Digital transformation hit overdrive for retailers and restaurants in 2020

Commentary: We'll all be glad to see the COVID-19 pandemic end. Before it does, it's remaking key industries.

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Image: Tirachard, Getty Images/iStockphoto

Though some things have been tedious and slow during the COVID Era, the future happened really fast. Specifically, the future of how we buy things.

As Benedict Evans, an analyst (and former Andreessen Horowitz investor) who runs a popular weekly newsletter, called out, over the past three quarters U.S. e-commerce has grown as much as it normally would in three years. That's a blistering pace and, importantly, it's not merely helping those retailers and restaurants that have traditionally focused online. No, retail and restaurants in general are embracing digital extraordinarily fast. Why? Because transformation is better than extinction.

SEE: Digital transformation: A CXO's guide (free PDF) (TechRepublic)

Distributing the future more evenly

William Gibson famously said in 2003 that "The future is already here--it's just not evenly distributed." Following that thinking, the shift toward e-commerce is nothing new, even if it has benefited some pockets of the economy more than others. Indeed, e-commerce started (and, momentarily, stopped) with a bang during the dot-com boom/bust, and has steadily grown since then. 

That "steady" growth had a massive up-tick in 2020 due to COVID-19 (Figure A).

Figure A

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Image: Benedict Evans

In fact, in areas (like the U.K.) that locked down particularly hard, e-commerce grew even faster. In the U.K., e-commerce is now 30% of all retail, Evans reported, and 40% if we remove online groceries from that retail number. The U.S., by contrast, was locked down less (if at all, in some areas), so e-commerce is "only" 25% of all retail. But that's a big step up from 2019.

Restaurants have had a harder path. Early in the pandemic, surveys showed moving online to be the "biggest challenge" cited by nearly half of all restaurants. National fast food chains were relatively quick to embrace the new normal imposed by COVID, while smaller restaurants (as well as the chains) sometimes reluctantly embraced delivery services like DoorDash and Uber Eats. In turn, these businesses saw revenue roughly double during the pandemic, even as open questions remain about their profitability (and whether restaurants can afford to continue to use them post-pandemic). Food delivery, in short, remains an unanswered question.

SEE: Research: Digital transformation plans shift due to COVID-19 (TechRepublic Premium)

Online retail, by contrast, is not. It's here to stay. And, most importantly, it's not just the traditional online retailers who are benefiting. 

As Evans pulled out of the data, physical retailers are increasingly expanding their e-commerce businesses. Some of them are working through vendors like Shopify, which saw consumers spend nearly 100% more on the Shopify platform in 2020 than they did in 2019. Walmart (online sales up 79% in Q3 2020), Nordstrom (online sales now 61% compared to 30% in 2019) and other so-called brick-and-mortar retailers have aggressively built out their own e-commerce operations. All of this is good for consumers, who have a rising number of options when they need to buy something. 

No, we're not yet "in the online future," but we're getting there quickly. Restaurants still have a ways to go, but retail seems set to go increasingly online, with a hefty dose of brick-and-mortar presence.

Disclosure: I work for AWS, but the views expressed herein are completely my own.

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