ALEXANDRIA, Va.—April saw online sales explode worldwide, according to ACI Worldwide, a universal payments company. The general retail sector saw a 209% jump in global e-commerce sales last month compared with the same period last year.
With physical stores shut across most of the U.S. and Europe in April, e-commerce provided retailers a way to make up for the loss of brick-and-mortar sales. However, retailers have run into several issues as they work to keep up with online demand.
For one, e-commerce sales are known to result in a higher volume of returns. Some industry estimates are return rates as high as 30%. For another, factory shutdowns in Asia and shipping slowdowns everywhere have impacted retailers’ efforts to meet customers’ needs.
Still, some brick-and-mortar retailers that have long enjoyed strong sales are suffering in the increasingly digital world, reports Business Insider.
Prior to the pandemic and lockdown, those retailers competed by offering an experience that couldn't easily be replicated online. For instance, dollar stores, such as Dollar General, Dollar Tree and others, typically use deals, discounts and the thrill of a treasure-hunt shopping experience to keep customers coming back. Many of the retailers relying almost entirely on in-store sales saw business dry up immediately due to enforced store closings and a limited online offering—or none at all—to fall back on.
In the short term, this means an immediate hit on sales. But analysts say even as stores begin to reopen, it is the long-term impact of the pandemic that these retailers should be concerned about. Some shoppers may hesitate to visit stores and will switch to digital options permanently. Plus, the specter of a possible second wave of COVID-19 infection puts stores without a strong online presence at even greater risk.
In the past, off-price stores and dollar chains had defended their lack of a strong online presence by highlighting the simplicity of their business model.
“There was some justification in this because online selling adds complexity and cost and can erode margins. The continuous positive results from players like Primark and TJX [the parent company of TJ Maxx] justified their positions," said Neil Saunders, managing director of GlobalData Retail.
But the coronavirus crisis has changed that narrative. “In the short term, not being able to transact online has severely damaged brands without an online presence,” he said. “Their sales have simply faded away, and there is no means by which they can capture some of the demand that still exists. Potential customers have also diverted to competitors."
Photos of lines outside stores as they reopen in the U.S. this week indicate that some shoppers are happy to resume their former shopping habits, but analysts say this won’t be true of everyone. Many customers will continue to be cautious and avoid stores, especially if they are in high-risk groups or are reluctant to wear a face mask or worry about social distancing measures.
NACS has compiled resources to help the convenience retail community navigate the COVID-19 crisis. For news updates and guidance, visit our coronavirus resources page.