As the Covid-19 pandemic pushed consumers worldwide indoors at the start of 2020, eCommerce saw exponential growth. While analysts and industry experts anticipated slow adoption of online platforms, continued public health concerns enabled small online businesses to grow their holiday season revenues by over 100% year-over-year.
To understand this unanticipated transition and its implications for business owners, I spoke with Andrew D’Souza, CEO and Co-Founder of Clearbanc, the founder-friendly capital and data solution. Since founding Clearbanc in 2015, Andrew has invested over $1 billion into over 3,300 startups, becoming the world’s largest eCommerce investor.
Gary Drenik: In Clearbanc’s “Lockdown: Sales Up” report, you note eCommerce’s response to social change and unrest throughout 2020. What can the data help you predict about eCommerce in 2021?
Andrew D’Souza: Our report found that swift changes in consumer spending that began in March 2020 sustained through the entire year, and now into 2021. eCommerce businesses and their founders could not have predicted the significant shifts they experienced throughout 2020, but ultimately the trend was growth. In fact, Clearbanc-funded eCommerce companies saw an average 54.34% increase in monthly revenues compared to 2019.
While many of us are optimistic about 2021 and vaccine rollout, the future remains uncertain. Still, according to a recent Prosper Insights & Analytics Survey, nearly 47% of adults have changed their shopping behavior because of public health concerns. As global infection rates keep increasing, we expect eCommerce to become the first choice for the majority of consumers.
Drenik: Medical Supplies, Cannabis and Collectibles were all on the rise in 2020. Which consumer categories should we keep an eye on this year?
D’Souza: Consumer purchases last year were representative of 2020 and we expect that trend to continue this year. With more stay-at-home orders being announced, we expect to see medical supplies, including PPE, stay a priority while most of the population awaits vaccine delivery. This includes purchases from health and wellness brands along with telehealth use, which, according to Prosper, over 29% of adults have already utilized since the pandemic started.
We can also expect cannabis and alcohol sales to increase in alignment with lockdown announcements. Similarly, consumers are searching for entertainment alternatives, from new media subscriptions to board games. If vaccine deployment is successful, we also expect to see meaningful increases in event and travel purchasing, which experienced -50.1% and -33.6% decreases in sales, respectively.
Drenik: Small businesses were the biggest eCommerce winners last year. Why is that? Do you expect that growth will continue?
D’Souza: Small businesses are generally more agile and are quick to adopt creative solutions and web-first approaches. They have explored new ways to find capital, promote themselves, and acquire customers throughout 2020. Widespread calls across social media to support small businesses have also bolstered online traffic. Our ‘Lockdown: Sales Up’ report showed that coming out of Black Friday, small online businesses collecting less than $50,000 in monthly revenue saw 150% revenue growth revenues, compared to 20% for companies making $300K or higher per month.
Drenik: How are brands adapting their advertising plans to capitalize on the accelerated shift to eCommerce?
D’Souza: eCommerce advertising in 2020 was very different from the norms of years prior, not just because of Covid-19 but also public discourse. Coinciding with April and May’s lockdowns last year, we recorded Facebook and Google ad spend growth of 24% and 63% YoY. However, the most significant changes were felt when boycotts against Facebook began in July.
Over the next four months, we noticed our customers spent an average of 28.54% less on Facebook, increasing monthly Google ads spend by as much as 112.69%. As society becomes increasingly connected online, brand image and social alignments are crucial to building and sustaining customer relationships. As we move into 2021, we expect these social discourses to keep impacting advertising plans, especially concerning the upcoming US presidential inauguration.
Drenik: Once the pandemic is over, is there reason to believe that consumers will return to in-store shopping?
D’Souza: As public health risks decrease; consumers will be shopping in-store more than they did the previous 10-12 months. Still, we assume the overall increase in eCommerce will continue. Entire generations of shoppers turned to online shopping for the first time during Covid-19 and have come to rely on it for essential purchases.
Drenik: As online shopping becomes the norm, how have pay-over-time models and subscriptions impacted the bottom line for small businesses?
D’Souza: Pay overtime models aren’t new for retail, but they are quickly growing in the e-commerce world as customers shift to buying more expensive products online (Affirm’s January IPO shows just how much the space is growing). And subscriptions have grown quickly as well in the last year, they’re a great way for retailers selling lower cost items to add more consistency to their bottom line. The more solutions that exist for founders to adapt to this new online-first world, the better they’ll be able to reach new customers and grow.
Drenik: Thanks, Andrew, for your insights on eCommerce and where it’s headed in 2021 and beyond.
To see how a quality and accurate data set can be applied to target marketing models and time series forecasting Prosper has partnered with AWS to make their data available via the AWS DataExchange. Included in the data are a series of US signals, leading indicators, predictive analytics and advance privacy compliant marketing models for the US and China:
To read my previous Forbes articles on changing consumer behavior, predictive analytics, machine learning, data privacy and more, please click here.