Peter Bernstein, Chief Economist, email@example.com, 312-431-1540 x1515
Sometimes narratives are formed based on data available at the time, but the narrative persists even after the data no longer tell the same story. This is the case with the story that the Covid-19 pandemic caused a larger permanent shift toward online shopping.
It is true that online shopping has grown considerably since the end of 2019. Data from the Census Bureau show that e-commerce sales in 2021Q3 reached $215 billion, 42% above sales in 2019Q4. And despite a substantial 20% jump in total retail sales during that time, the e-commerce share of total retail sales increased from 11.0% to 13.0% during that time.
We might attribute this increase in the e-commerce share to the pandemic except for one very important fact: the e-commerce share of retail sales was rising before the pandemic and would have continued to rise, pandemic or not. The issue is not how the current share compares to its earlier value but how the current share compares to what it would otherwise have been.
Based on our analysis of the historical trend in the e-commerce share of retail sales, we conclude that absent the pandemic, the 2021Q3 e-commerce share would have been 12.5%, meaning the actual post-pandemic share was only 0.5 percentage points above that trend.
Sources: U.S. Census (Actual) and RCF Calculations (Trend)
Looking more closely at the data over the past two years it is easy to see how the narrative regarding the shift to online shopping emerged. In 2020Q2, the e-commerce share reached 15.7% compared to a pre-pandemic trend value of 11.4%. But since that time, the e-commerce share has declined because the growth in online sales has been substantially less than the growth in offline sales.
Actual and Trend E-Commerce Share: 2019Q4 – 2021Q3
Trend share forecast begins in 2020Q1
Put another way, based on our analysis of the pre-pandemic trend, the peak share of 15.7% would not have been reached until 2025. Thus, the conclusion – quite reasonable back then – was that the pandemic had caused a 5-year acceleration in e-commerce.
But the story now is quite different. The 2021Q3 share of 13.0% would have been otherwise reached in the first half of 2022, just 6 to 9 months ahead of schedule.
And if the e-commerce share continues to decline, it is possible that by the end of next year, the share will be no higher than it would have been absent the pandemic. In any case, it appears that the pandemic will end up having a much smaller permanent impact on e-commerce than was once believed.
Our analysis suggests that other pandemic narratives — be it the assumed shift to working from home, the labor market shortage, or numerous other social and economic changes — will have to be continually reassessed as new data become available.