The Failed Dream of E-Commerce: In the Last Five Quarters, Online Retail Has Lagged Behind, and Shares of Online Retailers Are Plummeting

Although e-commerce continues to grow rapidly, physical stores are still holding up well compared to online retail outlets, as many people still prefer the shopping experience in stores where they can see and try products before committing to a purchase.

How many times have we heard from someone or been the ones talking about how the pandemic would forever change the way consumers shop? Everyone who thought that e-commerce would destroy traditional retail because customers would enjoy the online shopping experience and that this trend would continue after the pandemic, with physical sales becoming obsolete… They were wrong.

In the last five quarters, online growth has lagged behind the growth of the overall retail industry, and in some categories, such as clothing, the percentage of sales made online has returned to the level it was at before the first case of coronavirus infection.

Old habits are hard to break

– The S&P 500 fell 25 percent in the first nine months of this year, but stocks closely tied to e-commerce lost even more value. Amazon plummeted 32 percent, wiping out half a trillion dollars ($500 billion) of its market value. Shopify lost 80 percent of its value, while shares of European online retailers Asos Plc and Boohoo Group Plc fell by more than 70 percent – said Milan Horvat, CEO of FIMA Plus.

Based on the data provided, we can conclude that the pandemic only temporarily (and forcibly) pushed consumers to shop from home. It seems that many ‘analysts’ predicted bad news for physical sales without considering the restrictive measures that limited most things that were previously quite normal, and that they actually did not want to get rid of.

Yes, it was great to wear sweatpants and a shirt during online meetings and order products over the internet, but some experiences are simply irreplaceable. No one can convince us that a tomato is fresh unless we touch it at the market, and we always want to smell a leather jacket before we spend a substantial amount of money on it. Rituals remain the same despite the pandemic, and the numbers confirm this.

Global retail is expected to reach $29 trillion in 2022, representing an increase of 4.7 percent annually. This follows a jump of 12.1 percent from 2020 to 2021 when total retail rose from $24.7 trillion to $27.7 trillion.

The figures for global retail in 2021 actually far exceeded market expectations. Experts predicted that total retail would rise to around $25 trillion. Additionally, retail projections from 2022 onwards indicate a continuation of the positive trend and growth. The global growth rate of the retail industry is set at an average of 4.14 percent from 2022 to 2026, according to eMarketer data.

Physical interaction with the product

Horvat also quoted Wendy Wood, a professor of psychology and business at the University of Southern California, who believes that ‘people have underestimated the impact of adopted habits.’ We learn habits throughout life and adopt them through experiences, and eventually, they integrate so much into a certain life context that they become almost automatic.

When social distancing eased and crowds returned to their routines, the habits associated with them returned as well. This is part of the reason why millions of people around the world are returning to shopping malls, Horvat said.

We should not be surprised by the return of such habits. The ability to physically interact with a product before purchase, especially with personal items like clothing, cosmetics, furniture, or groceries whose quality and freshness must be checked.

Additionally, goods can be obtained immediately instead of waiting for delivery. Customer service (with which we have at least once had a bad experience) is bypassed because there is the possibility of direct conversation with sales representatives, delivery costs are avoided, and the return of unwanted products is circumvented.

Shopping in stores is an experience that many people enjoy, often with spouses or friends and in combination with other activities such as dining or enjoying good coffee. It is hard to believe that someone enjoys opening delivered packages and ordering food through an app more, and even harder to consider that such a thing will become more attractive than physical shopping.

– People are, besides rational, emotional beings; we need social contacts because we are individuals connected in social communities. COVID-19 has changed us, but we still do not know how much and in what ways – concluded Horvat.