One of the most consequential forces in technology is how and
where you buy stuff, and
US online shopping has hit a wall.
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This might feel surprising if you see Amazon delivery vans
chugging through your neighborhood, but e-commerce sales growth has slowed.
This is hurting companies like Amazon that sell us stuff and tech titans like
Facebook that rely on advertising from online merchants.
The swing from pandemic e-commerce craze to malaise is one of
the biggest things happening in technology, financial markets and the economy
right now. The ripple effects of our shopping behavior have contributed to the
current sad phase for the technology industry and falling stock prices. They
also show how influential we are in the fate of trillion-dollar technology companies
and the U.S. economy.
The e-commerce sag could be temporary as people and businesses
adjust and then readjust to the pandemic. In the meantime, the uncertainty
about the future of our collective shopping habits is confounding normally
confident corporate executives and forecasters.
Let me recap what has happened with online shopping: When the
coronavirus started to spread in the U.S. in the early months of 2020, we spent
less on travel and services and more on physical goods, and we bought way more
than we usually do from the safety of our internet connections. Some experts
predicted that we had raced ahead to a future in which online shopping was a
far larger part of Americans’ lives and budgets.
And that did happen.
E-commerce now appears to be a bigger chunk of Americans’ spending than it
would have been if the pandemic had never happened.
But the change was perhaps not as drastic as some analysts had
expected. And in 2021, possibly for the first time, in-person shopping in the
U.S. gained ground on e-commerce.
That difference between online shopping expectations and reality
is starting to sink in, and it’s having surprising effects. Amazon during the
first three months of this year posted its slowest sales growth in decades, and
it warned of more of the same in the next few months. Amazon also said that it
would pull back on expanding its warehouses, where some business was so slow
that the company was sending workers home early.
Its quarterly financial results prompted questions about whether
Amazon’s e-commerce machine had peaked, although the pessimism could look silly
in six months or a year if sales go through the roof again.
This online shopping comedown isn’t confined to one company.
Other e-commerce stars including Etsy and Shopify, whose software powers online
businesses for millions of smaller stores, also posted unexpectedly low sales
growth or low expectations for the near future. An analysis by Mastercard
showed that U.S. online shopping purchases fell in March for the first time in
nearly a decade, while in-store purchases climbed.
It’s not surprising that e-commerce buying soared when people
were hunkered down at home in 2020 and slid backward once many felt more
comfortable shopping in person and were again eager to splurge on travel, eating
out and other in-person activities. But companies didn’t really see this
pendulum swing coming.
Facebook’s parent company, Meta, said last month that its
suddenly meh advertising sales were due in part to online shopping companies
becoming less eager to buy ads on Facebook when their sales were under
pressure. “The acceleration of e-commerce led to outsized revenue growth, but
we’re now seeing that trend back off,” Mark Zuckerberg told Meta investors two
weeks ago.
And Meta said recently that it was slowing its hiring.
All of this cost-cutting and lack of confidence in the future
would have seemed wild six months or a year ago, when Meta, Amazon, Google and
other tech companies had stupendously bonkers revenue and profits.
The question this is raising is whether we misjudged the past
two years of technology-driven changes in consumer behavior. Yes, some of us
who picked up the habits of shopping more from home and Zooming everything will
continue to do so. But there’s been a return to 2019 behaviors, too. Recently,
I shook hands with everyone at a business meeting and wondered what happened to
the prediction that the coronavirus would end handshakes.
We still don’t know what “normal” looks like in the U.S. or
elsewhere, and we probably won’t for a year or more as our spending habits
adjust to higher prices, ongoing difficulties with manufacturing and shipping,
rising interest rates, continued coronavirus infections and a desire to frolic
in the real world.
The new normal for shopping probably doesn’t look like either
the comeback for physical stores that we’ve seen in the past six months or the
surge of online shopping from 2020. It is difficult to predict the collective
behavior of millions of Americans. And that is making all of technology
shudder.
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