CHENNAI: The mantra for 2022 really should be: Nobody knows anything. It is amazing how little we understand about how the pandemic has changed our lives and our country. It’s unclear if the US economy is hot or not, or if big cities like New York will be scarred forever. We don’t know if women’s careers have been permanently damaged or if our mental health will be good. The future of our online shopping habits is another unknown. The government recently revealed that the US e-commerce boom during the pandemic is even bigger than it previously believed. But in 2021, this trend has started to recede a bit. Physical stores beat e-commerce last year, and they’re continuing to do so this year. The shopping trajectory on the internet has gone from bananas to confusing bananas.
Today, business executives, retail analysts and economists are trying to figure out how quickly we might transition to a future in which online shopping is the primary way to shop.
Will internet shopping return to something like the fairly flat growth rate of the decade before 2020? Or has the pandemic permanently energized our e-commerce lives?
Don’t expect a definitive answer for a long time, but the next few weeks of clues from Amazon, Walmart and government sales data will give us a better idea. This is not just a corny debate. Our collective buying behavior impacts trillion-dollar companies, millions of retail jobs, and the health of the American economy. Uncertainty about the direction of online shopping is one of the biggest questions currently facing the tech industry and financial markets.
For most of the decade leading up to 2020, Americans increasingly shopped online at a predictable rate. E-commerce sales have grown about 10 to 15 percent a year, according to Census Bureau data, taking a little more out of the money Americans spend in stores each year.
Then internet shopping became hyper, with our online purchases increasing by at least 50% in the first few months after the virus began spreading in the United States, according to recently revised government figures. But last year, shopping in physical stores accelerated and online shopping has since lost ground. For many people, it is a relief to walk the aisles of stores again. High inflation can also cause people to spend more of their budget on essentials that we still buy in droves in stores. Other signs point to a similar picture of internet shopping growth, including data from Mastercard Spending-Pulse, which tracks US shopping, which showed e-commerce sales grew by only 1.1% in June compared to the same month in 2021. In-store purchases increased by almost 12%. None of this is a shock. Of course, we weren’t going to continue shopping online as if it were the spring of 2020. And it’s likely that online shopping is a much larger share of Americans’ spending today than it is. would have been if the pandemic had never happened.
The open question is what is happening now. Are we going to return to the relatively slow and steady growth of online shopping in 2019? Or will the hermetic habits acquired at the start of the pandemic continue to influence our purchases, making this growth even faster? Or maybe even slower?
This is all a major headache for anyone selling stuff, but it matters to us too. Amazon said it had overestimated the sustainability of the online shopping craze and was overspending on new warehouses and other things. The company is shrinking, which is affecting people’s jobs and the communities where Amazon is retreating.