How Covid-19 Boosts Shopping Local, Lifting Shopify Stock

It’s probably a fool’s errand to make economic predictions these days. No one really knows how the coronavirus pandemic will play out in the next few months, much less the next year.

One thing that does seem clear: Consumer shopping habits have changed. They will likely change again … and again.

Shopify (NYSE: SHOP) is one company that is poised to do well no matter how things evolve. This Ottawa, Canada-based e-commerce company has outpaced the stock market significantly.

The stock price closed at $757.80 on Friday. It’s up 90% year to date, and is near its 52-week high of $844. But some analysts believe Shopify is overvalued.

Offline and Online Shopping Evolve

Investors considering Shopify need to examine the retail environment. Lockdown measures are being loosened around the world, but the situation continues to develop. Some stores remain closed or are reopening with new restrictions.

Some jurisdictions allow pick-up and delivery only. Local virus flare-ups could bring a new wave of shutdowns, or new modifications to how stores operate.

A new survey from Brandwatch offers clues on how consumer behavior has changed in this unsettled environment. The consumer intelligence company asked nearly 7,000 people in the U.S. and six other countries about their shopping plans.

Continuing to work at home, many Americans have changed their plans for clothes and shoe shopping. About a quarter said they won’t be buying any clothing.

But Brandwatch found that 73% of people who previously planned to buy new clothes or shoes this year still plan to. The company wrote:

While bigger purchases are being put off, people are still planning to make the smaller (arguably essential) ones. Consumers have to keep themselves entertained, too. Back in April we looked at how those in the U.S. were talking about spending their stimulus checks, finding thousands of posts about splashing out on purchases. Popular items included books, video games, and sneakers.

Overall, the Brandwatch survey finds consumers are being cautious. And they plan to remain cautious even if the pandemic situation improves. Sixty-eight percent of respondents who’ve tried to save more during the pandemic say they will continue to do so once the outbreak is contained.

Looking toward the holidays, consumers expect to spend less this year. Forty-four percent said they planned to cut spending on gifts for the holidays and other celebrations. But 45% think they’ll spend about the same as last year, and 11% actually said they’ll spend more in 2020. Definitely a mixed bag.

‘Shop Local’ Trend

Here’s a Brandwatch finding that offers growth potential for Shopify: local business sales. The survey found that 33% of consumers think it’s more important that the things they buy are locally sourced now compared to before the outbreak.

A number of campaigns have emphasized supporting small and medium businesses, which are served by Shopify. Many locked-down consumers have expressed the desire to help save their favorite local restaurants, bars and boutiques.

Anecdotally, some have even said that they want to “spread the love” beyond Amazon (NASDAQ: AMZN). It’s an amazing service that can deliver almost anything to your doorstep, quickly and cheaply. But in this environment, some consumers are thinking even more about Amazon’s negative impact on local Main Streets.

The #shoplocal hashtag has been prominent on social media. Brandwatch found that “there were more mentions of [the hashtag] in March and April 2020 than there were in November and December 2019,” which includes Black Friday and the holiday gift-giving season.

Last month, Facebook (NASDAQ: FB) introduced new features designed to encourage support for local small businesses. A new Facebook section promotes local businesses and helps retailers amp up their online interactions with customers. On Instagram, users can deploy a special sticker to promote their favorite local business.

And Facebook has partnered with Shopify to create Facebook Shops, part of the social network’s effort to support small businesses in the coronavirus pandemic.

Online Shopping Habits Change

The pandemic caused many people to buy things online that they previously would have bought in bricks-and-mortar stores. “More than 20% of our respondents said they’ve bought clothes, groceries, or toiletries and beauty products online when they normally wouldn’t have got them that way,” Brandwatch reported. “That’s a significant jump in custom.”

Companies like Shopify are betting that some of these habits will continue after the pandemic ends. Brandwatch found that 50% of new online consumers across all categories said they would continue to shop online now that they’ve had the experience.

“The number is particularly high for those who’ve bought clothes online – 73% say they’ll continue to do so post-outbreak,” Brandwatch reported. “Given that so many people are still planning to make clothing purchases in 2020, this is really encouraging for big fashion retailers.”

The only downsides for e-commerce in the Brandwatch survey were delivery and out-of-stock issues. Those should improve as early pandemic buying fades.

As the shopping environment continues to evolve, Shopify seems well poised both online and off. The company’s new point-of-service (POS) solution is designed to bring more bricks-and-mortar retail onto its platform during the pandemic.

Shopify is also focusing on cross-platform sales, where consumers can order online for pickup in-store or curbside. Local businesses should find these options appealing, since they allow them to pivot quickly based on pandemic developments and changes in consumer behavior.