Opinion

Online Retail to the Rescue: A Reality Check on Growth During the Pandemic

It’s hard to believe, but it’s been almost a year since the pandemic hit the United States. Since then, Americans have moved increasingly online for their needs, including shopping. In fact, the pandemic has supercharged e-commerce sales, pushing them from 11.8 percent of sales in the first quarter to 14.3 percent in the third. Now, in the holiday season and with the “Cyber Five” in the mix, it’ll grow even more.

Despite suggestions from Amazon’s critics to the contrary, this growth in online sales doesn’t benefit just one company. It’s driving impressive sales numbers across the board, including in unexpected industries. As more Americans rely on online retailers for their shopping needs, competition has been ignited in e-commerce, with plenty of Amazon’s competitors outpacing it in growth.

In part, this is because in the early months of the pandemic, many brick-and-mortar stores quickly ramped up their digital offerings and saw explosive growth. For example, Target saw its online sales grow 200 percent in Quarter 2 while Walmart’s grew 100 percent. Even Nestlé grew its e-commerce sales by 49 percent and home improvement retailers like Home Depot doubled their online sales in the second quarter.

Amazon, meanwhile, saw its sales grow only 40 percent — a far cry from its competitors’ growth in sales volume.

Despite its comparatively small growth, Amazon still faces attacks by critics who never fail to lob claims of antitrust violations at the business. According to them, Amazon’s sales, profits and creation of 430,000 jobs during the pandemic are bad for consumers and the economy. How more choices, lower prices and good-paying jobs are bad for consumers or the economy is never explained.

These attacks miss the mark and could themselves have unintended consequences that negatively affect our already vulnerable economy.

Online shopping has grown year after year for over a decade as more businesses move online. Every major retailer from Macy’s and Nordstrom has sold its products online for some time. And now, many nontraditional retailers are moving online as well. When the pandemic hit, small and large businesses quickly adjusted their operations to prioritize and grow their online offerings.

This growth in e-commerce was inevitable. Amazon, while it may be the best-known online retailer, faces strong competition from the likes of well-known retailers with marketplaces like Walmart and Target, as well as stiff competition from fully digital marketplaces like Shopify.

In fact, Shopify is giving Amazon an impressive run for its money: Shopify’s sales are likely to equal 40-45 percent of Amazon’s this year, and it saw a 109 percent increase in sales during Q3 alone. Shopify’s third-party sellers also brought in $5.1 billion over Black Friday weekend, while Amazon’s brought in $4.8 billion.

What’s more, investors are betting big that online shopping will remain popular once the pandemic’s over. With Americans experiencing firsthand the benefits of online shopping — more selection, cheaper prices, special deals, free delivery — many have grown more comfortable with online shopping.

And the pandemic has further shown that the line between “e-commerce” and “brick-and-mortar” shopping is arbitrary: Many consumers now buy their products online and pick them up in person (curbside delivery, for example, has proven quite popular with consumers wishing to avoid stores).

So as more and more businesses enter the scene, and as more grow to support those businesses’ logistics, e-commerce will never be “just Amazon.”

Critics seize on Amazon’s size and claim that big is bad. But at a time when economic recovery and hiring remains slow, Amazon’s 430,000 new jobs and $15 minimum wage help everyday American workers and communities can get the very lifeline they need during the pandemic. This growth of jobs and wages provides a critical boost to the American economy.

In addition, by selling both name-brand and independent products, Amazon helps the economy more than we think. Just as mom-and-pop stores can sell their products on Amazon so too can out-of-work Americans looking to sell homemade products. Remarkably, third-party sellers saw 60 percent sales growth during Black Friday alone, and more than 71,000 small- or medium-sized sellers made more than $100,000 selling on the platform during the holiday season.

The economic benefits don’t stop there. Because sales have grown on Amazon, independent sellers have expanded their own production to meet demand, creating nearly 2.2 million more jobs.

It’s ironic that Amazon’s critics accuse Amazon of capitalizing on the pandemic to entrench its size when in reality the critics are the ones using the pandemic to paint a false picture of competition in digital sales. Yes, the pandemic has fueled Amazon’s sales growth the last year. But so too has it fueled the growth of online sales across the entire economy.

If the pandemic has taught us anything, it’s that consumers benefit from having options about where they shop. And as Americans grow ever-more accustomed to shopping across platforms, and mixing and matching online and in-person shopping, all retailers will need to invest in and expand their digital offerings and services. Otherwise, the intensified competition in retail will swallow them whole.

 

Chris Marchese is counsel at NetChoice, a trade organization.

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