The mantra of 2022 should really be: nobody knows anything.
It’s amazing how little we understand about how the pandemic has changed our lives and our country. It’s not clear whether the US economy is hot or not, or whether major cities like New York will be scarred forever. We’re not sure if women’s careers are permanently affected or if our mental health will be okay.
The future of our online shopping habits is another unknown.
The government recently revealed that the US e-commerce boom during the pandemic was even bigger than it previously thought. But in 2021, that trend started to reverse a bit. Physical stores beat e-commerce last year and continue to do so this year. The trajectory of internet purchases has changed from bananas to confusing bananas.
Now business leaders, retail analysts and economists are trying to figure out how quickly we can move into a future where online shopping is the primary mode of shopping. Will internet purchases return to something like the fairly steady growth rate of the decade before 2020? Or has the pandemic given our e-commerce life a permanent boost?
Don’t expect a definitive answer just yet, but the coming weeks with clues from Amazon, Walmart and government sales data will give us a better idea.
This isn’t just a nerdy debate. Our collective buying behavior affects trillion dollar companies, millions of retail jobs and the health of the US economy. The uncertainty about the direction of online shopping is one of the biggest questions facing the tech industry and financial markets right now.
8 signs the economy is losing steam
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Worrying prospects. Amid continued high inflation, rising consumer prices and declining spending, the US economy is showing clear signs of slowing, fueling concerns about a possible recession. Here are eight other measures that point to problems ahead:
Consumer confidence. In June, the University of Michigan survey of consumer confidence reached its lowest level in its 70-year history, with nearly half of respondents saying inflation is affecting their living standards.
The housing market. Demand for real estate has declined and construction of new homes is slowing down. These trends could continue as interest rates rise and real estate companies, including Compass and Redfin, have laid off workers in anticipation of a downturn in the housing market.
Buyer. A commodity that analysts see as a measure of sentiment about the global economy — due to its widespread use in buildings, automobiles and other products — copper has fallen more than 20 percent since January, reaching a 17-month low on July 1. .
Oil. Crude oil prices have risen this year, partly due to supply constraints caused by the Russian invasion of Ukraine, but lately they have begun to falter as investors worry about growth.
The bond market. Long-term government bond yields have fallen below short-term yields, an unusual event that traders refer to as a yield curve inversion. It suggests that bond investors expect an economic slowdown.
I will try to depict the store situation as clearly as possible.
For most of the decade before 2020, Americans increasingly bought online at a predictable pace. According to data from the Census Bureau, e-commerce sales were up about 10 to 15 percent a year, taking a little more each year from the money Americans spend in stores.
Then online shopping became hyperactive, with our online purchases rising by at least 50 percent in the first months after the virus started spreading in the US, according to recently revised government figures.
But when brick-and-mortar shopping gained momentum last year, online shopping has since lost ground. For many people it feels like a breath of fresh air to wander through the shopping aisles again. High inflation can also push people to spend more of their budget on essentials that we still mostly buy in stores.
Other signs point to a similar picture of slight growth for internet purchases, including data from Mastercard SpendingPulse, which tracks US purchases, which showed e-commerce sales rose just 1.1 percent in June from the same month in 2021. store purchases were up nearly 12 percent.
None of this is a shock. Of course, we wouldn’t continue shopping online as if it were spring 2020. And it’s likely that online shopping is a much larger part of US spending today than it would have been had the pandemic never happened.
The open question is what happens now. Are we going back to the relatively slow and steady growth of online shopping of 2019? Or will the Hermitian habits learned in the early stages of the pandemic continue to affect our shopping, accelerating this growth even faster? Or maybe even slower?
This is all a big headache for anyone selling stuff, but it’s important to us too. Amazon has said it overestimated how sustainable the online shopping mania would be and that it was overspending on new warehouses and other things. The company is pulling out, affecting the jobs of people and communities where Amazon is pulling out.
And I’m sorry to bring this up, but a golden age for online shoppers could be in jeopardy. Hangovers from the pandemic and other changes have made it more difficult and expensive for businesses selling gear online to buy, ship, store and advertise their products. If online shopping is less rosy in the coming years, merchants large and small may reconsider how much money they spend on e-commerce features we love, such as free shipping and in-store pickup.
Understanding inflation and how it affects you
If you thought the past few years have been insecure in terms of shopping and beyond, it might be even more so.