eCommerce has grown in 3 months what it has grown in 10 years

During the forties the cost of user acquisition in eCommerce has tended to zero, something unheard of, and has not only boosted online sales but has revolutionized some dormant sectors such as food; also the population that has begun to buy online is older and therefore has greater purchasing power, and we all know that when you start shopping online you keep doing it all your life.

Percentage of U.S. consumers who bought something online for the first time due to social distancing, by age group

The law that governs eCommerce is the balance between user acquisition cost and the lifetime value of that same user, i.e. how much it costs us to capture versus how much it costs us. This is different from the law that governs physical commerce, or rather traditional commerce, which is based on sales margin, sales quantity and structure costs. The eCommerce business is much more liquid than the physical one because on the one hand the structure cost is not so important but on the other hand the user acquisition costs are much higher than in a physical store; it costs more to capture a user because the conversion is much lower: if one in five people who enter a store buy (20% conversion), only one in a hundred people who enter a web site buy (1% conversion), and web traffic is an expense, not an income.

Thanks to Corti I have learned of the article by Benedict Evans where the most devastating data I have ever seen is collected: on August 18 both the UK and the US published their statistics on how eCommerce and physical commerce have changed during the quarantine. In two months the UK went from 20% to 30% eCommerce penetration and the US from 17% to 22%.

United Kingdom in maroon and the United States in pink. Source: ONS, US Census, from Benedict Evans' blog.

Food eCommerce, which has been sluggish for ten years with little or no growth because it is unprofitable, has skyrocketed in three months. Why is food eCommerce unprofitable? Because it brings together the perfect eCommerce stormThe company's main advantages are: low price, low margin and high weight; but in return it offers high recurrence and many other advantages that remain to be seen and that are very clear to yours truly, such as the data source of bringing milk, water and beer to a house for years.

UK eCommerce food sales doubled during the quarantine. Online in red and offline in gray. Source: ONS seasonally adjusted

But it turns out that there was room to grow this "unprofitable" eCommerce that led Amazon this year to close Amanzon Pantry in Germany, France and Italy, and if not tell that to Walmart, which is the first company to close the Amanzon Pantry in Germany, France and Italy, then tell that to Walmart, which is the first company to close it. starts to hurt to Amazon right there, where it hurts the most and where it is least prepared to take the hit.

Restaurants already know that eCommerce is no longer an option but an obligation to survive and soon the big food companies will realize this; this trend has no way back even if COVID ends tomorrow because people, especially older people, have already learned to shop online.


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