E-commerce and online shopping slowed in April after consecutive gains over the past year. This shows that Americans have new priorities straining their budgets, but the e-commerce market is still going strong.
According to the Adobe Digital Price Index report, the most comprehensive measure of inflation among e-commerce agencies, the decline represents a shift in online consumer habits.
Americans spent $77.8 billion online in April, down 6.8% month over month from March. April spending was still 4.5% higher than April 2021, but this year-over-year increase was a far cry from the January and February increases of 12.3% and 15.5%, respectively.
This big shift comes as Americans focus their budgets on gas and travel. Notably, the World Travel & Tourism Council (WTTC) which represents the tourism industry, projects that travel to the United States will reach pre-pandemic levels throughout this year. And with rising gas prices, American e-commerce is taking a hit.
Rising interest rates and inflation are also pushing Americans to consume less online. According to Vivek Pandya, principal analyst for Adobe Digital Insights, these online shopping trends are fading due to several factors:
“You have consumers who have spent a lot on durable goods, things like electronics, and over-indexed on their spending, and now they have to deal with higher fuel prices, higher flight prices, trips, that they’re looking to do more, it cuts into their budget,” he said.
Patrick Brown, vice president of growth marketing and insights at Adobe, echoes Pandya’s thoughts and believes that higher borrowing costs and uncertainty are contributing to the spending halt.
But while spending has slowed in this regard, the fact remains that Americans spent $77 billion in April. This is a significant increase from the $586 billion forecast for e-commerce in 2019.
“Consumers continue to embrace the ease of online shopping and more personalized customer experiences in the digital economy,” he said.
April may be showing signs of a slowdown in many aspects of e-commerce spending, but one area that remains strong is online grocery.
Notably, grocery prices rose 10.3% and pet product prices rose 8% in April. This is an area that many shoppers have developed a habit of during the pandemic when physical purchases were limited.
Similarly, clothing prices rose 12.3% year-on-year, despite data showing that inflation in this area is declining. Adobe reports that apparel grew by an average of 15.5% each month between November 2021 and March 2022.
The numbers show that shoppers are comfortable shopping for these essentials online.
Conversely, prices for computers and electronics were down 5.2% and 5.7% year-over-year from April 2021.
While US e-commerce remains strong, Europe is also looking to compete with the biggest online shopping platform, Amazon. One of the most important aspects of online shopping that consumers rarely notice are the areas of logistics and fulfillment.
Shopify demonstrated this when it acquired Deliverr last week for $2.1 billion to start distributing products like Amazon. Today, a Berlin-based startup, Byrd, is closing its second round of funding to provide warehousing, delivery, and manageable software services for e-commerce customers.
The startup that started in Vienna currently provides customers with “virtual” warehouses from where they can store and ship products. This is possible by using extra space in already existing warehouses, instead of building new ones.
The company also provides its own software that allows companies to manage, analyze and track shipments and deliveries worldwide.
Currently, Byrd operates in seven European countries: France, Germany, the Netherlands, Austria and the United Kingdom. Its latest additions include Italy and Spain, and Sweden, Denmark and Poland will launch later this year, totaling 30 warehouses in 10 countries.
The advantage that Byrd offers its customers is an alternative to selling through Amazon.
“We’re already filling a ton of Amazon orders,” Byrd CEO Alexander Leichter said.
“Why wouldn’t they ship through Amazon? Merchants like to be independent and have choice, and consolidate operations across different channels. So it’s not true now and it won’t be true in the future that Amazon is the best bet. There is still a vast opportunity for independent solutions.
As companies see an increase in e-commerce sales, they are organizing to find the best way to move forward and capture the momentum. Online used-car shopping platform Vroom recently named its new CEO, Thomas Shortt, as part of an effort to focus on long-term growth.
“Consumers love our business model, and we have proven that we can sell and acquire vehicles for sale,” Shortt said in a press release. “We will now focus more on improving our unit economics, reducing our operating costs and maximizing our cash flow.”
In the first quarter of 2022, Vroom sold 19,473 cars, up 26% from 2021. In total, the company generated $675.4 million in revenue from online sales, up 60% from compared to the previous year. The company also increased its gross profit by 8% with sales of $34.3.
So while April may have shown a slowdown in the pandemic e-commerce boom, there are still plenty of signs that the industry is stronger than ever. Companies continue to look for ways to innovate and create better online shopping experiences for consumers. High gas and travel prices may have slowed things down a bit, but eventually there will be customers ready to click and buy.