This week, I can’t but help but notice that there might be good tidings in store for online commerce. As a wise editor once told me, “Follow the money, son, and you will find the story.” My forecast for sunny skies in the world of ecommerce is extrapolated from some of the data shared by the likes of Shopify, Square, and Uber. While the overall revenues for Uber slumped and the losses mounted, Uber Eats — the company’s on-demand grocery delivery service — saw 54% growth during the first quarter of 2020, ballooning to $4.7 billion. It is easy to imagine that, during the second quarter of the year, this momentum could build further.
Uber Eats is about 20 percent of the American market for meal delivery services. The online research company Second Measure found that, by the end of March 2020, meal delivery services saw year-over-year growth of 25%. DoorDash has about 42 percent of the market now. “An analysis of U.S. consumer spending at 72 delivery companies reveals that the industry’s year-over-year sales have increased 78% as of March 29,” Second Measure noted.
While the onset of the pandemic pretty much pummeled all companies, things are looking good for Shopify and Square, two major enablers of online commerce. In a series of tweets, Shopify COO Harley Finkelstein point out that between March 13 and April 24, the number of consumers who bought something for the first time “from any Shopify merchant grew 8% and from merchants, they’d never shopped at before by 45% compared to the six-week period immediately prior.” During the same period, he pointed out that the “new stores created on Shopify grew 62%.”
While Square had a losing quarter, the company has seen a considerable jump in the number of customers signing up for its services thanks to a sudden need for curbside pickup and local delivery in this forced transition to contactless commerce. “A lot of these sellers wanted to get online and wanted to sell online, but just didn’t make the time to do so. So this was kind of a forcing function to show them all the benefits of being online,” said Jack Dorsey, Square CEO, in his call with investors. “I think what that ultimately does is they will have a lot more attention online as the offline comes back and be much stronger businesses.”
The optimist in me believes that the change will be lasting. Now, I am well aware of the potentially long and painful recession looming. I am also aware of the unemployment numbers. However, I am mindful that the economy will slowly, eventually regain a sense of normalcy. The downturn will take out inefficient and debt-laden companies — we have already seen venerable brands such as Neiman Marcus and J. Crew file for bankruptcy. Some fashion and luxury brands are starting to go out of business. John Varvatos, for example.
More of these companies will fail, not because they can’t design fresh and exciting products, but because they are saddled with retail locations — and future survival will depend on data, analytical intelligence, and ability to be resilient and adaptive. I see this as an opportunity for a different class of companies to emerge. This sudden clamor for online might bring good cheer to many direct to consumer brands, and there are many of them.
“We expect the online share of fashion and apparel in Europe and North America to increase by 20 to 40 percent during the next 6 to 12 months,” consulting giant McKinsey & Company recently pointed out in a research report outlining the prospects of the fashion business. The offline retail experience will be fraught with insecurity and mistrust for some time. And behaviors learned today are likely to stick.
Whether it is ordering groceries online, getting food delivered via Uber Eats, contactless commerce, or simply working from home, we are not going to forget these lessons we have had to learn so quickly. The real question is: How much will we remember about life before all this? How much of the change will be permanent? No one knows for sure, but all seem to agree that the “new normal” will fast become the “normal.”
I was recently reading about how an earlier epidemic — the 2003 SARS crisis — changed society, and there are a lot of parallels to our current experience. That event set the stage for the Chinese e-commerce boom. In a retelling of that 2003 crisis, Digital Commerce 360 writer Ker Zheng outlines the example of JD.com. During the SARS crisis, the company — which was a chain of retail electronics stores — saw most of its stores shutter, and they were forced to post their offers to chat groups in QQ, a messaging service owned by Tencent. JD.com posted links and messages to other forums. It wasn’t long before JD.com went all-in on e-commerce.
Alibaba saw a similar interest and demand on its B2B focused platform. It decided to launch Taobao, an e-commerce platform that was focused on consumers. The company had to confront SARS within its employee ranks, and it was forced to maintain its teamwork from home. Taobao now has 600 million customers, and JD.com is worth over $60 billion. Web Smith points out that, today, online commerce in China “is at 36.6% penetration while America lags at 11.2%.” When I read those numbers, I see an opportunity for online commerce.
Could it be that one of these companies that are fresh off a growth spurt will morph into the new superheroes? “The plague sweeping the world has turbocharged the growth of the internet and catapulted us into the future,” Michael Mortiz, a partner at Sequoia Capital, wrote in his column for The Financial Times. “In the space of March 2020, many businesses fast-forwarded to 2025.”
Originally published as my newsletter, Near Future on May 10, 2020.