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Bielefeld, September 9th, 2022 – E-commerce is the new normal, the Bundesverband E-Commerce und Versandhandel Deutschland e.V (bevh) announced at the beginning of 2022. And it had (had) every reason to be in January – with sales growth to over 80 billion euros in 2020 and a renewed boom to 100 billion euros in gross sales in 2021. According to bevh, every seventh euro in 2021 was spent on goods in e-commerce. Online retailers could hardly save themselves from orders for the most diverse product categories from garden furniture to fashion items. Even the stepchild of German online retail, foodstuffs, was able to generate an increase in sales of over one billion euros due to the 2021 pandemic. So good times for logistics service providers in e-commerce fulfillment. And now?
Is the online retail boom over?
Headlines such as “End of the boom in online retail”, “Dark times” and “Disillusionment in online retail” are circulating. The weekly newspaper Die Zeit even called the figures in relation to retail and online trade “dramatic”. Industry associations and e-commerce giants such as Otto or Amazon are lowering their forecasts for sales in 2022 – such as the German Retail Association (HDE) – or are no longer issuing forecasts at all. The market seems too uncertain. Is it really the end of the e-commerce hype?
The crux of the high bar
We give a resounding no to this question. It is true that consumers are changing course. Since the beginning of the war in Ukraine, German shoppers have become more pessimistic. Increasing inflation in all areas from food to energy is worrying consumers, so that the GfK consumer climate index has measured the worst value since 1991. However, this does not only affect e-commerce, but also stationary trade to the same extent. “We are definitely noticing a certain decline in sales with some of our customers. Whether and to what extent our customers feel the reluctance of consumers depends to a large extent on the product range. For some things, money is simply not as easy as it used to be in the past,” says Thomas Finke, Head of E-Commerce at B+S, giving an insight into the current situation.
Nevertheless, German consumers have rarely been more open to online trading. How does such a slump in sales come about? In order to understand this trend and put it into perspective, we have to shift our perspective. Away from the boom years 2020 and 2021. Because, for example, due to the lockdowns and shop closures, the cancellation of various vacations and thus the availability of that certain something of money for other nice things, these two pandemic years have raised the growth bar in e-commerce very high. However, growth forecasts for 2022 were often made on the basis of these two years. A misleading comparison. Because if you look at the relevant value of the pre-Corona year 2019, you immediately get more optimism. Total sales in online retail in the second quarter of 2022 are 25.8 percent above the comparative value in the pre-corona year 2019, according to bevh. So we should be talking about a return to normal growth rather than a crash.
But not only planning at Corona level is a problem for some online retailers, Thomas Finke knows: “The crux of the high bar is the external influences that have forced our customers to act. Stuck container ships, a corona-related lockdown in China, a high order situation in the last two years: online retailers wanted to prevent one thing this year – and that is a supply bottleneck that has cost online shops a lot of sales in recent years. As a result, enormous inventories were built up and capital tied up with them. And now? The war in the Ukraine is reducing sales in Eastern Europe, and the general reluctance of consumers means that goods remain in storage. And goods that are lying around bring in less sales than goods that are turning.” Nevertheless, Thomas Finke is positive about the future: “Despite all the challenges, we are well prepared for the year-end spurt and the peaks around Black Friday, Cyber Week or the Christmas business.” After all, consumers will probably still not want to miss out on bargains, and there will be presents under the tree again in 2022. “We are ready for the peak,” says Thomas Finke happily.
How online retailers can score despite inflation and material shortages
But what does the current mix of restraint and optimism, material shortages and safety stocks mean for online retailers? So that they can continue to grow healthily, it is necessary to adapt their processes and strategies to the current challenges. Current figures from bevh show that online retailers who not only rely on the connection to stationary trade but also to the connection to marketplaces are more resistant to the decline in sales. It is therefore more important than ever to push ahead with the expansion of sales channels and thus also to align your logistics processes with this type of diverse range of goods – including transparent data flow between shop, merchandise management and storage systems.
In times of lower total sales, it is also the top priority to optimize the margins at item level. Here it is important to check all purchasing costs, sales prices, marketing or logistics expenses intensively and to derive the right actions, even if this means that some items are dropped from the range due to unprofitability. Outsourcing the processes to an e-commerce fulfillment service provider also helps to create synergy effects in terms of cost optimization. So that at the end there is still something left over from the cake in order to be able to grow healthily in the long term.