How the pandemic has caused a perfect storm for online retail – and why it’s set to continue
FOR a good portion of the last year, online has been the only option for many of us trying to buy anything beyond our grocery essentials.
The resulting surge in demand for digital shopping has seen soaring sales for international online giants like Amazon, Zalando, Otto, Boohoo and Asos.
But there have also been opportunities for smaller, more local retailers that have been able to tap into this increased online demand and a growing sentiment towards supporting local – and often struggling – businesses.
According to PayPal, which has over 1.5 million active users in Ireland, Covid-19 and the resulting lockdowns have accelerated the shift from physical to online commerce by about two to three years.
“A recent study of ours found that one in four Irish consumers used or bought online services for the first time during the pandemic,” says Joachim Goyvaerts, the company’s director of Benelux and Ireland.
The Paypal survey – involving 2,000 customers in Ireland – also indicated that 76% of people bought products online during lockdown.
HUGE INCREASE IN ONLINE BUYS
Figures from Visa, meanwhile, show that 40% of its cardholders who didn’t shop online before the pandemic were doing so by the end of June 2020.
According to Central Bank of Ireland data, online spending on credit and debit cards increased by 19% month-on-month in November 2020 and by 35% on a year-on-year basis.
During that month, credit card spending online amounted to €483m, while consumers spent €2.13bn on websites using their debit cards.
Elsewhere, data from fintech company Revolut shows that 36% of spending by its 1.2 million customers in Ireland took place online in December 2020.
This was up from 25% 12 months earlier. Given that the shops reopened at the beginning of December 2020, there had already been a significant move back to physical buying – in November, online accounted for 54% of consumer spending by Revolut customers.
The pandemic has pushed digital up the list of priorities for businesses, with significant investment in existing ecommerce capabilities and a big jump in the number of retailers and producers starting to sell online for the first time.
DIGITAL WAS NEXT FRONTIER
The eCommerce Association of Ireland (ECAI) estimates that 10,000 businesses have pivoted to online over the last year.
“Shops, businesses and services couldn’t open their doors so they really reached out to find other ways of trading and online was an obvious one,” says Niall Bodkin, chairman of the ECAI.
Arnold Dillon, director of Retail Ireland, says changes in online demand that retailers would have expected to happen over several years were condensed into a number of months.
“There had been a gradual move to online over many years so it’s not an entirely new phenomenon but in certain categories of retail it was really pronounced,” he says.
“For the established retailers, digital was always the next frontier when it came to retail. But lockdown accelerated a lot of those trends.”
TREND TO BUY LOCAL
Ross O’Colmain, manager of construction, cleantech, timber and consumer sectors at Enterprise Ireland says increased demand and a noticeable ‘buy local’ sentiment combined to make the incentive for local retailers to invest in their online presence more compelling.
With more businesses online, consumers also have the chance to buy from local shops if they want to.
“I think there’s a growing awareness among consumers that they could just order from their local clothes store, for example,” O’Colmain says.
“It’s not just about large ecommerce platforms – your local neighbourhood store can fulfil that desire to shop online and you can have it delivered to your home the next day.”
Dillon notes that international retailers and shopping platforms have traditionally accounted for a very large proportion of online retail sales.
“There was a big concern when shops shut that a lot of business would be lost to retailers outside of Ireland. I think we have seen some very positive trends and a suggestion that some of the share of the online market has been won back by domestic retailers.
“There was definitely a concerted efforted by a lot of consumers to try to support those businesses that were adversely affected by the restrictions in Ireland.”
The buy local cause was boosted towards the end of last year with several initiatives, including Champion Green, a €1m consumer marketing campaign supported by Kilkenny Design and Vias, as well as Retail Excellence Ireland, the Small Firms Association and Chambers of Commerce Ireland.
The results of this effort are reflected in the Revolut figures, which suggest that 43% of online spending in December was with Irish firms with the remaining 57% going to overseas websites.
This compares with 35% of internet spending with domestic retailers and businesses in December 2019.
SUPPORTING OUR OWN
Going forward, consumer spending decisions online will have a direct bearing on the survival of the high street in small towns, says Ger Keohane, director at StudioForty9 and a member of Retail Excellence Ireland’s ecommerce group committee.
“Irish consumers have the option now to influence what happens in their local communities, towns and indeed economies by choosing to purchase and engage online with local and national Irish retailers.”
This can be through the ecommerce store, he says, but also via video for personal shopping, online appointment bookings for an in-store retail experience with knowledgeable assistants and click and collect.
“Choosing local online is a choice to support and contribute to our own local community and economy,” Keohane says.
“I think Irish consumers started to realise that in late 2020, and nurturing the understanding of that power of choice and influence, and encouraging the reflex to think and shop local – especially when online – will be critical for Irish economy and society in the future.”
There are other advantages to buying from Irish-based websites beyond helping to support the local economy, says Bodkin.
“These shops and companies, individual websites that have opened up are experts in their field: people open a bicycle store because they’re mad about bicycles, they open bookshops because they love books.
"They’re giving you a completely different level of service. That’s where it’s advantageous to buy from a local Irish website.”
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The increased appetite for online shopping is expected to continue beyond the eventual lifting of restrictions.
A third of those surveyed by PayPal said they plan to buy more products or services online going forward than they did before Covid-19.
“People have become used to interacting differently with shops and I would say those trends are likely to remain part of the retail landscape,” says Dillon.
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- Published in association with Bank of Ireland
