US eCommerce Disruption 4.0: Pandemic Impact Has Staying Power

THE COWEN INSIGHT

In our 4th annual eCommerce study, we find the sector reflecting outsized growth. Our updated US eCommerce vertical model suggests eCommerce sales will reach $1TN in ’22, roughly 2 years ahead of our prior estimate. This is likely because COVID-19’s impact on consumer behavior has some permanence.

We estimate US eCommerce sales of $867BN in ’20, +48% y/y. This increase is primarily driven by massive growth in the Consumables, Food & Beverage and Home verticals. We forecast >10K big brand store closures in ’20, largely due to COVID-19.

Online Grocery is at an inflection point, with users nearly doubling during the pandemic, including 32% of survey respondents using Online Grocery vs 18% a year ago

What makes Cowen’s Proprietary eCommerce Vertical Model unique?

1. US eCommerce vertical model: provides investors with a clean framework for quantifying eCommerce’s disruption overall, and by vertical
2. Proprietary Monthly Recurring US Survey: provides insights on COVID’s impact on consumers and years of data on AMZN trends
3. Data from Cowen’s Retail Store Closure Database

COVID-19 Drives Massive Acceleration of US eCommerce Penetration

1. Updated model suggests US eCommerce sales rise to $867BN in ’20, +48% y/y and to $1.4TN in ’25, a 10% CAGR
2. COVID-19 consumer tracker data shows higher online shopping alongside a reticence to return to physical stores
3. Our US retail store closure database implies >10,000 major chain / brand retail store closures in ’20 vs. ~9.2K in ’19

Looking Ahead Into ’21 and Beyond

We forecast US eCommerce growth of +11% y/y in ’21, despite the difficult +48% y/y comp in ’20. This could prove to be conservative as:

1. eCommerce spend remains elevated per our data despite store re-openings suggesting some permanence to shifting consumer spend
2. Accelerating store closures the past few years drives eCommerce spend shift
3. Food & Beverage and Consumables are key growth drivers. We estimate they will account for 34% of incremental eCommerce spend in ’20 vs. 16-19% the prior 5 years.

These under-penetrated, high purchase frequency verticals will drive eCommerce growth in ’21-’25. They account for 36-37% of incremental eCommerce sales per our estimates, well above pre-COVID contributions. Home & Auto will also drive growth in the coming years.