Consumers and companies worldwide have ramped up online ordering for software products and digital goods as they struggle to improve productivity and security while working remotely and spending more time at home.
2Checkout on Monday released a report that indicates a sharp spike in online commerce aligning with the timing of the current global pandemic. The report is based on the company’s global online sales data collected in March from more than 17,000 merchants selling both services and digital and physical goods.
A key finding shows the demand for digital goods trended upward beginning in March. Software-based offerings — including multimedia tools (40 percent), collaboration (22 percent), and end-point security solutions (15 percent) — accounted for the highest levels of growth for March compared with February.
Overall, 2Checkout estimated a 15 percent increase in online sales of digital goods globally due to the COVID-19 lockdown. Sales of physical goods during the same period did not show any significant growth globally.
The lack of global growth for physical goods could be attributed to the interruption in the supply chain and logistics related to the delivery of physical items, according to 2Checkout’s researchers.
The findings are pretty significant when compared to pre-pandemic conditions, noted Erich Litch, president of 2Checkout.
“We also analyzed year-over-year data to understand trends at country and category level. So we are confident that the upward trends are generated by the pandemic,” he told the E-Commerce Times.
Report Parameters
The company is an all-in-one monetization platform that helps online businesses sell digital and physical products in the international market. The modular platform offers capabilities in several areas: global payments (more than 45 methods at a global level), digital commerce, subscription billing, global tax and financial services, risk management and compliance, and partner management.
“We noticed a decline in transactions with offline payment methods involving cash, such as Cash at 7-Eleven in the USA. The weight of this payment method is small — less than 1 percent of our U.S. transaction volumes. However, we noticed a 30 percent decline in cash payments, which was expected,” Litch said.
The data at country level is based on shopper-country transactions, which provide 2CheckOut with a very wide data set for analysis.
Researchers compiled the data from actual sales records. They also conducted a survey among the client and prospect population to understand what challenges they were facing and what measures they had taken to cope with the pandemic. Those results have not yet been released.
2CheckOut’s clients range from enterprise-level companies such as HPE Software, myFICO, Kaspersky Lab, and Malwarebytes to small and mid-size enterprises (SMEs) and a long tail of micro businesses in more than 200 countries and territories.
Other Findings
The report tracks the COVID-19 Impact on global online sales. It shows that online sales of services such as advertising or business services also retracted, with declines of 11 percent in March 2020 compared with the previous month.
Italy was the first country to have a significant increase in orders beginning March 9. In other countries online sales spiked in mid-March, coinciding with government-mandated lockdowns.
A surge in endpoint security sales occurred across many countries except Germany, which normally maintains a strong market for consumers and businesses in this category.
Sweden has not experienced a significant increase in digital goods sales, but it has seen a continued increase in services sales as expected. Residents there are not under shelter-in-place orders.
“The data we are seeing during this time of uncertainty demonstrates a sharp rise in the purchasing of digital solutions — designed to improve both the productivity and security of the global workforce operating remotely, as well as home entertainment — as part of a social distancing effort,” said Litch.
Country-Specific Data
Following is a sampling of consumer buying activity in March as consumers and businesses started ramping up shopping as the health emergency spread. Based on the patterns revealed in the March analysis, Litch expects to see an increase in online sales across categories in the near-to-medium term at higher levels than estimated prior to the pandemic.
“So even if not at the same growth rate as in March 2020, we expect the upward trend to continue, so this is likely to become the new norm,” he said.
- United States — The number of orders started increasing in the U.S. on March 17. On average, online sales were 10 percent higher in March compared with the previous month, 13 percent for digital goods. On the digital goods side, orders increased mainly for endpoint security and audio-video/multimedia software.
Among other categories, such as financial products, no significant increase was seen other than the organic one. Services saw a decline in online sales by 8 percent compared with the previous month, while online sales of physical goods saw a mild increase month over month of 2 percent.
- United Kingdom — The UK is among the top three markets for most categories in the 2Checkout sales charts. That country saw a 14 percent increase in online sales of digital goods in March compared to the previous month.
Online purchases of services showed a 4 percent decline. A drop of 7 percent occurred for physical goods sales.
- Italy — Italy was the first country where the number of orders spiked dramatically, starting March 9. On average, online sales of digital goods were more than 40 percent higher in March compared with the previous month.
Orders increased mostly for endpoint security, audio-video software and Web tools. Physical goods online sales in Italy also were on an upward trend. However, online sales of services were down by 21 percent from the previous month.
- Spain — The number of orders increased significantly in Spain beginning March 15. On average, online sales for digital goods were 30 percent higher in March compared with the previous month.
Orders increased mainly for endpoint security, utilities and audio-video software. On the physical goods side, online sales saw a decrease of 17 percent. Services suffered an even bigger decline at 39 percent.
- Germany — The number of orders started peaking in Germany on March 19. On average, online sales of digital goods were 15 percent higher in March compared with the previous month. Orders increased primarily for audio-video and multimedia software.
Germany is a strong market for endpoint security products, indicating consumers and companies are buying these products anyway. That makes the COVID-19 impact less significant on this product category. E-commerce sales of physical goods were up by 4 percent, and services were down by 7 percent in the same period of time.
- Sweden — The volume of online orders for digital goods in March was only slightly higher than the previous month at an 8 percent increase. It is a small increase compared to other developed countries.
At the same time, researchers identified an upward trend on online sales of services during March. Both trends were probably due to the lack of lockdown. The sales evolution remains to be seen for April 2020.
- Australia — Australia’s data showed a slight increase in digital sales. However, Australia also saw a decrease in e-commerce sales of services, a 10 percent decline in March over February.
New Normal Developing
If the pandemic evolves as many epidemiologists expect — that is, receding and then recurring until more effective testing procedures and a vaccine are developed — the massive jump in online commerce likely will be permanent and even could grow, suggested Charles King, principal analyst at Pund-IT.
“That would provide obvious benefits to established online retailers like Amazon, but it could also create opportunities for mainstream retailers to up their online commerce game and open the door to disruptive new companies,” he told the E-Commerce Times.
The 2CheckOut report does not flag anything as being unexpected, questionable or problematic. However, it does raise questions about how supply chains can or will adjust to the new normal, King added.
“As many reports have noted, the pandemic has shown some cracks in Amazon’s armor in terms of the speedy delivery promised to Prime shoppers,” he pointed out. “If the company and its suppliers fail to address that, it would erode or remove one of Amazon’s biggest advantages.”
It’s worth considering how brick-and-mortar merchants will fare if online retailers and suppliers fail to address their supply chain shortcomings, King suggested. If they fail to find speedy solutions, consumers and businesses might revert to supporting local retailers.
“If that happens,” he said, “expect those businesses to develop new services and offerings designed to keep customers coming back for more.”
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In light of the explosive growth of e-commerce, it comes as no surprise that new trends evolve almost daily. Business owners should be aware of them to remain competitive and retain their target audience.