Online shopping see biggest slowdown in over decade as tariffs disrupt e-commerce: Survey

A new AlixPartners survey reveals the e-commerce sector is undergoing its most significant disruption in over a decade, primarily driven by trade war tariffs. This has led to widespread double-digit year-over-year declines in online category growth, with consumers altering buying behavior by delaying purchases or seeking domestic alternatives. Retailers are responding to rising delivery costs and increased return rates by tightening shipping and return policies, raising free shipping minimums, and prioritizing last-mile delivery cost reduction, necessitating a fundamental reassessment of sourcing and pricing strategies to maintain competitiveness.

Analysis

The e-commerce sector is confronting its most significant structural challenge in over a decade, primarily driven by trade tariffs that are materially altering consumer behavior and retailer economics, according to an AlixPartners survey. The data reveals a broad-based contraction in online demand, with year-over-year declines in home delivery purchases reaching double-digit percentage points across key discretionary categories, including a 12-point drop for sporting goods and a 10-point fall for electronics and furniture. This pullback is directly linked to consumer reactions to price uncertainty, as 34% of respondents reported delaying purchases and a substantial 66% indicated they would seek domestic alternatives if import prices rise by 10%. In response to these demand-side pressures and rising operational costs—with nearly three-quarters of executives citing higher per-package delivery expenses—retailers are shifting their strategic focus from service enhancement to cost containment. This is evidenced by the tightening of delivery and return policies, with almost half of retailers increasing minimum order values for free shipping and prioritizing last-mile cost reduction. The findings signal a fundamental pivot in the e-commerce landscape, where sourcing diversification, pricing strategy, and logistics efficiency are becoming critical determinants of profitability and survival.

Key Decisions for Investors

• Investors should reassess exposure to e-commerce retailers heavily reliant on imported goods from tariff-impacted regions, particularly those in hard-hit discretionary categories like electronics, sporting goods, and home furnishings.
• Consider overweighting retailers with robust domestic supply chains or those demonstrating superior logistics cost management, as they are better positioned to capture market share from price-sensitive consumers and mitigate margin erosion.
• Monitor company-specific changes to shipping and return policies, as aggressive cost-cutting measures may protect margins in the short term but could risk long-term customer loyalty and market share.
• The online grocery space should be viewed as a defensive sub-sector within e-commerce, given its notable resilience to the broader downturn highlighted in the survey.