ago levels, according to the most recent estimates from the U.S. Commerce Department.
E-commerce accounted for 13.6% of total retail sales in the U.S. in the first quarter, the same share as during the holiday shopping peak in the fourth quarter of 2020, but down from last year’s quarterly high of 15.7% of retail sales in the second quarter.
The shifting sales patterns highlight the stakes for companies that benefited from the changes in consumer buying patterns over the past year and are now trying to determine how much of the online shopping will outlast the pandemic. One survey of more than 1,000 consumers in late March and early April by consulting firm AlixPartners LLP showed one-third of U.S. shoppers plan to continue buying clothing online, while 25% intend to keep ordering groceries that way.
Online commerce is prompting “a great deal of work building new distribution centers and recalibrating networks,” said DHL’s Mr. Foreman, adding that logistics operators and retailers are investing in information technology and automation to speed up the flow of goods, and are still shifting inventory away from retail stores and toward e-commerce fulfillment.
“We’re seeing a lot of brands start to think about what their long-term strategy looks like… and that change in their business model, that increased e-commerce mix,” said
chief executive of King of Prussia, Pa.-based online fulfillment and technology provider Radial, whose customers include Cole Haan and Ashley Stewart. “Most of the brands that we’re working with have very ambitious growth targets for their e-commerce business.”
Radial’s overall volumes have slipped since the height of the pandemic, Mr. Simpson said. But demand is still up compared with 2019, and the company is opening more distribution centers in North America and in Europe.
Mr. Simpson said several brand executives have told him that although foot traffic in stores is rising, sales haven’t returned to pre-pandemic levels. Stores are still struggling to restock inventory, he said, so in some cases “you can window-shop, but you still need to purchase online.”
At Ship Hero LLC, which provides e-commerce software and fulfillment services through seven U.S. warehouses, volumes fell 5% from April to May.
“It’s the first down month we’ve seen since Covid, except December to January,” after the holiday shopping peak, Founder and Chief Executive
said of the company, which does business as ShipHero. “There is also a big shift in what’s selling, with travel products doing great and pet products staying very strong while apparel, home and baby [products] are weak,” he said.
Even with the lower volume, ShipHero’s online order volumes were up more than 150% year-over-year, he said, and overall business is around two-and-a-half times what it was before the pandemic.
Fort Lauderdale, Fla.-based fulfillment specialist ShipMonk Inc., which spent about $12 million on warehouse automation to meet surging online demand, said e-commerce orders from existing customers have declined recently compared to peak Covid-19 levels.
Still, orders for those clients were more than triple those of 2019, and the company still plans to open more warehouses in the U.S., Europe and Mexico to supplement existing sites in Florida, Pennsylvania and Southern California.
“Once you layer on the addition of 1,000 new brands, our overall volume grows exponentially,” said Chief Revenue Office
Chicago-based e-commerce fulfillment provider ShipBob has added 10 facilities this year, for a total of 24 sites in the U.S. and Europe, and could add up to 10 more by the end of the year, said Chief Marketing Officer
“We see this buying behavior in the U.S. and internationally as the new norm,” he said.
Such adjustments are driving up demand for warehouse space, especially close to big population centers, a trend logistics developers expect to continue even as more shoppers return to stores.
“We’re running out of land for our projects,” said
managing director of global strategy and analytics at Prologis Inc., one of the world’s largest owners of industrial real estate. “I think demand will be durable in our business. The decision to expand a supply chain can take years, not days or weeks or months.”
Write to Jennifer Smith at [email protected]
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