FNHI - The Post-Pandemic World Will At Least Have Plenty of Sunshine
Unsurprisingly, consumers turned to online shopping more than ever before as they faced lockdown measures imposed by the governments. The already existing trend gained an even stronger momentum. April being the first full month of COVID-19 restrictions saw a digital revenue outpacing all previous years and months as Retail Dive reported.
With overall retail sales plummeting 16% year over year due to store closures, non-store sales, mostly conducted through e-commerce, rose 28%. Their piece of the pie is growing as they captured 19% of overall retail sales, which is an increase of the previous two year average of 12% that was estimated by Wells Fargo Economics Group. ?And even as lockdown measures ease, this trend is bound to remain as shoppers remain wary.
Traffic was up 30% year over year and 15% month over month; conversion rates were up 22% year over year and 18% month over month. Social media also delivered, bringing 89% more traffic to retail sites compared to April 2019, according to that report. Facebook (NASDAQ:FB) is also boarding the e-commerce train as along with Instagram rolls out Shops that turn business profiles into storefronts.
But the costs of e-commerce are high as the pandemic also revealed its weak spots.
Surging sales came at a cost of profits
Amazon (NASDAQ:AMZN), the ‘winner’ of the pandemic when it comes to sales, had to pay quite a cost for this title as the entire forecasted profit will be spent on COVID-19 related costs, not to say wiped out. Its CFO recently showed uncertainty regarding when will its famous Prime shipping resume and with Amazon dramatically cutting their service level and quality, sellers are everything but pleased.
Target (NYSE:TGT) also saw its biggest digital sales jump as they skyrocketed 141% during its latest quarter but also at a cost. Moreover, profit fell not only due to supply chain and labor disruptions but because bought mostly weaker margin essentials as opposed to higher margin products as they put fashion aside.
Walmart (NYSE:WMT) didn’t run into that level of profit trouble in its first quarter, although the company acknowledged that it couldn’t avoid a hit to margins and bottom line from the period’s ballooning online sales. Other retailers such as Home Depot Inc (NYSE:HD) are also seeing surging online orders and curbside pickup resulting first quarter net sales increasing 7.1% to $28.3 billion but net income paying the price as it dropped 10.7% to $2.2 billion and its operating income fell 8.9% year over year to $3.3 billion. But unlike Amazon which received a lot of bad press, Home Depot took care of its workers and Walmart even took in all those from the dead restaurant and hotel industry.
E-commerce limitations revealed
E-commerce has its limitations but consumers are coming to terms with its limits such as the pain of returns. But there are also serious concerns about the environmental impact — from the excessive packaging to the need for delivery that spikes emissions and contributes to pollution. And some retailers just need physical locations to market their customers regardless of all the tech perks. Simply put, COVID-19 has taken the magic out of e-commerce.
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