Data Scout is Localogy’s series that curates and draws meaning from third-party data. Running semi-weekly, it adds an analytical layer to the industry data that we encounter in daily knowledge building. For Localogy original data, see the separate Modern Commerce Monitor™️ series.
The last 90 days have clearly been transformative for local businesses. And unlike most uses of the word “transformative” in tech circles, this hasn’t been positive. But in our ongoing SMB silver-linings construct, the question is if this period will instill SMB tech adoption that’s positive and permanent.
As we examined yesterday, one of those areas is e-commerce functionality and logistical support. That’s not just typical ordering, transactional and shipping capabilities, but other flavors of e-commerce that have experienced forced acceleration. We’re talking order-ahead and curbside pickup options for SMBs.
Besides the anecdotal evidence all around us, (and financial performance of e-commerce players like Shopify), Localogy’s Modern Commerce Monitor survey supports these sentiments. Specifically, 40 percent of businesses want to sell more online and 41 percent want to be more nimble and adoptive.
With that backdrop, eMarketer is out this week with new data that support the notion of an ongoing impetus for eCommerce adoption. Specifically, the firm projects 18 percent year-over-year growth in eCommerce sales in 2020, bringing the total to $709.78 billion or 14.5 percent of U.S. retail sales.
Overall, total U.S. retail sales will drop 10.5 percent according to eMarketer, leaving the 2020 total at $4.894 trillion, which is equivalent to 2016 levels and steeper than 2009’s 8.2 percent drop. Physical retail is the weighing factor, falling 14 percent to 4.184 trillion, only slightly offset by e-commerce gains.
If you combine the growth in e-commerce with the deficit in physical retail (a net loss), it supports the above acceleration of e-commerce integration for SMBs. In other words, the driving factors for adoption are both carrot and stick. But based on offline revenue proportion, it will be more stick than carrot.
That severity and duration of physical retail’s deficit could also drive the degree of SMB eCommerce adoption. Because the pain will be felt deep and long, there’s less chance that SMBs will eschew necessary digital transformation while riding out a short-duration storm. eMarketer projects a two-year recovery.
The good news is that SMBs forced to adopt digital tools as a survival imperative will end up stronger in the long run. In other words, as things return to normal, they’ll be more digitally-adept in subsequent ‘normal’ times than they’d ever be in an alternate universe where a pandemic never happened.
Where this opportunity falls is SMB Saas players who can get local merchants up to speed. We’re seeing a race for that opportunity as the usual suspects (Google, Yelp, Shopify) pivot fast to get the right tools into SMB hands. They’re motivated at least partly by long-term relationships and sustained adoption.
As a side note, the local media & commerce industry is fond of citing e-commerce’s “10 percent” of U.S. total retail spending. This figure is often invoked to underscore the value and scale of offline commerce versus online. We’ll have to start saying “14 percent” instead of “10 percent”… at least for the time being.