eCommerce businesses saw an unprecedented surge in their sales during the pandemic when lockdowns and social distancing measures were implemented around the world. With most people staying at home and unable to go out shopping, many turned to online stores for their needs — leading to a booming period for eCommerce retailers.
However, it appears as though this newfound success may have been short-lived, with recent data showing that eCommerce sales are now slowing down since its spike in 2020.
Now that the end of the COVID-19 pandemic is in sight, it begs the question – is the eCommerce boom over?
eCommerce Sales Plummet as Consumer Spending Decreased
More and more eCommerce businesses are feeling the squeeze as online spending continues to dissipate. The shift to the post-pandemic era brings a slew of challenges, including the risk of a global recession and financial crises.
This economic slowdown has far-reaching effects, impacting every part of our society and economy. From reduced business budgets to job losses, these difficult times make it hard for consumers to spend money on eCommerce products and services.
According to Forbes, American consumers spent $5.28 billion less on online transactions this year. A recent report shows that nearly all consumers are spending less overall, and around 34% are spending less online.
Rising interest rates and persistent inflation is causing people to cut back spending on many items to still afford the essentials.
Inflation Is Driving Up Supply Chain Costs
Inflation caused by the pandemic and the ongoing Ukraine-Russia war is a growing concern for many businesses, and it’s becoming increasingly difficult to manage supply chain costs as prices continue to rise.
The eCommerce industry has been hit especially hard, with retailers struggling to keep up with the rising cost of doing business.
The Adobe Digital Economy Index found that nearly half of all small to medium-sized businesses have seen an increase in operating expenses due to inflation in the past year alone. This has made it more challenging for businesses to remain profitable while still providing quality products at reasonable prices.
In addition, transportation and labor costs associated with shipping goods have also gone up significantly as a result of inflationary pressures.
eCommerce Shopping Habits Changed Post Pandemic
Another challenge the eCommerce industry must face is adapting to changing consumer behavior. Our economies may be reopening, but consumer spending habits won’t snap back to 2019.
Over the past two years, we’ve seen significant changes in how people live, work, and shop. These new habits will endure beyond the pandemic and permanently changed our values, attitudes, and behaviors.
Despite lockdowns easing, people are still choosing to stay at home. Accenture reports that some product categories experienced increased demand while others saw dramatic decreases in sales. Shoppers are buying more home-related items, such as exercise equipment, household cleaning products, groceries, and pet supplies.
The majority of shoppers are also now turning towards more budget-friendly options and smaller purchases rather than larger items. This is likely due to economic uncertainty and an increase in financial responsibility from many individuals as they navigate through this new environment.
Moreover, customers are also seeking out more convenience when it comes to their purchases, such as same-day or next-day delivery services.
Post-Pandemic Reset Leads to Mass Layoffs in eCommerce and Tech
You might have seen the alarming news of mass layoffs across corporate America. Many believe that these headline-grabbing layoffs from major companies are a warning sign of what’s ahead.
According to The Washington Post, what’s really happening is a big reset of the broader economy.
After decades of rapid growth and two years of record-high profits brought in by the pandemic, tech and eCommerce companies became more ambitious.
Many executives went on a growth frenzy, eager to use the pandemic as an opportunity to make more sales and profit. Companies like Meta, Shopify, Shopee, and Amazon expanded like it was going to be a forever pandemic.
But their projections were way off. They grossly overestimated their growth trajectory, overhired workers, and failed to anticipate consumer behavior would go back to normal after COVID restrictions were lifted.
With expenses mounting and growth stagnating, they needed to cut costs dramatically. Layoffs were an easy short-term solution. Slashing off thousands of employees was these companies’ way of bracing for slower growth and the possible recession ahead.
Shopify laid off roughly 10,000 workers, or 10% of its global workforce. Shopee initiated large-scale layoffs in 5 Asian countries, and Amazon is cutting at least 10,000 white-collar professionals in corporate and technology roles.
Is it Really the End?
The big question remains. Are persistent inflation, changing consumer habits, and mass layoffs signs that the eCommerce boom is over? Yes and no.
What happened to the eCommerce sector is a classic example of an industry that got too big too fast. Investors and executives rushed business decisions and wanted profits now but overlooked potential risks.
eCommerce is still lucrative, but the post-pandemic reset might finally bring the maturing the industry needs.
You’ll see lawmakers and regulators advocate for more safeguards to stop online fraud and abuses. And investors will demand more transparency and changes to entire business models.
It will be a messy transition, but if economic history is any guide, what eventually emerges could be better for everyone.
The eCommerce boom during the COVID-19 pandemic has been an unprecedented success for online retailers, but this may not last forever. Changes to consumer behavior and preferences, as well as rising production and shipping costs, have made it difficult for many companies to sustain their success in a post-pandemic world.
Companies need to focus on providing better customer experiences and developing innovative products to remain relevant in the future.
Additionally, investing in the right talent can help drive more sales and keep customers engaged.
Want to take your eCommerce business to the next level? Jarvis Cole can help!
It’s easier to save time, find the right people, and fill your available positions faster with Jarvis Cole.
Jarvis is a global leader in eCommerce recruitment and eCommerce hiring services. We have successfully sourced and recruited expert eCommerce professionals for businesses of all sizes, ranging from startups to big corporations. We help you find the right candidate for the job.
Discover the latest eCommerce jobs and industry news by following us on LinkedIn.
Get in touch with us today, and let’s work together to make your eCommerce business the success it should be.