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Ecommerce is showing staying power with consumers following the pandemic, leaving room for the growth of more product categories and digitally-enabled ways to shop.
That’s the takeaway from new data released by Adobe Analytics this week that offers the latest evidence to help understand shifts in digital shopping behavior that accompanied the lifting of pandemic restrictions in 2022.
While there is evidence that more people returned to stores in 2022, Adobe found continued growth in several areas of ecommerce that spiked during the pandemic, including grocery and Buy Now Pay Later. At the same time, a slowdown in curbside pickup and uptick in mobile shopping offer a reminder that behavior will continue to evolve.
Here's a look at the data:
Grocery and home furnishings grow
There are signs that consumers are turning online to buy more types of products. Categories like home furnishings and grocery previously struggled to take off in ecommerce, but both saw notable growth in 2022.
Home furnishings grew 10.2% year-over-year, reaching $126 billion in spend. This continued in February 2023, with 12.9% sales growth to $9.4 billion.
Grocery, which saw a surge during the pandemic, saw continued growth of 10.8% in 2022, reaching $86.8 billion. In February 2023, there was even more pronounced growth of 26.7% YoY, driving $8.4 billion in spending.
Not every category saw such a dramatic uptick. Electronics, which consistently has the largest share of ecommerce spend, grew 4% year-over-year in 2022. Meanwhile, apparel fell 3.8% year-over-year.
“Ecommerce demand has remained resilient in an uncertain economic environment, driven in part by lasting pandemic habits where consumers had no choice but to leverage online food and home furnishing shopping services,” said Vivek Pandya, lead analyst at Adobe Digital Insights, in a statement. “Now consumers have embraced the rich ecommerce experiences that made them feel comfortable getting these necessities delivered to their doorsteps, making these categories new growth drivers in the digital economy.”
BNPL still up, curbside pickup slows
The pandemic ecommerce boom also led consumers to embrace new types of digital shopping experiences, from how they paid to how they received items.
In this area, there are also signs of continued expansion. Buy Now Pay Later, which allows shoppers to pay in installments, had a fast rise in 2020 and 2021 amid the ecommerce boom. Expansion continued as a higher cost of living due to inflation left consumers seeking to spread out payments. In 2022, the share of online purchases made with BNPL continued to grow at a rate of 14% year-over-year, while revenue grew 27%.
Adding to evidence of staying power, BNPL is proving to be popular in the categories showing the most growth. In the first two months of 2023, groceries’ share of BNPL grew 40%, while home furnishings grew by 38%.
“The rise of Buy Now Pay Later usage for groceries tells us that consumers are likely making bigger purchases online to take advantage of special promotions and stock up on staples, thus managing living expenses in more flexible ways,” Pandya said. “The strong online growth of home furnishing purchasing is expected to bolster Buy Now Pay Later adoption, given the higher ticket prices in this category.”
Price is also playing a role. According to Adobe’s Digital Price Index data from January 2019 through February 2023, share increased in the cheapest pricing tier for categories such as groceries (35.6%) and electronics (57.1%).
The pandemic also introduced more shoppers to fulfillment methods that blended ecommerce and stores. One of these was curbside pickup, which was a must-have option for retailers amid the health emergency that required distancing. But this practice has seen a slowdown. In 2021, 23% of online orders from retailers who offered curbside pickup used this option. In 2022, it fell to 19%, followed by a further fall to 17% in the first two months of 2023. However, there are still more signs of interest in grocery, which was a prime use of curbside pickup. That category grew 8% year-over-year in early 2023. By contrast, electronics grew only 2%.
Many retailers now have curbside pickup, and that's unlikely to go away. Rather, it is now best considered one of a number of options that retailers are offering consumers who want to have choices, alongside in-store pickup and local delivery.
The return to stores didn't replace ecommerce. Rather, the two channels are now blended more than ever before. As shoppers move across physical and digital retail, they are embracing mobile devices that help to connect the two. Adobe noted that the 2022 holiday season marked a “turning point” for mobile shopping, as a majority (51%) of Cyber Week sales were made using smartphones for the first time. This trend is expected to continue. By December 2023, Adobe expects smartphones to drive the majority of sales every month.
Yet there’s a gap between the largest retailers and smaller retailers in growth. Retailers with over $1 billion in annual sales are driving 38% more visits that result in purchases than retailers making $10-50 million in annual sales. For smaller retailers, share of revenue is also 8.6% lower.
It underscores how there are still plenty of opportunities to expand and improve digital commerce. The pandemic proved to be a great leap forward for retailers introducing ecommerce capabilities, but it is not the end of the expansion.
Trending in Economy
Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.