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Is eCommerce dying?

The eCommerce industry is experiencing more lows. As the pandemic-fueled boom fades and customers return to physical stores, many large eCommerce retailers are reporting lower sales. Is this a signal that the eCommerce industry was just a phase?

Amazon shares plunged for the biggest single-day drop since 2006. Last week, Amazon reported a 3% drop in online sales in the first three months of the year. They also forecast a meagre 3% sales growth for the current quarter.

Being the eCommerce behemoth it is, Amazon generally sets the pace for the rest of the industry. Other players in the eCommerce industry are showing signs of slowing down.

Share prices of SEA Ltd, the owners of South-East Asian eCommerce giant, Shopee, have been tumbling since the beginning of this year.

Lazada’s owner, Alibaba Group shares have also been tumbling.

Wayfair announced its active customer count dropped 23.4% from last year. Shares tumbled nearly 26% yesterday after this announcement.

Bed Bath & Beyond reported an 18% nosedive in online sales.

Etsy and eBay shares both dropped by double digits yesterday.

At least five senior executives from Meta’s fledgling eCommerce division have fled in the last six months.

Shopify shares plummeted about 15% on Thursday after posting lower-than-expected earnings.

What could be causing such steep drops?

As eCommerce demands grew during the pandemic, so too did shipping costs. Shipping a container from China to the US used to be $500, now it’s almost $20,000. Besides that, due to strong demand and not enough supply, shipping times have seen a major increase. This has increased delivery times.

The conflict between Russia and Ukraine has caused an increase in oil prices thus further increasing fuel costs.

Finally, as pandemic levels decrease so have the restrictions on going out. It simply become easier and more convenient to go out and buy stuff.

So why have Indonesia’s eCommerce giant, GoTo shares not dropped?

GoTo’s focus has been on local market supply and demand. They are not subject to international shipping issues. However, they are not entirely immune. Oil prices and inflation can still affect them in the long term. However, the recent palm oil export ban may slow down such an incident from occurring.

Overall it can be seen the drop in eCommerce shares may signal online shopping demands will continue but with weaker growth. Customers will still require brick and mortar stores for the smaller purchase items. A hybrid market may emerge eventually.

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