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Ecommerce Surged Above Holiday Levels in May, Pointing to a Huge Q2 for Amazon and Others

Ecommerce spending surged 78% in May, and recent commentary from retailers shows that consumers are embracing a range of choices, not just delivery.
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As consumers sheltered at home, ecommerce spending surged 78% in May and exceeded holiday levels of online spending. 

That's according to Adobe Analytics, who put a dollar figure on just how much ecommerce has growth in the COVID-19 pandemic. The pandemic led to $52 billion in extra online spending, based on actual spend versus prior projections. May generated $82.5 billion in total online spending, with ecommerce shopping levels tracking above the heavy spending period of November and December 2019. 

"With consumers now having had three months to adjust to 'the new normal’, we are seeing signs that online purchasing trends formed during the pandemic may see permanent adoption," said Taylor Schreiner, director at Adobe  (ADBE) - Get Adobe Inc. Report Digital Insights "While BOPIS [buy online, pick up in store] was a niche delivery option pre-pandemic, it is fast becoming the delivery method of choice as consumers become more familiar with the ease, convenience and experience BOPIS offers."

All signs point to a huge second quarter for ecommerce firms like Amazon  (AMZN) - Get Inc. Report, as well as retailers with a well-developed online footprint. 

Amazon will benefit from "exceptionally strong" ecommerce demand in the second quarter, wrote Wells Fargo analysts in a note this week. And Amazon's recent investments in its core fulfillment infrastructure will reap rewards later in the year, particularly during the holidays.

Other retailers have pointed to strong demand in Q2 as well. EBay  (EBAY) - Get eBay Inc. Report, for example, recently raised its second quarter and full-year sales outlook, guiding for Q2 sales between $2.75 billion and $2.80 billion, versus a prior forecast of $2.38 billion to $2.48 billion. The company expects $9.56 billion to $9.76 billion in revenue for the full year.

Walmart and Target both withdrew their full-year sales outlook, but also reported soaring online sales in the first quarter. 

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Target  (TGT) - Get Target Corporation Report reported in late May that its same-day services, which include drive-by pickups for goods bought online, ballooned 278% in the first quarter; overall digital sales rose 141%. Walmart  (WMT) - Get Walmart Inc. Report noted 74% growth in its U.S. ecommerce business last quarter, and also expanded its express delivery and store fulfillment capabilities. 

Retailers are aiming to parlay the recent online sales surge into lasting gains. 

"I think we've accelerated our digital fulfillment awareness with the guests and fulfillment capabilities by upwards of three years," said Target CEO Brian Cornell on a recent shareholder call. Walmart management said it's focused on providing a range of choice in fulfillment during COVID-19, with customers gravitating towards store pickup and delivery.

According to an Adobe survey of over 1,000 U.S. consumers conducted in early June, 23% preferred buying online, then in-store or curbside pickup over home delivery. Pickup options are likely to remain popular even after stores reopen, Adobe said. 

It's too early to tell whether ecommerce will permanently ratchet higher even as the economy reopens and consumers start shopping in person again, Wells Fargo analysts wrote. But in the second half of the year, watch for some momentum to shift to Amazon's speedy delivery capabilities over in-store pickup as life gradually returns to normal. 

"Though we view omnichannel retailers’ recent progress on BOPIS/curbside as very much worth monitoring, we believe that AMZN’s continued build-out of last-mile fulfillment capacity and a gradual return to more hectic work and school schedules among consumers will likely shift momentum back toward rapid delivery," wrote analyst Brian Fitzgerald. 

Shares of Amazon have risen 34% year to date.