Since March of last year when the U.S. declared the COVID-19 pandemic a national emergency, industries and businesses of all types and sizes reckoned with changes in consumer habits, business operations and impacts on the supply chain. Retailers had to cope with ongoing changes to in-person capacity limits and in-store closures throughout the year as the number of COVID-19 cases waxed and waned. Many also had to navigate logistics challenges for the first time as their online operations scaled. Simply put, the only certainty from the past year was uncertainty and continual change.
While nearly every industry and business was feeling the effects of the pandemic over the past year, small businesses were a group that was overwhelmingly impacted as one in five small businesses closed at the beginning of June. Despite the harsh effects felt last year, there were bright spots for some industries as e-commerce spending ramped as people stayed home.
COVID-19 small business case study
According to the MetLife & U.S. Chamber of Commerce Small Business Index, in the fourth quarter of 2020, half of small businesses reported that they anticipated operating for a year or less in the current business climate before having to permanently close. This data came as COVID-19 cases hit some of the highest levels across the nation. However, not all small businesses were negatively impacted. Our data found that a segment of small online retailers bounced back after the initial onset of the pandemic faster than the overall retail sector.
We looked at 10 small retailers with a predominantly online presence and tracked their total sales and items sold between January 2019 through February 2021. The small online business cohort was comprised of retailers in the outdoor and sports equipment, household goods, and wellness industries. The sample group in the study saw growth of 35% in total sales between March and June 2020 as total retail sales were declining.
Similarly, although the Avalara Retail Index found that total retail sales dipped in November following a busier than usual October, our case study cohort saw steady growth in total sales throughout the 2020 holiday season from October through December. However, in line with the rest of the Avalara Retail Index, the case study cohort did show a more significant drop than usual following the holidays as COVID-19 cases hit record numbers across the nation in December.
E-commerce adoption aided small business recovery
This growth in sales for small online retailers points to perhaps one of the biggest and most impactful trends driven by the pandemic–the acceleration of e-commerce adoption. At the onset of the pandemic, businesses were quickly forced to shift to e-commerce as mandated closures prevented traditional in-store shopping, and at-home orders encouraged more people to stay home. In fact, many businesses adjusted their entire business model to be digital-first in order to keep their doors open and serve their customers as safely and conveniently as possible. This e-commerce acceleration, combined with consumer preference moving toward e-commerce, created opportunities for small online retailers to reach new customers that they otherwise wouldn’t have.
With the increased availability of vaccines, many in-person businesses will continue to rebound this year, and when the pandemic eventually subsides, the major takeaway from the past year for all businesses is that the shift toward e-commerce is here to stay. According to the U.S. Census Bureau, e-commerce sales amounted to $792 billion in 2020, which amounts to 14% of total retail sales — increasing from 7.3% of total retail sales in 2015 when in-store shopping reigned supreme. In the future, it’s unlikely that consumers will revert to pre-pandemic shopping behaviors. Instead, omnichannel commerce will likely experience continued growth as consumers embrace a hybrid approach to shopping that includes both online and offline channels to make purchases.
Amit Mathradas is the President and COO of Avalara.