Mastercard report: 2020 sees consumers spend additional $900bn online 

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he latest research from Mastercard reveals that during 2020 consumers spent an additional $900bn at online merchants globally. And, across the world, e-commerce made up roughly $1 out of every $5 spent on retail in 2020, up from about $1 out of every $7 spent in 2019.

Bricklin Dwyer, Mastercard chief economist and head of the Mastercard Economics Institute, says: “While consumers were stuck at home, their dollars travelled far and wide thanks to e-commerce.”

“This has significant implications, with the countries and companies that have prioritised digital continuing to reap the benefits. Our analysis shows that even the smallest businesses see gains when they shift to digital.”

Is this rise purely down to Covid? Mastercard’s Recovery Insights report analyses how Covid-19 has contributed to the acceleration of digital spending.

The report shows that the pandemic accelerated the shift to e-commerce spending already well underway in certain markets, such as the UAE and the US, but also for countries that were in the early stages of their digital retail shift, such as Egypt and Brazil.

Adding to this, figures show that e-commerce increased the most in more populated, urban areas. Mastercard says: “City dwellers were less willing than exurb dwellers to take public transport and venture out to stores to avoid contact with potentially infected people.”

Another key takeaway is that essential retail sectors, such as grocery stores, saw some of the biggest gains. Mastercard predicts that 70-80% of the grocery e-commerce surge will remain permanent.

In addition, international e-commerce increased by 20-30% during the pandemic.

Consumers are also increasing their e-commerce footprints by buying from up to 30% more online retailers. Mastercard argues that this reflects expanding consumer choice as consumers worldwide are making purchases at more websites than in previous years.

Residents in Italy and Saudi Arabia have increased their e-commerce footprints the most, making purchases from 33% more online stores. This is closely followed by Russia and the UK.

Mastercard’s analysis reveals that small business owners who were able to establish a digital presence or expand an existing one saw benefits. However, many weren't equipped to make the transition online-or lagged their larger counterparts.

This trend particularly impacted restaurants. In the US, for every $1 spent at a large restaurant chain, just 70-75 cents was spent at a small restaurant.

Mastercard argues that before the pandemic, small and large restaurants were on a more equal footing, but the pandemic widened the gap as large restaurants were better equipped to cope with restrictions.

Not only did Covid-19 encourage shoppers to move online but it also meant that in-store purchases were mainly made using electronic payment methods. Worries around “dirty” cash fuelled the shift to card and contactless payments.

According to Mastercard, in the US, the pandemic accelerated the shift to electronic payments by about one year.

Before Covid-19, the share of cash use as a portion of all sales declined roughly 2.5% per year. After lockdowns began, non-cash payments jumped by an additional 2.5 percentage points beyond the trend.

The research also shows that at quick-service restaurants, there was an even larger one-time shift away from cash of about 3.9 percentage points, on top of the previous trend of about 3 percentage points per year.

For years, the industry has been undergoing a digital transformation – so, even without Covid, is the shift to e-commerce really a surprise?

Covid-19 is just an accelerator of trends that already existed – trends, such as the growth of online shopping, increased globalisation of consumer spending, and a shift toward touch-free experiences.

As a result, many would argue that, without the pandemic, the current digital payments landscape we are experiencing may have taken longer but would have arisen regardless.

The Mastercard Economic Institute estimates that some of the shifts to digital will remain permanent parts of the retail landscape.

The institute says: “2020 is behind us, but there's no doubt the increased number of people who were pushed to go online, in droves as never before, have changed the retail landscape for the long run.”

However, it also notes that when given the opportunity, many shoppers will return to stores and in-person recreational activities, where the transaction, not the experience, is often digital.