E-commerce and online shopping slowed in April after consecutive gains for the past year. This shows that Americans have new priorities biting into their budgets, however the ecommerce market is still going strong.
According to the Adobe Digital Price Index report, the most comprehensive measure of inflation among ecommerce agencies, the drop represents a shift in online spending habits.
Looking at the Numbers
Americans spent $77.8 billion online in April, a month-over-month drop of 6.8% compared to March. April spending was still 4.5% higher than April 2021, but that year-over-year increase was nowhere near the increases in January and February, 12.3% and 15.5%, respectively.
This big change comes as Americans are focusing their budgets around gasoline and travel. Notably, the World Travel & Tourism Council (W.T.T.C.) which represents the tourism industry, projects that travel in the US will reach pre-pandemic levels throughout this year. And with gas prices on the rise, American e-commerce is taking a hit.
Rising interest rates together with inflation are also causing Americans to consume less online. According to Vivek Pandya, lead analyst for Adobe Digital Insights, these online shopping trends are dying down due to several factors:
“You have consumers who’ve been spending on durables, things like electronics, pretty heavily, and over-indexing on their spending, and now as they’re having to contend with higher fuel prices, higher flight prices, travel, which they’re looking to do more of, that’s cutting into their budget,” he said.
Patrick Brown, Adobe’s VP of growth marketing and insights, echoes Pandya’s thoughts and believes that higher borrowing costs and uncertainty contribute to the halt in spending.
But while spending has slowed in this regard, the fact remains that Americans spent $77-billion in April. This is a significant increase from the $586-billion predicted for e-commerce in 2019.
“Consumers continue to embrace the ease of online shopping and more personalized customer experiences in the digital economy,” he said.
April may be showing signs of slowing in many aspects of ecommerce spending, but one area that remains strong is online grocery shopping.
Notably, prices for groceries grew by 10.3% and prices for pet products increased 8% in April. This is an area in which many shoppers developed a habit during the pandemic when physical shopping was restricted.
Similarly, apparel prices grew by 12.3% year-over-year, despite the data showing that inflation in this area is easing. Adobe reports that apparel grew an average of 15.5% each month between November 2021 and March 2022.
The numbers show that shoppers are comfortable buying these necessities online.
Conversely computer and electronic prices decreased by 5.2% and 5.7% year-over-year compared to April 2021.
The Global Ecommerce Race
While American e-commerce remains strong, Europe is also looking to compete with the largest online shopping platform, Amazon. One of the most important aspects of online shopping that consumers rarely notice are the areas of logistics and fulfillment.
Shopify demonstrated this when they acquired Deliverr last week for $2.1-billion to begin distributing products like Amazon. Now, a Berlin-based startup Byrd is closing its second round of funding to provide warehousing, delivery services, and software for e-commerce customers to manage.
The startup which began in Vienna currently provides its customers with ‘virtual’ warehouses where they can store and ship products from. This is possible by using extra space in already existing warehouses, instead of building new ones.
The company also provides its own software which lets businesses manage, analyze, and track shipments and deliveries worldwide.
Currently, Byrd operates in seven European countries: France, Germany, the Netherlands, Austria and the U.K. Its newest additions include Italy and Spain, and Sweden, Denmark and Poland will be launching later this year totaling 30 warehouses in 10 countries.
The advantage Byrd provides to its customers is an alternative to selling through Amazon.
“We already fulfill a ton of Amazon orders,” said Alexander Leichter, Byrd CEO.
“Why wouldn’t they ship through Amazon? Merchants like to be independent and have choice, and consolidate operations between different channels. So it’s not true now and it won’t be true in the future that Amazon is the best solution. There is still a vast opportunity for independent solutions.”
Ecommerce Sales Spike
As companies see an increase in ecommerce sales, they are organizing to find the best way of moving forward and capturing the momentum. Online used car buying platform Vroom recently named its new CEO, Thomas Shortt, as part of an effort to focus on long-term growth.
“Consumers love our business model, and we have proven we can sell and acquire vehicles at sale,” said Shortt in a press release. “We will now sharpen our focus on improving our unit economics, reducing our operating costs, and maximizing our liquidity.”
In the first quarter of 2022, Vroom sold 19,473 cars which is up 26% compared to 2021. In total, the company generated $675.4-million in revenue through online sales, up 60% from the previous year. The company also increased its gross profit by 8% with $34.3 in sales.
So while April may have shown a slowing of the pandemic e-commerce boom, there are still many signs that the industry is stronger than ever. Companies continue to seek ways to innovate and create better online shopping experiences for consumers. High gas and travel prices may have slowed things a bit, but eventually there will be customers ready to click and buy.
