Decline in U.S. Online Services Sales Mirrors the COVID-19 Outbreak Timeline

The global coronavirus pandemic continues to propel online retail sales higher in the U.S., particularly in the Online Grocery sector. But according to a special mid-March edition of 7Park Data’s E-Commerce Macro report, it’s having the opposite effect on online services sales.

Typically, our monthly E-Commerce Macro reports examine the preceding month in its entirety. But nothing is typical about the unprecedented impact the coronavirus continues to have on all industries. 

The chart below shows that the divergence between sales for online retail (including grocery, equipment, apparel and all Amazon) and services (comprising subscriptions, online platforms, travel, entertainment, restaurants and payment processors) has been in lock-step with the timeline marking the rapid spread of the coronavirus throughout the U.S. Online services sales began falling following the February 26th announcement of the first U.S. case of COVID-19 (the respiratory illness the novel coronavirus causes) caused by community transmission. 

The steady downturn continued as the country responded with more serious measures, from curtailing public gatherings and restricting travel to closing most businesses and ordering people to work from home. That steady downturn became a sharp drop on March 11th when the World Health Organization declared a global pandemic, leading to an -11.2% softline sales decline for the week ending March 14th. 

Online retail sales have moved in the opposite direction, led by a +101% increase in online food sales vs. the prior year for the week ending March 14th – the fourth consecutive week of significant growth. Basket size (dollars spent) increased 36% as shoppers ordered 55% more items per order. 

Growth extends to many major retailers and types of goods: Walmart Grocery accounts for over half of the growth in online food sales, and pet retail giant Chewy.com’s contribution is in the double-digits. 

This latest data mirrors the key trend we identified in our February 2020 Macro E-Commerce report, which showed that Amazon and the Online Grocery category were the two largest contributors to a +21.3% Y/Y spike in overall online retail sales compared to January. It’s interesting to look back now and note that the first U.S. COVID-19 case was confirmed on January 26th.

As we move through the rest of March and into April, the question for online retailers is whether shipping delays of several days, even weeks, will impact sales. 

On March 22nd, Recode reported that Amazon has confirmed the April 21 delivery dates many consumers received when they placed their orders is accurate. According to an Amazon spokesperson:

“To serve our customers in need while also helping to ensure the safety of our associates, we’ve changed our logistics, transportation, supply chain, purchasing, and third-party seller processes to prioritize stocking and delivering items that are a higher priority for our customers. This has resulted in some of our delivery promises being longer than usual.”

Shipping delays won’t be unique to Amazon. For example, on the section of its website dedicated to providing coronavirus-related updates, Target states it is “placing limits on products like hand sanitizer, toilet paper, disinfectant wipes, dry goods like soup and pasta, food like milk and eggs, bottled water and more… (We’re) working to fulfill online orders… however, due to high demand, we are facing delays.”  

These delays show just how many people are following self-isolation recommendations and doing their shopping online. But if the delays grow longer, will consumers feel compelled to add even more items to their online shopping baskets? Or will they try to make due with what finally arrives on their doorsteps?

The full March edition of our 7Park Macro E-Commerce report will provide the answers. 

To learn more about our Macro E-Commerce reports, and other reports covering Consumer, Technology, Industrials, Healthcare, and other sectors, please contact us. 

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