But… will electronic commerce continue growing?
As consumers go back to in-person shopping, investors ask themselves: was the Covid-19 blow a one-time thing, or will online commerce continue to grow steadily?
The answer is unclear, but it’s safe to say that in the long run, the electronic commerce market will have a lot of room to grow and could increase from the current $3.3 billion to $5.4 billion in 2026.
“It’s believed that the rut caused by Covid-19 won’t flatten future growth of electronic commerce”, says Brian Nowak, a stock analyst who covers the American Internet industry. He sees that electronic commerce will reach 27% of retail sales by 2026. “We have yet to see a roof for electronic commerce’s penetration worldwide”.
Many factors are boosting growth, including:
This means that the electronic commerce boom will likely continue for investors, in such a way that it keeps offering profit opportunities in several businesses, regions, and verticals, especially at a moment at which recent share values don’t necessarily reflect said projected growth.
Adopting electronic commerce is still necessary
Digital commerce growth represents a permanent change in ways of shopping. In fact, Morgan Stanley’s industry model, as well as other data, suggest that electronic commerce will continue to gain traction, even in countries where online shopping is already popular.
For example, in South Korea, thanks to a well-developed payment logistic infrastructure, online sales represent 37% of all retail activity, but growth doesn’t stop there. South Korea's electronic commerce could increase up to 45% in the next five years, boosted by food delivery and same-day options.
In a similar fashion, the US is expected to see a growth in electronic commerce that reaches 31% of sales by 2026, against the 23% representation it holds currently. This is expected to occur as physical stores close and consumers prioritize their well-being.
The boom of electronic commerce during the first year of Covid-19 is easy to understand, but the fact that it continued to grow during 2021 shows a change in actual behavior regarding online shopping”, says Nowak.
Electronic commerce as a percentage of retail sales continues to grow in all regions
New markets and segments to keep in mind
Electronic commerce markets in earlier stages and new segments are also prepared for significant growth. In certain areas of South East Asia and Latin America, for example, electronic commerce could increase by 17% and 20%, respectively. This movement is expected to occur during the next five years with annual accumulation.
As far as segments go, it’s foreseen that electronics, which leads all electronic commerce activity categories, will grow from 38% of retail sales to 45%. Digital sales are also growing in new verticals that include beauty, clothing, and food.
“Although there are headwinds in certain countries and verticals, it’s believed that those obstacles will continue to fall”, says Andrew Ruben, who covers retail commerce and electronic commerce in Latin America.
Advanced technology and a strategic partner are keys to success
Behind the scenes, improvements in all areas, ranging from digital payments to supply chains and fulfillment ability, improve the client’s experience, which boosts the consumer’s diverse behavior even further.
“One of the main differentiating factors for electronic commerce platforms could be the supply chain and fulfillment ability, which could reach an improved client service”, says Gary Yu, who covers Chinese telecommunication and Internet shares, in which food delivery is growing faster than e-commerce in general.
Internet use and the increase in connectivity are also important driving forces, especially in emerging markets where the population is younger and spends more time online than in their more developed counterparts. Consumers in Colombia and Brazil, for example, spend an average of over five hours a day online, which creates a significant opportunity for retailers to reach a new client market.