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E-commerce has seen a sales pick up but costs are also rising

The quarantine and subsequent removing of restrictions have continued to help e-commerce sales in the latter half of the spring. Compared to a period before the pandemic in late February, nearly all the categories in e-commerce are up approximately 40% according to Signifyd Inc. While e-commerce giant Amazon is seeing a significant uptick in sales, their recent earnings results show that the company is spending on changes that need to take place to protect its employees and customers.
What categories have seen an uptick in sales?

The riots in the United States, which were mixed in with peaceful protests following the murder of George Floyd, sparked an interest in purchasing weapons. According to Signifyd, who surveyed 10,000 retailers, weapons and accessories had the largest increase week-over-week during the last week of May of 2020.

This category saw a spike in revenues with online sales for the 119 merchants in this category increasing 79% during the last week of May compared with the previous week. When compared to the last week of February 2020, before the quarantine, online sales in this category are up 345% according to Signifyd. The categories that have seen the largest e-commerce uptick since the onset of the quarantine are leisure and outdoor, which are up 139%; auto parts and tires, which are up 79%; electronics, which are up 78%; alcohol and cannabis, which are up 69%; comedies and collectibles, which are up 48%; home goods and d├ęcor, which are up 46%; and general merchandise, which is up 41%.

What is most interesting is most of the sales are to new customers according to vendor PFS Web. A survey of more than 2,000 retail customers finds that 40% of say they shopped on a new web site during the pandemic and 45% of those shoppers expect to continue to shop on that new site. There is a new experience that shoppers are trying out, which is purchasing an item that they want online and then picking it up at the store. This process increased by 248% in the last week of May compared to the pre-quarantine period in late February according to Signifyd. This was confirmed by Rakuten Intelligence, which tracks email receipts of online US customers.

Costs at e-commerce are also rising

While the revenues at e-commerce companies are rising so are their costs. This can be viewed by evaluating the financial results reported by e-commerce giant Amazon. While the company stock trading price has surged to fresh-all time highs, both revenues and expenses are on the rise. It appears that Amazon is willing to devote a lot of resources to help its employees, customers and community.

On 30 April, Amazon reported its Q1 financial results. Revenues rose by 26% to $75.5bn. However, Amazon’s net income decreased to $2.5bn from $3.6bn and its operating income decreased from $4.4bn to $4bn. Additionally, Amazon is expecting to spend the entirety of that $4bn operating income to fight the Covid-19 crisis for the Q2 2020.

While it might appear that Amazon is rushing ahead of its competitors, the company reports that it has made over 150 significant process changes at sites around the world to ensure the health and safety of its teams. This includes obtaining 100 million face masks for staff as well as mandatory temperature safety checks for employees. Out of the $4bn, Amazon expects to spend in the second quarter, $800m will go towards safety measures for its employees. Amazon has also hired 175,000 and has increased the minimum wage by $2 an hour from $17 an hour. In total, Amazon says its increased pay will total nearly $700 million during the quarantine period.

Will e-commerce stick?

The upshot of the quarantine is that e-commerce companies had the opportunity to show how digital shopping could look like once each country from around the globe emerges from quarantine. It appears initially that many e-commerce companies have made inroads to new customers. The initial stock up phase saw panic buying which gave way to purchases that remained constant.

People who used to rush to grocery stores now appear to be shopping online and getting delivered directly to their homes. Additionally, non-essential goods are seeing a significant uptick as consumers are happy to purchase online and even pick up at the store without having to stroll through the isles. While the revenues have seen a substantial uptick, costs have also been on the rise. This process will likely continue until companies can create a safe and secure work environment for their employees. The bottom line is that e-commerce is here to stay and will likely grab a bigger piece of the pie from companies that do not have an online presence.

19 Jun 2020 12:25

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About Boris Dzhingarov

Boris Dzhingarov graduated UNWE with a major in marketing. He is the CEO of ESBO ltd brand mentioning agency. He writes for several online sites such as Tech.co, Semrush.com, Tweakyourbiz.com, Socialnomics.net. Boris is the founder of MonetaryLibrary.com and cryptoext.com.




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