before Note, described the potential for a strong online holiday shopping season in 2022, based on early data from several sources. On the one hand, we recognize long-term trends such as more consumers adapting to digitalization and more people working remotely. Both of these trends have led to increased internet usage, where it is more convenient to order online than to visit a store. Mainly, consumers are feeling inflationary pressure and private consumption is softening. However, we believe that this kind of environment may actually help e-commerce more to take market share from total retail sales. This is because price-sensitive consumers may not have the money to shop. Harderbut they are still shopping smarter Search your options and look for discounts over time. All of these are easier to do online than in person. These trends are expected to continue as inflationary pressures persist over the next few months. And some of this behavior may continue in the long run as retailers continue to expand their e-commerce operations in response to consumer needs. In the short term, many in the e-commerce sector expect strong sales growth in the fourth quarter after a strong holiday season. The S-Network Global E-Commerce Index (ECOMX) is up 14.0 year-to-date on a total return basis compared to the S&P 500 Index (SPX), which is up just 4.7% as of Jan. 24, 2023. % is rising.
E-commerce data is estimated to be strong in Q4 2022, which is reflected in holiday shopping data.
The U.S. Census Bureau releases fourth-quarter e-commerce data on February 18, but has already released advance retail sales estimates through December 2022. historical data. We estimate that e-commerce sales in Q4 2022 will be about 15.0% of total retail sales, compared to 14.5% of total retail sales in Q4 2021 last year. Estimated market share has grown significantly since 4Q19 and is only slightly below the higher levels seen in 2020. We continue to gain market share.
This strength was evident during the holiday shopping season (roughly from Black Friday to Christmas). During this time, Mastercard SpendingPulse said online sales grew 10.6% year-on-year. According to their data, e-commerce accounted for 21.6% of total retail sales, compared to 20.9% in 2021 and 20.6% in 2020.[1] Similarly, ECOMX’s top constituent Shopify (SHOP) reported a 19% increase in sales since last year’s Black Friday and Cyber Monday weekends.[2] Adobe Insights, known for its annual Holiday Shopping Trends report, reports that online shopping for the 2022 holiday season will grow 3.5% year-over-year. during the holiday season. According to Adobe Insights data, major product segments such as electronics, toys, and apparel saw discounts of nearly 20% to 25% between the beginning of October and the end of December.
The trend of online shopping seen during the holiday season is likely to continue as consumers continue to face inflationary pressures.
Inflation has shown some signs of easing, but consumers are still experiencing price pressure, especially on basic necessities such as food and gasoline. According to the Consumer Price Index (CPI), prices increased the most for eggs (+59.9% y/y), margarine (+43.8%), butter (+31.4%) and lettuce (+24.9%). A must have. , wheat flour (+23.4%). Other staples such as bread and milk rose 15.9% and 12.5% respectively. The personal savings rate is hovering near his lowest level since 2005, reaching about 2.4% of disposable income as of November, according to Bureau of Economic Analysis data. These macroeconomic pressures have encouraged consumers to shop more strategically. This means it’s easier to do online and you can easily research and compare prices across different stores and vendors. Consumers who shop online are also leveraging omnichannel strategies (that is, combining both online and in-person shopping experiences). For example, during the holiday season, the number of “buy online-pick up in store” orders increased more than those using express or standard shipping.[3] This could suggest that even consumers who prefer to pick up products in person still use the internet to order products, or at least search for discounts. All of these contribute to increased website traffic and increased advertising revenue for e-commerce companies. With inflation still relatively high so far in 2023, consumers are likely to continue shopping wisely throughout the year as months of inflationary pressures pile up on them. While there may be some pressure on overall consumer spending, this remains a long-term tailwind for e-commerce, and we believe e-commerce growth remains resilient through a challenging spending environment. , which may influence retailers to build or expand their e-commerce business.
Conclusion:
Consumers are feeling pressure from inflation, especially affecting household essentials such as food and gas. Funds may be limited, but consumers still want to spend, making them more selective in their purchases and shopping strategically for discounts. We expect this to be a tailwind for e-commerce throughout the year, as seen in .
Plus, we look forward to seeing you at the Exchange, February 5-8 in Miami. For event details and registration, please visit: Exchange website.
[1] Mastercard SpendingPulse: U.S. retail sales increased 7.6%* this holiday season
[2] Shopify merchants hit $7.5 billion in sales on Black Friday Cyber Monday
[3] 2022 Holiday Shopping Trends & Insights Report
The S-Network Global E-Commerce Index (ECOMX) is the underlying index of the First Trust S-Network E-Commerce ETF (ISHP).
