Retail sales took a massive beating in the months of March and April due to the coronavirus-induced lockdown. However, it started rebounding in May as states began easing restrictions and allowed businesses and stores to reopen. That said, e-commerce was one of the biggest beneficiaries of the coronavirus crisis.
In fact, the retail sector could have further taken a beating but e-commerce saved it from bleeding further. The lockdown saw more people relying more on online orders and delivery services. And with signs of a second wave of coronavirus, it is likely that the traction in online orders will continue.
Pandemic Helping E-Commerce to Flourish
Online grocery shopping made its first appearance in the late '90s and early 2000s. However, it made a bumpy start particularly in the United States, with people still opting for brick-and-mortar stores. Things somewhat started changing after Amazon.com, Inc. (AMZN - Free Report) invaded the retail space and changed the entire landscape.
Still e-commerce has so far accounted for a very small portion of total retail sales in the United States. However, this year is proving to be a game changer for e-commerce not only in the United States but globally. Covid-19 has been a defining event for e-commerce, accelerating the adoption curve significantly.
According to Digital Commerce 360 analysis, e-commerce represented 5.6% of total retail purchases in 2007. By 2019, it accounted for 16% of total U.S. retail sales, and it is projected to grow further this year. This will be particularly because most people have been buying almost all essential commodities including staples and grocery online over the past three months.
E-Commerce to be Driven by Grocery Sales
According to a new report by eMarketer, total U.S. retail sales are projected to decline 10.5% this year, with a 14% drop in brick-and-mortar sales. However, e-commerce is poised to grow 18% (following a 14.9% gain in 2019), which reflects a notable increase in both the number of digital buyers and the average spending per buyer.
Online sales have been driven by a surge in click-and-collect, specifically curbside pickup. According to the report, U.S. click-and-collect e-commerce sales are expected to grow to $58.52 billion, up 60.4% from its initial forecast of 38.6% growth. Moreover, e-commerce is going to be driven by grocery sales.
U.S. online grocery sales reached $7.2 billion in June, reflecting a 9% increase over May, according to the Brick Meets Click/Mercatus Grocery Survey, with growth fueled by increased concerns about COVID-19 and additional fulfillment capacity. The report revealed that 45.6 million households used delivery and pickup services in June to satisfy a larger portion of their grocery needs.
The economy has started reopening but the government is still struggling to contain the spread of the pandemic. Safety measures, like at-home orders and strict social distancing guidelines will continue to exist for at least a few more months now. Hence, more people will rely on online delivery, especially grocery and household staples. Given this situation, it might be prudent to invest in retail stocks that have a strong online presence.
Amazon.com, Inc.is one of the largest e-commerce providers, with sprawling operations in North America, now spreading across the globe. Its online retail business revolves around the Prime program, well-supported by the company’s massive distribution network.
The company’s expected earnings growth rate for next year is 92.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the past 60 days. Amazon has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
eBay Inc. (EBAY - Free Report) operates as an online shopping site that allows visitors to browse through available products listed for sale or auction through each company's online storefront.
The company’s expected earnings growth rate for the current year is 23%. The Zacks Consensus Estimate for current-year earnings has improved 12.6% over the past 60 days. eBay sports a Zacks Rank #1.
JD.com, Inc. (JD - Free Report) through its website offers offers computers; mobile handsets and other digital products, home appliances; automobile accessories; clothing and shoes; luxury goods including handbags, watches and jewelry, furniture and household products; cosmetics and other personal care items.
The company’s expected earnings growth rate for the current year is 20.2%. The Zacks Consensus Estimate for current-year earnings has improved 76.1% over the past 60 days. Jd.com carries a Zacks Rank #1.
Sally Beauty Holdings, Inc. (SBH - Free Report) is an international specialty retailer and distributor of professional beauty supplies. It is among one of the largest distributors of beauty products in the United States.
The company’s expected earnings growth rate for next year is 77.7%. The Zacks Consensus Estimate for current-year earnings has improved 34.9% over the past 60 days. Sally Beautyholds a Zacks Rank #1.
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