E-commerce has been a threat to traditional retail businesses since the internet was invented. Since the early dot com era, economists and business analysts have predicted that e-commerce would soon become the default shopping method for modern consumers. Although online shopping changed the landscape of American retail, before COVID-19, it hadn’t threatened the existence of brick and mortar businesses completely.
This pandemic is guaranteed to reshape our world in many ways. How it will emerge reformed is anyone’s guess. Here is a look at how e-commerce and traditional retail may interact in the future.
The Birth of e-Commerce
Early on, experts said the internet was a fad. Then they said it would consume our daily lives. The former was proven to be a laughable mistake. The latter grows more and more accurate every day.
Ever since Amazon started making waves, economists have predicted extinction for the commercial real estate sector. However, that extinction never quite materialized. Although e-commerce has steadily claimed more and more of the overall retail market, its growth hasn’t come close to overtaking in-person sales.
In 2007, e-commerce only accounted for 5.1% of sales and in 2019 it represented 16%. Although this is an astonishing feat in a small period, it doesn’t quite forecast the death spiral many analysts believed it would cause. Many companies have been forced to rethink their retail strategy and create multiple sales channels to accommodate customers. But leading up to COVID-19, e-commerce, the relationship between e-commerce and brick and mortar retail seemed more symbiotic and less predatory.
The Impact of COVID-19
COVID-19 has caused an unprecedented disruption in American business that will have lasting impacts on the future. This has dealt a blow to commercial real estate that is tenfold more destructive than anything e-commerce could do alone.
Countless businesses have already gone belly up. Non-essential retail locations have closed down. Without clear direction from the federal government regarding rent and debt forgiveness, it’s impossible to tell how these businesses will rebound in the coming months. The stimulus package will provide some temporary relief, but some businesses will change fundamentally. Ecommerce, on the other hand, has become essential instead of just convenient. Amazon’s stock was up over 25% from the beginning of 2020 in late April, while the rest of the market was in chaos. For the time being, e-commerce is the only thing keeping some companies afloat while others are left to wither.
The Future of Retail
E-commerce may finally become the boa constrictor that swallows the cow – an ugly, yet morbidly fascinating act of nature. However, this doesn’t mean it’s completely over for brick and mortar retail. This disruption will merely catalyze a growing trend in commerce.
The national reaction to the quarantine has proven how fundamental in-person interaction is to our lives. Although there will be a period where social distancing causes e-commerce to dominate the market, eventually the demand for brick and mortar will return as we get closer to a vaccine or herd immunity. The question is who the best position in the market will have to capture the demand as it returns.
Businesses with a strong e-commerce component will likely emerge the victors. They’ll be the ones who suffer the least during this period, and they’ll have the cash on hand to reopen. Some may decide physical real estate is unnecessary and move their focus to digital. But others will be eager to open physical locations as soon as it’s profitable to do so.
It’s doubtful that physical storefronts will disappear completely, but they may likely change hands. New brands will emerge to replace the businesses that couldn’t survive the shift and they will likely be a younger, more tech-oriented crowd.
It’s too early to say exactly how the pandemic will play out in the long run. It’s an economic crisis that is dependent on rapid advancement in medical science. There are so many meaningful variables at play, anyone who claims to know what will happen is delusional. However, some obvious factors indicate a change is coming. Only time will tell whether that change is positive or negative
