Why 2020 Ecommerce Sales Will Top $1.1 Trillion Dollars: 5 Predictions

predictions-for-cyber-weekend-2020

It’s January 1, 2021. As people around the world wake up and some shrug off hangovers from socially distant New Year’s Eve celebrations, many eagerly set their sights on a more comfortable, simplified, and hopeful year ahead. As they tune into the news of the day, they spot this headline: “Ecommerce Sales Top $1.1 Trillion Dollars for the First Time Ever.”

Rewind back to February 2020. 

COVID-19, or the coronavirus, was just beginning to make major headlines, yet it was still an issue that hadn’t quite registered for most Americans at the time. 

Jessica Young, from Digital Commerce 360, had just told the world that US ecommerce sales had grown 14.9 percent in 2019—a relatively stable growth rate that was in line with their last decade’s worth of data. 

Assuming a simple straight-line projection, that would mean ecommerce sales for 2020 would have likely closed out the year at approximately $691.4 billion dollars—well-shy of that trillion-dollar headline. But that was before the enormous upheaval of a global pandemic. 

Fast-forward to today, July 31, 2020. 

The pandemic has reshaped economies, labor forces, and how people shop worldwide. More than ever, people took to the internet earlier this year to make purchases as stay-at-home orders and social distancing guidelines emerged. 

Because of this, 2020 will be the largest year ever in terms of ecommerce-driven sales, which are projected to top $1.1 trillion dollars for the first time in history, according to Klaviyo’s research.

Why will 2020 be the biggest year ever for ecommerce sales?

Over the last six months, states and stores have closed and reopened to a degree, though many have pulled back reopening plans amid persisting public health concerns. 

The new guidelines to keep people safe came with a hefty price tag—many storefronts, big and small, couldn’t withstand downward sales trends and were forced to close.

Others were forced to reinvent themselves and pivot their product offerings to remain essential in these new times. 

All were forced online in one way, shape, or form, leaving many brands having to immediately develop or lean into a fledgling ecommerce presence in ways they had never anticipated. 

2020 has brought about the single-greatest migration to ecommerce the retail world has ever seen. Broadly speaking, various news outlets have cited major upticks in online sales since the start of the pandemic. And specifically, on the consumer side, 90 percent of people said they were now shopping online, according to Klaviyo’s research. 

This tremendous growth is also highlighted in the sales data for the more than 38,000 ecommerce brands that Klaviyo supports. 

Klaviyo’s data science team took a look at the growth in sales these brands experienced this year across categories like essentials, non-essentials, and a new category that’s emerged as a result of the pandemic—new essentials. They then compared that data with what consumers were expected to spend before the virus hit and the term “social distancing” became part of our everyday lives. 

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They also took a look at the trailing three-day average daily sales for all of these brands—a core metric used to assess growth in ecommerce, which highlights the total daily sales over a three-day period for a group of businesses. 

Researchers found that in May 2020, at the height of nationwide stay-at-home orders, the trailing three-day average sales for these brands increased by more than 100 percent compared to the three-day trailing average from the pre-COVID days of January.

Even now, as many states have reopened and consumers have more access to storefronts, the trailing three-day average daily sales for these 38,000-plus businesses is still 57 percent higher than it was in January. And in Q2, the trailing three-day average sales for these same 38,000-plus brands was 55 percent higher than in Q1 overall. 

Even as people can now return to in-store shopping in many states, this data indicates that ecommerce is still booming. 

This ongoing retail migration online, combined with how consumer behavior will continue to change due to the pandemic, is precisely what will drive ecommerce sales to grow by 60 percent on top of the standard 15 percent growth rate that Digital Commerce 360 has reported in recent years. Ecommerce sales, overall, will likely grow a total of 85 percent this year and ultimately top $1.1 trillion in 2020, according to Klaviyo’s projections. 

Combine this projection with the $88.9 billion in Q2 2020 sales that Amazon reported, according to VentureBeat, which represents nearly $1 billion in sales per day, and knowing that Amazon drives more than one-third of ecommerce sales, it’s clear that this year will make headlines come January. 

While 2020 looks like it will shape up to be the single biggest year for ecommerce ever, the same can be said for Cyber Weekend (November 26, 2020 – November 30, 2020). 

Assuming Cyber Weekend sales represent a similar proportion of relative overall ecommerce sales in 2020 as they have previously, Cyber Weekend sales should come in at $51.1 billion—a sales number that’s likely to be larger than what we’ll see across the same weekend the following year (2021). 

Are these predictions in contrast with what others like eMarketer are expecting will happen? Yes. Could the exact numbers be off? Sure. But I’m confident in sharing these predictions based on the data Klaviyo collects. Whether the numbers themselves are exactly right or not, one thing’s certain: 2020 will be the biggest year in history for ecommerce sales.

Here are five more reasons why this year will likely be the biggest for ecommerce yet.

5 predictions that will drive ecommerce’s best year ever 

The onset of the coronavirus pandemic changed our daily lives drastically, yet those changes are just the beginning. More changes are on the horizon for the ecommerce space. Here are five predictions about what will drive those changes.

 

1. Consumer shopping behaviors have shifted, but they’ll never entirely shift back. Online is the new normal.

At the end of 2019, more than 40 percent of Americans were reported to have shopped from a direct-to-consumer (DTC) brand in the past year, according to Diffusion PR—and this data was widely cited across the ecommerce industry.

Just three months later, more than 70 percent of consumers were shopping online as of the end of March 2020, and by April 10, 2020, that number had grown to 90 percent, according to Klaviyo’s data

If you dig deeper into the data, you’ll see that the number of unique purchasers who shopped from more than 38,000 Klaviyo-powered brands by May 2, 2020, had increased by 102 percent compared to the pre-COVID timeframe. As of the end of July 2020, the number of unique buyers who shopped online from these same brands remained 62 percent higher than during the pre-COVID timeframe. 

Many people thought that, as states and stores began to reopen, ecommerce sales would return to their normal levels. That hasn’t been the case. Data shows that shopping online is the new normal. 

As the pandemic surged across the US in April 2020, the trailing three-day average daily sales was up over 100 percent compared to the pre-COVID timeframe, according to Klaviyo’s data. Now, even as many states have reopened, the trailing three-day average daily sales is still up 57 percent compared to the pre-COVID timeframe. 

While ecommerce sales may have been artificially higher at the onset of the pandemic due to stay-at-home restrictions, it’s unlikely that there’s an environment where in-person shopping returns to pre-COVID levels anytime soon. Between social distancing restrictions, headcount capacities, and lingering concerns of the virus spreading, ecommerce has won people over either by design or necessity.

 

2. An ongoing first wave and an imminent second wave of the coronavirus will continue to upend our daily lives.

Currently, in the US, the pandemic’s impact varies greatly by state. Three of the four largest economies in the country (California, Florida, and Texas) are surging with positive cases, despite it still being only the first wave of the pandemic. 

States that peaked earlier in the year and flattened the curve, like New York and Massachusetts, are proceeding with their reopening plans while hoping to avoid seeing another surge. 

In the Midwest, an impending surge is likely. Meanwhile, across the country, there’s controversy about wearing masks and schools are struggling to figure out if they’ll even be open for enrollment this fall. 

While the ability to go outside and stay socially distanced in many parts of the country is giving people some semblance of normalcy at the moment, that will likely shift as colder months arrive and people are forced back indoors. 

The question remains—as people go back inside, will they continue to practice proper social distancing or will we see the virus spread again? 

The truth is, nobody can answer that for certain. But, based on what we’ve seen so far, it seems as though a second wave is imminent. 

Even in Asia, where the virus was under control three months back, there’s now an alarming spread that’s evoking a potential second wave and the reimplementation of strict restrictions. 

If a second wave does hit the US in the fall or early winter months, many states will have no choice but to implement the second round of stay-at-home orders to curb the spread. This lockdown period, like the first, will force even more people back online. 

The result? We’ll once again see record-breaking days in the ecommerce space. What will drive this? A fresh set of new essentials. 

As consumers brace for cooler months and the need to once again occupy their time at home, they’ll need a new set of goods to keep them healthy, happy, and entertained.

 

3. Department stores are experiencing an inventory problem and it’s flying under the radar. 

With earnings reports coming soon, there’s no doubt that many retailers, especially those with brick-and-mortar storefronts, will post weak numbers for Q2. And while reports are indicating that June retail sales approached pre-pandemic levels and were just slightly behind June of 2019, most of these major retailers had difficulty moving their inventory during Q2.

Retail stores typically purchase their inventory six to nine months ahead of the next season, which enables them to have on-trend products for consumers as each new season approaches. 

But what do you do when three months have passed and you’ve been unable to open your doors to sell a season’s worth of clothing or home goods? 

Typically, most major department stores would turn to off-price retailers like TJ Maxx, Ross Stores, and Nordstrom Rack. Unfortunately for many consumers, beloved off-price retailers like TJ Maxx, Marshalls, and Home Goods, for example, decided not to ramp up their ecommerce presence during the pandemic. 

While temporarily shut down in Q2, the owner of these off-price retailers, TJX, retired the minor ecommerce presence they had while simultaneously closing their 4,400 physical stores for 90-120 days, driving no revenue. 

In late May 2020, as these off-price retailers began to reopen, they moved several months’ worth of clothing to their discount sections to make space for new inventory. 

Ultimately, according to Glossy, TJX could be a winner in the pandemic. But it begs the question—will routing inventory to off-price retailers be enough for the big box retailers to recover? 

Like many other industries, the pandemic effortlessly stopped the brick-and-mortar retail system in its tracks. Many big box brands couldn’t move their inventory and, as a result, many couldn’t acquire the capital they needed to purchase new inventory for the next season. In some cases, brands like Gap asked their suppliers to halt the production of fall goods

How does this impact the end consumer? 

Simple. As consumers venture out to purchase products for the fall and winter, they may very well find the stores they frequent don’t have the same selection they’re accustomed to. 

What’s a consumer to do when this happens? 

They’ll once again turn to ecommerce—a place where they can find anything they need. In many cases, they may shop directly from a brand, like The North Face, for example, that they would have previously purchased from a multi-brand department store like Macy’s. 

The impact on ecommerce sales is clear: even when consumers return to brick-and-mortar stores, many may, in turn, head back to ecommerce to fulfill their needs if they can’t find what they want in stores. 

This phenomenon is part of what will drive that staggering predicted $1.1 trillion in sales.

 

4. Discounts once reserved for Cyber Weekend will appear earlier and more frequently this fall.

The traditional sales cycles that retail marketers live by have, in many cases, been upended. 

In 2020, there was no “resort season.” Consumers went online to buy gifts for traditional spring and summer holidays, like Mother’s Day, Father’s Day, and graduations. Summer travel plans were replaced by staycations. And as we approach the fall, it appears that back-to-school shopping will remain in flux as colleges, universities, and school districts across the country grapple with whether or not school will be in session as normal—or if parents even feel comfortable sending kids back to school, if so.  

For some industries, these changes have been a bright spot. Staycations and backyard improvement projects have been key sales drivers for those brands that offer new summer essential products, like Solo Stove and their innovative firepits, which help people be more comfortable and enjoy their time at home. 

But for other retailers, especially those with key brick-and-mortar locations in states like  Florida, California, and Texas that are battling a surge, this time has presented what may seem like insurmountable challenges when it comes to moving inventory. 

As brands look to make the most of the second half of 2020, many will invest more heavily in ecommerce and will likely look to a discounting strategy as a means to catch-up. 

In Q2 2020, Shopify, one of the largest ecommerce platforms, saw the number of new stores created on their platform grow by 71 percent

It’s likely that a portion of these stores were Main Street hold outs that are now focused on building their ecommerce presence due to sales they lost during the earlier half of the year and in anticipation of a potential second wave that would cause another shutdown.

When it comes to discounts, consumers got used to seeing these earlier this year. So far this summer, according to Klaviyo’s data, brands have already sent three billion discount-focused emails, which represent 36 percent of total email sends during this timeframe. 

Since brands are already sending discounts at this volume, it’s unlikely that they’ll stop. In fact, discounts are likely to carry through Q3 and lead the ecommerce industry into a remarkable Q4.

 

5. Cyber Weekend 2020 will be the biggest event for ecommerce sales that we’ve ever seen—even bigger than Cyber Weekend 2021.

In 2019, nearly 190 million people shopped across the five-day period—up 14 percent from the previous year, according to the National Retail Federation (NRF), and Cyber Weekend accounted for 4.72 percent of total ecommerce sales—an estimated $28.4 billion dollars, according to Adobe

Combine these predictions with how consumer behavior is anticipated to continue changing and you’ll see a highly competitive holiday shopping season this year—one that’s projected to drive $51.1 billion dollars in sales. Here’s why.

First, to try and round out an overly challenging year, we’ll see retailers use timely discount-focused messages and they’ll begin sending them out even earlier this year.

Next, consumer behavior will once again shift. 

People won’t have easy access to the brick-and-mortar retailers that they’d usually shop with during the holidays. If there’s a second wave of the pandemic, stores will likely be closed. If there isn’t a second wave, stores will still likely have to adhere to social distancing restrictions, which include reduced capacity and limited hours, to keep a second wave at bay. 

In both cases, people will likely have to do more of their holiday shopping online this year.

What’s more, consumers who traditionally travel by air to visit family and friends for the holidays may not be able to or choose to do so this year. This will again drive consumers to shop online and ship gifts to their loved ones directly, further bolstering ecommerce sales. 

Finally, looking at the data from Cyber Weekend 2019, Klaviyo’s business intelligence team found that 60 percent of Cyber Weekend sales were driven by consumers who engaged with an email from a brand prior to Q3 that same year. Additionally, consumers who engaged with a brand’s email by clicking on it had a 10 percent greater average order value and accounted for 53 percent of total sales. 

What does this mean for 2020? Big results.

Never in the history of ecommerce has there been such a condensed period of relationship-building between brands and consumers. 

At the initial peak of the first wave, new purchasers were driving the majority of ecommerce sales. With each new purchase, brands had an opportunity to capture an email address and begin building a relationship with their subsequent marketing. 

Additionally, website forms that captured email addresses grew by over 100 percent in April and May 2020—another indicator that consumers were willing to start relationships with new brands.  

Knowing that 60 percent of Cyber Weekend sales are driven by the relationships that are formed before Q3, brands are in a unique position right now to set themselves up for great success this holiday season. 

What does this mean for brands?

Consumers are continuing to discover new brands online. 

As seasons and temperatures change, people will once again want to update their living spaces to accommodate their current needs. Children will need new items to navigate a return to schools or to supplement home-based learning. Home offices appear to be getting even more permanent as early innovators like Google announce longer-term or permanent work from home policies. 

While many brands have thrived or are in a position to thrive through the second half of the year, this comes at a juxtaposition to the current state of the world. 

Many of the brand founders and ecommerce marketers I’ve spoken with over the last few months have shared a variety of emotions. 

The growth is incredible. It’s unlike anything they predicted to occur in 2020. But it’s humbling, too. They realize their growth is coming as a result of the stress and loss the greater world is facing amid a pandemic we’re all still learning how to navigate.

Despite all of this change, though, the playbook to win hasn’t changed. The priority, however, has become clearer: brands have to build and maintain relationships with customers. It’s the only way to truly win, long-term. 

Here are three things any brand founder or ecommerce marketer should be thinking about and questions they should be asking themselves right now: 

 

1. Use your data to create memorable moments

Are we leveraging our data to create, curate, and control the experience we create for our customers? Are we building memorable moments with our marketing that will convert new customers and keep existing customers coming back? Are we doing so in a way that feels thoughtful, authentic, subtle, and in no way that could be perceived as creepy?

 

2. Be transparent and set expectations accordingly

Are we being transparent with our customers? Are we setting the proper expectations with our inventory availability? Are we communicating clearly regarding things like shipping delays? Are we building relationships to put our best foot forward and create positive first impressions of our brand? 

 

3. Communicate with empathy and awareness of how customers are feeling

Are we communicating with the proper level of empathy and awareness of what’s happening in the world? Whether people realize it or not, the stress we’re all living under and dealing with daily can still be incredibly overwhelming at times and it’s having a profound effect on what we deem important, how we want to live our lives, and what’s part of those new lifestyles.

Remember, these are predictions.

They may or may not come true. 2020 has been a year of constant flux with new variables and changes occurring on a near-monthly basis. But based on what we’ve all seen so far and what the data is telling us, these predictions are things that brands and consumers are likely to see throughout the remainder of the year.

Ecommerce is going to have its biggest year ever and it will drastically surpass the predictable 15 percent growth rate it’s consistently experienced over the last decade. This growth will lead to the biggest Cyber Weekend ever—bigger than what we’ll see in 2021. 

With hopes of a vaccine being available next year, if effective and readily available, people will likely be able to return to a more normal way of living and shopping. And at that point, malls, department stores, and other brick-and-mortar businesses will be ready and able to welcome back the browsers and shoppers of holiday seasons to come. 

Learn more about why building relationships with customers well-ahead of the holidays is essential for Cyber Weekend success.

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