Store shopping is back and booming. That’s why

Instead, consumers seem to have gotten tired of ordering everything from their couch and are back to shopping the old fashioned way.

“As the pandemic has subsided, you are seeing consumers returning to their pre-pandemic activities,” said Brian Nagel, who oversees the retail sector at Oppenheimer & Co. “Consumers see the benefits of shopping in stores.”

Several factors are converging to slow the growth of online sales, he said.

Inflation puts pressure on consumer wallets. This has led some shoppers to ditch high-priced discretionary items like electronics and furniture — items often bought online — or waive shipping fees.

Other consumers have shown a desire to get out and socialize after being locked down at home during the pandemic.

“Shopping in stores is a social activity,” Nagel said.

Signs of this shift in consumer preferences are everywhere.

In May, online retail sales rose 2.2% from the same month last year, according to payment data released by Mastercard on Tuesday. Sales in stores grew much faster – by 13.4%.

E-commerce stocks were the worst retail sector in the S&P 500 in 2022, down 28% as of Monday, according to S&P Global.

Amazon (AMZN) said it added too much storage capacity as it sought to meet pandemic demand and was inflated in some cases. Company now reportedly Sublease of some warehouse space to reduce excess capacity.
Companies such as Stitch correction (SIFIX) are fighting. An online clothing design service will lay off 15% of its full-time employees – about 330 employees – as e-commerce growth slows. The cuts come months after Stitch Fix cut its full-year guidance and said active customers were below expectations.
Karvana (CVNA), an online used car dealer, will lay off about 2,500 employees, or 12% of its workforce. In cities, several startups that promised to replace groceries at the corner with deliveries of food and essentials in less than 15 minutes are going bankrupt.

According to experts, new layoffs are coming.

“Many of these companies are hiring in anticipation of projected growth,” said Berna Barshai, an analyst at Empire Financial Research. “Now they will not justify these forecasts. The obvious response to unmet growth targets is to scale down, cut costs, and cut costs.”

2020 reversal

The trend represents a dramatic reversal in the drive for online ordering during the early stages of the pandemic. This has overturned predictions that the consumer shift to online shopping will be permanent.

Two years ago, when Covid-19 brought daily life to a standstill, online shopping surged.

With non-essential store closures and take-out orders, shoppers of all ages have been shopping for groceries, home goods, furniture, sports equipment and other items online in record numbers – some for the first time.

During the second quarter of 2020 e-commerce sales as a percentage of total retail sales increased by more than four percentage points to 16.4%.

The companies increased their workforce to meet demand, expanded their distribution capacity and partnered with delivery services such as Instacart and DoorDash.

But when businesses reopened in the summer and fall of 2020, the process began to reverse. Consumers rushed to malls to tidy up their wardrobes and make long-awaited purchases.

Online sales still make up a larger portion of retail sales than before the pandemic. But they are steadily declining from their spring 2020 peak.

Leading companies say they are seeing more shoppers returning to stores.

“We have seen a marked shift in shopping behavior across channels, with in-store sales higher than expected and digital sales lower than expected.” Macy (M) CEO Jeffrey Jennett said last month by phone with analysts.

Jennett said shoppers came to the stores to buy formal wear, such as dresses for parties and social events. At the same time, they have given up on buying everyday clothes online.

Niraj Shah, CEO of an online furniture store Wafer (Tue)told analysts last month that the “pendulum” has returned to in-person shopping following a surge in online shopping in 2020.

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