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The mantra of 2022 should really be: No one knows anything.
It’s stunning how little we understand about how the pandemic has changed our lives and our country. It’s not clear whether the U.S. economy is hot or not, or if big cities like New York will be forever scarred. We aren’t sure if women’s careers have been permanently impaired or if our mental health will be OK.
The future of our online shopping habits is another unknown.
The government disclosed recently that America’s e-commerce boom during the pandemic was even bigger that it previously believed. But in 2021, that trend started to backslide a bit. Physical stores beat e-commerce last year, and they continue to do so this year. The trajectory of internet buying has flipped from bananas to bananas confusing.
Now, corporate executives, retail analysts and economists are trying to figure out how quickly we might move to a future in which online shopping is the primary way to shop. Will internet buying return to something like the fairly steady growth rate of the decade before 2020? Or has the pandemic permanently turbocharged our e-commerce lives?
Don’t expect a definitive answer for a long time, but the next few weeks of clues from Amazon, Walmart and government sales data will give us a better idea.
This is not just a nerdy debate. Our collective buying behavior sways trillion-dollar companies, millions of retail jobs and the health of the U.S. 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 That the Economy Is Losing Steam
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Worrying outlook. Amid persistently high inflation, rising consumer prices and declining spending, the American economy is showing clear signs of slowing down, fueling concerns about a potential recession. Here are other eight measures signaling trouble ahead:
Consumer confidence. In June, the University of Michigan’s survey of consumer sentiment hit its lowest level in its 70-year history, with nearly half of respondents saying inflation is eroding their standard of living.
The housing market. Demand for real estate has decreased, and construction of new homes is slowing. These trends could continue as interest rates rise, and real estate companies, including Compass and Redfin, have laid off employees in anticipation of a downturn in the housing market.
Copper. A commodity seen by analysts as a measure of sentiment about the global economy — because of its widespread use in buildings, cars and other products — copper is down more than 20 percent since January, hitting a 17-month low on July 1.
Oil. Crude prices are up this year, in part because of supply constraints resulting from Russia’s invasion of Ukraine, but they have recently started to waver as investors worry about growth.
The bond market. Long-term interest rates in government bonds have fallen below short-term rates, an unusual occurrence that traders call a yield-curve inversion. It suggests that bond investors are expecting an economic slowdown.
I’ll try to present the shopping situation as clearly as I can.
For most of the decade before 2020, Americans bought more and more online at a predictable pace. E-commerce sales went up by about 10 to 15 percent a year, according to Census Bureau data, grabbing a little more each year from the money that Americans spent in stores.
Then internet shopping went hyperactive, with our online buying climbing by at least 50 percent in the first months after the virus started spreading in the U.S., according to recently revised government figures.
But then last year, shopping at physical stores picked up speed, and online shopping has since lost ground. For many people, it feels like a relief to roam store aisles again. High inflation may also be pushing people to devote more of their budgets to essentials that we still overwhelmingly buy in stores.
Other signs point to a similar picture of meh growth for internet purchases, including data from Mastercard SpendingPulse, which tracks U.S. purchases, that showed e-commerce sales increased just 1.1 percent in June from the same month in 2021. In-store purchases rose nearly 12 percent.
None of this is a shock. Of course we weren’t going to keep shopping online as if it were spring 2020. And it’s likely that online shopping today is a much bigger chunk of Americans’ spending that it would it have been if the pandemic never happened.
The open question is what happens now. Will we go back to the relatively slow-and-steady online shopping growth of 2019? Or will the hermitic habits learned in the pandemic’s early phase continue to influence our shopping, making this growth even faster? Or maybe, even slower?
This is all a major headache to anyone who sells stuff, but it matters to us, too. Amazon has said that it overestimated how enduring the online shopping mania would be and that it spent too much on new warehouses and other things. The company is pulling back, which affects people’s jobs and communities where Amazon is retreating.
And, I’m sorry to bring this up, but a golden age for online shoppers might be at risk. Hangovers from the pandemic and other changes have made it more difficult and expensive for companies that sell stuff online to buy, ship, store and advertise their products. If online shopping has a less rosy next couple of years, merchants large and small may rethink how much money they’re devoting to e-commerce features that we enjoy, like free shipping and order pickup in stores.
Understand Inflation and How It Impacts You
If you thought the past couple of years were uncertain in shopping and beyond, it might become even more so.