‘Everybody sees real growth’: E-commerce surge drives related investment

Demand for e-commerce options in retail was already growing before the pandemic, but growth in the sector accelerated during COVID-19, pushing retailers to embrace new shopping methods to reach customers.

Department of Commerce data showed a 7.7% increase in retail e-commerce sales in the first quarter of 2021 compared to the fourth quarter of 2020. E-commerce accounted for 13.6% of all retail sales in the first quarter of 2021, a 2% increase from the first quarter of 2020.

“I think the pandemic brought on an acceleration in use of e-commerce and retail sales, and that’s a good thing in terms of the advantage of the technology,” said Jack Kleinhenz, chief economist at the National Retail Federation.

At its peak in April 2020, e-commerce made up 16% of all retail sales, according to data from the NRF. As the pandemic worsened and consumers worried about leaving their homes, retailers offered different versions of e-commerce transactions, including pure e-commerce, which involves customers ordering an item online and having it delivered to their homes, and hybrid e-commerce, which entails ordering an item online to be picked up at a store.

Retailers are embracing the demand for e-commerce and finding new ways to accommodate customers. Construction firm Clayco, which has offices in St. Louis, saw a high demand for construction of warehouses and distribution centers before the pandemic.

Clayco Executive Director Bob Clark said construction of these facilities made up 37-40% of Clayco’s revenue in the past, but the company had expected demand to taper off in the coming years. This year, Clayco is expecting this construction to make up 50% of its revenue, bringing in $2 billion this year with sustained growth in the next decade.

“There was tremendous demand before, but that’s kind of doubled down,” Clark said. “There were people that were saying that warehouse and distribution center business was going to cool off, and we were kind of in the seventh inning of the boom. Now, there’s no talk about the innings anymore, because I think everybody sees real growth in that sector for the next 10 years.”

While Kleinhenz predicts e-commerce will continue to grow, he suspects brick-and-mortar stores will still play a role in purchasing of goods consumers want to see in-person, like groceries. He sees a new future of commerce, where online and in-person shopping melds to form a new shopping experience.

“E-commerce is here to stay,” Kleinhenz said. “It’s an important part of a multi-channel strategy that any successful retailer is going to have to have in place. It’s going to require investment, if they haven’t done it already, and continuing investment. It’s just the new way of life.”

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