The surge in work from home has accelerated US online shopping
This report is a collaboration between the Mastercard Economics Institute, Joel Alcedo (Mastercard Economics Institute), Scott Baker (Northwestern University), Nick Bloom (Stanford University) and Ethan Harris (Mastercard Economics Institute Senior Advisor)
Executive Summary
The pandemic triggered a 500% increase in working from home. Analyzing Mastercard SpendingPulse™ data, which estimates total retail sales across all payment types, shows that this transition drove part of the increase in U.S. online shopping. The authors estimate this rise in home working contributed to the lift of U.S. online retail shopping. As of March 2024, online retail shopping is running at a $375 billion annual rate above the 2015-2019 trend1. The greatest increase in online shopping arose in regions with the largest share of hybrid and remote workers, suggesting both national and local impacts. Looking ahead, with hybrid working from home likely here to stay, the authors expect to see continued growth in online shopping driven by changing consumer habits.
Working and shopping from home
The obvious questions are: What has driven such a sharp shift in both activities in the U.S., and will they continue? We explore five potential explanations which help explain a correlation between work from home and online shopping:
Geographical changes (the “donut effect”): Working from home has seemingly led employees to shift out to more suburban areas away from city centers. Work from home may increase online shopping because it allows people to work in less densely populated areas where in-store shopping is less convenient. Hybrid workers will tend to spend more time in suburban areas near home with fewer shopping options. Fully remote workers are likely even more impacted as they can move even further away from urban areas.
Convenience: Work from home likely makes it easier to shop online during work hours. This is particularly the case in industries such as financial services where there are strong restrictions on internet use in the office.
Impact of income: Both remote workers and online shoppers tend to have higher incomes. The literature on work from home shows that it has expanded the most for white-collar and relatively high-paying jobs. Higher income workers could shop more online because they put a higher dollar value on time and hence prize the convenience of online shopping.
Technology advances: The increase in both shares is likely driven by similar technological advances. Better technology has enabled a more seamless online shopping and work from home experience.
Learning effects: Both working from home and online shopping may have benefited from “learning by doing” during COVID lockdowns. Employers, workers, retailers and consumers adapted to the restrictions, leading to new ways of organizing online activities and increased consumer awareness and trust in online options.
The regional perspective
To examine how these changes are playing out over time and across U.S. counties, we combine two unique U.S. county-level datasets. First, the Work from Home (WFH) database includes country and U.S. county data on the share of job postings that offer hybrid or fully remote work. The second dataset, from Mastercard SpendingPulse, provides an estimate of retail sales across all payment types at a U.S. county level, including online spending.
Merging these datasets reveals interesting patterns. For example, the figure below shows the nominal detrended shares across two groups of counties: the detrended online sales for counties with the 10% highest (orange) and the 10% lowest (white) share of work from home job listings. In counties with low work from home, the online shopping share has essentially returned to the pre-pandemic trend, while it is about 4% above trend for the counties with the highest work from home presence.
The bar chart below summarizes the relationship between the two shares across 3,195 U.S. counties. Specifically, we combined U.S. counties into 10 deciles from lowest prevalence of work from home (far left bar in the chart below) to the most. The resulting plot clearly highlights the relationship. Counties who have greater share of remote or hybrid job listings tend to also have a higher share of online retail shopping.
Working (and spending) hours have changed
With a greater share of the population having more workforce flexibility and access to shopping online, consumers have the ability to be nimble about when they shop. No longer do consumers have to rely on swinging by a store after work or weekend errands. We therefore examined spending on food – both groceries and restaurants – to see how people have shifted the time of day that purchases are made online. By analyzing aggregated and anonymized Mastercard transaction data, we found the following trends:
Groceries: Likely due a variety of factors including hybrid work, lifestyle changes, proliferation of delivery services and lifestyle changes, we find that there has been a shift in spending toward the hours between 11 a.m. and 5 p.m. in 2023 as compared to 2019 for grocery stores. The shift in spending during the midday hours is not just a story for the working days of Monday through Friday, but also evident during the weekend, which suggests that it is driven by more than just work from home gains and likely access to delivery services.
Restaurants: In contrast, shopping for food online at restaurants has spread out more evenly throughout the day compared with 2019. This is best seen in the intra-day peaks and troughs in spending shares: The beige line below representing 2019 has higher-highs and lower-lows throughout the day compared with 2023. During the weekday, the share of lunchtime spending has shifted outside of the typical lunch hour into other times of the day.
These results suggest that nationwide, online shopping behaviors have fundamentally reshaped to align with the modern, flexible lifestyle. The boundaries between work and personal time have shifted, along with lifestyle changes throughout the week, giving rise to a shift in the distribution of online shopping throughout the day.
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Far from over
The digital transformation is likely far from over. By Q1 2024, the return to office movement in the U.S. had stalled out. The levels of working from home, after dropping in 2021 and 2022, started to flatline in 2023. Looking ahead, factors such as new technologies making remote work easier could mean working from home levels starting to grow again in the next few years. This may also shift shopping preferences, lifestyles and locations, all of them potentially driving continued growth in online shopping. The trend is also self-reinforcing: As the share shifts, so do economies of scale for better online user interface as well as new types of inventory management and distribution. Company leaders, particularly in the retail sector, will need to continue to adapt to the new more digital world.
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Notes & Disclaimer
About the Mastercard Economics Institute
Mastercard Economics Institute launched in 2020 to analyze macroeconomic trends through the lens of the consumer. A team of economists, analysts and data scientists draws on Mastercard insights - including Mastercard SpendingPulse™ - and third-party data to deliver regular reporting on economic issues for key customers, partners and policymakers.
Disclaimer
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