A new report from Mastercard underscores just how dramatically the retail environment changed last year during the coronavirus (COVID-19) pandemic. The findings show that consumers’ online spending surged by $900 billion. Put another way -- about $1 of every $5 that consumers spent in 2020 was spent with an online retailer.
“While consumers were stuck at home, their dollars traveled far and wide thanks to e-commerce,” said Bricklin Dwyer, Mastercard’s chief economist and head of the Mastercard Economics Institute.
Dwyer says the numbers have significant implications and perhaps sped up a trend that would have played out over time. He thinks the online spike in spending prodded some smaller businesses to embrace e-commerce, something that will make them stronger in the long-run.
“Our analysis shows that even the smallest businesses see gains when they shift to digital,” Dwyer said.
The changes may be lasting
Some of that e-commerce business isn’t returning to brick-and-mortar stores. Mastercard estimates that as much as 30 percent of the shift to digital channels, caused by the pandemic, is expected to be permanent.
The wide-ranging report uncovered some other observations. The authors say the pandemic caused consumers to expand their footprints and buy from a wider variety of online merchants. Many shoppers might have done the bulk of their online ordering with Amazon in the past, but they expanded the number of online stores they used by up to 30 percent in 2020.
The pandemic also changed the way consumers paid for purchases. They abandoned cash and significantly increased their use of digital payments -- a move accelerated by a coin shortage over the summer.
“According to our analysis of payment forms at brick-and-mortar retail stores and restaurants, we saw non-cash payments jump by an additional 2.5 percentage points beyond the ongoing trend,” the authors wrote. “This led to an acceleration of the shift from cash to electronic payments by a full year.”
In another trend that the report predicts will be lasting, consumers increased their use of e-commerce purchases of food. The report suggests that up to 80 percent of this increase will be permanent.