Technological Evolution: The Explosion Of eCommerce

in LeoFinance2 months ago

It is stunning how quickly technological explosions can happen. The key is they take years (often decades) to materialized but, there comes a point in the exponential curve when things explode.

eCommerce came about not long after the World Wide Web came into being. Over the past 25 years, more of our physical shopping has occurred in the digital realm. Of course, the leader, by a wide margin, in this arena is Amazon.

COVID-19 changes a great many things in life. Ultimately, it took trends that were already in place and accelerated them forward. For example, the move to video conferencing was growing consistently during the last decade. However, in response to COVID, it absolutely exploded. This has ushered in the "work from home" movement.

Not to be outdone, retail is also seeing acceleration. Even though the trend was in place for more than 20 years, we see a massive amount of acceleration this year. Naturally, this is on top of the large growth that was taking place already.

Here is a chart as to what the growth of eCommerce looks like.

ecommerce.png
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This chart is an example of how things proceed along at a consistent pace, albeit growing. Here we see the eCommerce rate go from roughly 4% in 2010 to just shy of 12% by the end of Q1, 2020. That is a tripling in a little more than a decade.

However, as we can see, after the acceleration takes place, the numbers really grow. During the second quarter, the rate went from 11.8% to 16.1%. We an see how statistically significant that is when looking at the chart.

Here is the typical exponential curve. Notice how we see the "elbow" forming already.


Source

Over time it is easy to envision how the new trajectory will continue and make the top chart mirror, to a degree, the bottom one.

The key is this puts enormous pressure on retail real estate. The retail apocalypse is nothing new. The challenge is that it is accelerating. This is how technological disruption happens. Things move slowly, in comparison, at first, only to go into overdrive.

Another issue is the fact that the square footage in the United States for retail far outpaces the rest of the world. During the last 40 years, the country went retail happy, building out stores wherever it could. This resulted in a large percentage of space that simply cannot be filled.


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This takes on added meaning in the eCommerce era, especially since it is obvious that things are only starting to accelerate. It is a situation that is going to cause a great deal of pain for those who are involved in the owning, financing, and management of retail real estate.

On the bright side of things, all that land will be available for repurposing. Over the next decade, we are likely to see a lot of land freed up due to technology. Parking lots, office and retail space, and eventually, farm land will all be used for purposes other than they are now.

That said, it will be a process to get there. The retail real estate is only going to be the first to bear the burden of disruption.


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Looking at the graph, you can see that it was quite a rise for the first months of 2020. Covid-19 literally transformed the world and we had to answer. Success was expected with the great demand that emerged for electronic commerce. Amazon and others in the business have been able to learn well all this time.

Unfortunately, behind every success there are people who take advantage of the situation to steal. Here in Brazil I am tired of counting the countless cases of people being cheated for having bought something on the internet and who never received it.

It is a pity that many of these people made their first purchase attempt and the experience was the worst possible. Over time, I hope people can have a better understanding of where they're going in order not to have unpleasant surprises.

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Together with the movement of employees out of the cities into the countryside due to home-office regulations, less business-travel and also in order to save on a reduced income -, this is looking quite challenging for the whole real estate sector. At the moment it looks like the party is still going on with a further increase in housing prices in urban centres in Germany, but that might not hold for long.

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eCommerce was growing all the time, but in this period it did burst out of the proportions. Some friends were saying that working from home they made them do rational or irrationals buying online and that for sure they are buying more as ordinarily. I thing people take a refuge in online buying to decompress and destress their minds from what is happening.

In a time when minimal living should expand, it seems that we are seeing the opposite effect through more buying than ever.

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