The E-commerce Landscape in 2021 – What Can We Expect?

February 15, 2021

2020 was a year that galvanized the e-commerce industry, with brands pushing through huge change for their online platforms as physical retail took blow-after-blow with the pandemic and lockdowns.

As the dust settled on the end of 2020, e-commerce had grown to represent over a third of all retail sales in the UK, with the US seeing the same growth in one year, as it had over the previous decade.

With this surge, there were many who saw exponential growth of their customer base, soaring profit margins and spikes in demand for their products (such as ASOS who saw a 329% boost to profits through lockdown). But now, many are facing 2021 with a mixture of cautious optimism and trepidation as the world shows very early signs of a return to a more typical life in the latter part of the year, leaving brands wondering, what will e-commerce look like in the long term?

2021 – A Year of Two Halves

With only a few weeks of 2021 behind us, preliminary eMarketer data paints a picture of an optimistic first half of the year similar to the last 6 months of 2020, with e-commerce growth forecasts up to as high as 20-30% depending on the country in question and respective industry. Indeed, with many countries returning to some form of lockdown, as well as tightening restrictions on stores being open, demand for e-commerce continues to remain at a high level.

However, past the first half of the year, 2021 becomes something of a mystery for both platforms and agencies alike. The promise of a vaccine combined with the potential return of physical retail before the holiday peak period has meant many are wary of saying that e-commerce’s aggressive growth will continue throughout the year (eMarketer’s report as much approaches the second half of 2021 with a healthy dose of caution). Couple that with the fact that timelines around general population immunity are hazy at best, and you end up with a striking clear first half of 2021 and an almost impossible to forecast second half.

3 Potential Scenarios for E-commerce

Operating off of the available data, trends from last year and assumptions based on other countries who have come out of lockdown more successfully than Western economies, we can assess the 3 potential scenarios for e-commerce in H2 this year.

Scenario 1: Return to 2019 Standards [Unlikely]

The first scenario would be a reversion back to original e-commerce/in-store splits, with the greater majority of consumers who prefer the physical retail experience returning to shop in-store, whilst e-commerce shrinks to its previous level and the business continues as if 2020 never happened.

For many brands, the data seems to indicate that this is highly unlikely at this early stage. In 2020, H&M published figures indicating that after lockdown had been lifted in China, the business saw footfall to stores down 79% despite nearly 90% of locations being open.

This makes grim reading for many retailers who are keen to get customers back in-store so that leases can be paid and jobs can be restored. For those building a spike for in-store revenue into their projections this year, our advice would be to be conservative with your figures.

Scenario 2: E-commerce Grows, High Street Continues to Struggle (Likely)

The second scenario proposes that e-commerce continues its current growth path resulting in many larger brand stores becoming redundant due to the majority of demand shifting online. Early indicators from platforms like Facebook show a movement of older shoppers to e-commerce with the intention to shift their offline habits to online platforms permanently.

With more brands electing to shutter stores in previous retail hotspots, the question remains; what will replace them? The high street and other similar shopping centers in the rest of the world have been in a steady decline for years and the need for reinvigoration has been called for by many. 

The choice of “Pick up in-store” has meant businesses like Apple and Argos have been able to adapt with smaller stores doing in the pandemic, meaning perhaps e-commerce will have some positive impact on the high street too. Our US client Ace Hardware fast-tracked the launch of curbside pickup on their website, training stores to execute the feature in a week, and launched a supporting ad campaign during the pandemic in an exemplary case of adapting to consumer needs .  

Scenario 3: A Blend of Both (Most Likely)

Between the data and the anecdotal evidence coming out of various markets, it would appear that a middle ground between these two scenarios is the most likely option. Though e-commerce does look to grow, we expect that a return of physical retail will flatten the growth curve and bring some demand back in-store. While sentiment around in-store shopping in 2021 is still uncertain, we can speculate that shopping as a destination experience will undertake a resurgence for many post-pandemic consumers, and retailers should therefore focus on their omnichannel experience. 

At the same time, the death of the high street for bigger brands has given the opportunity for smaller retailers to fill the gap with ever-cheapening rental prices and candidates for roles being at a high.

Perhaps most importantly, the pandemic looks to entirely shift how we interpret the value of e-commerce for retailers, with many now seeing it as the logical evolution for their brand, whilst others see it as a way of enhancing their in-store capabilities.

2021: A Puzzle with Pieces Hidden

Midway into February and with very little solid data available, most are scrambling to pull together their own estimates on what this year holds for industry, the internet and socioeconomic movements. 

Our advice right now is to view the next 12 months cautiously and with the ability to be flexible, a simple change to vaccine deadlines or lockdowns could instantly reshape how this year will play out.

Focus on using the data available, find a narrative that suits the facts (not the other way around) and be prepared to move quickly. 2020 was a year that required agile thinking and quick changes to strategy, and 2021 looks to take that to a whole new level.

If nothing else, the impact of 2020 in which we saw the digitatisation of products and services jump ahead by seven years in a matter of months will be felt by many people over many years to come.


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