eCommerce in the Wake of COVID-19
Monday, October 5, 2020
By Adele Cooper, from Wayflyer
The early days of the COVID-19 pandemic were defined by great uncertainty. Most businesses had no idea how long lockdown measures would last, or to what extent the global public health crisis would impact their employees and core operations. For retailers, however, there was never any doubt that the pandemic would hit their industry hard. As brick and mortar shops around the world were forced to close their doors, and millions of consumers took shelter in their homes, it immediately became clear that retail companies were in for a difficult year, and the numbers quickly proved those expectations to be correct. In early February, it was projected that the U.S. retail industry would grow by some 2.8% in 2020. By June, analysts were predicting that U.S. retail would decline by 10.5% over the course of the year.
Of course, given that the decline in sales was driven in large part by the forced closure of brick and mortar locations, it’s no surprise that one retail category has proven to be an exception to this rule. With consumers spending more time at home and online than ever before, COVID-19 has helped facilitate impressive gains in the realm of eCommerce. The category is expected to grow some 18% in 2020, up from a 15% increase in 2019. And while the eCommerce surge may be slowing as retail stores reopen, it’s likely that the pandemic will have long-lasting effects on the eCommerce industry, having introduced new consumers to new categories of online shopping that they may never have tried otherwise.
However, the pandemic did not necessarily change the trajectory of the eCommerce industry. One could argue that it has merely accelerated the digital transformation that was already occurring in the retail industry. In this blog post, we’ll take a closer look at how eCommerce has grown in the wake of the pandemic, and the eCommerce product categories that have benefited most and least from these shifts in consumer behaviour. We’ll also look at how the relationship between eCommerce and brick and mortar retail may change in the post-COVID-19 era.
Changing Categories: How COVID-19 Impacted Consumer Choice
We tend to think of the holidays as prime time for e-commerce. The combination of Black Friday and Cyber Monday keep many consumers online for the entire weekend after Thanksgiving, hunting for holiday deals. Yet data shows that quarantine prompted even higher levels of consumer spending. According to Adobe’s May Digital Economy Index, online consumer spending between April and May reached $153 billion, outstripping the $142.5 billion spent online between November and December of 2019.
Even as stores have reopened, however, many consumers still continue to opt for online shopping experiences: In July, online consumer spend was 55% higher than it was in July of 2019. And it’s not just the methods of purchase that have changed. The product categories consumers are purchasing have shifted as well. Online grocery shopping hit a record high of $7.2 billion in June, as consumers remained cautious about visiting the grocery store in-person. School-supply shopping began earlier than usual this year, with computers seeing a particularly pronounced surge as many families prepared for a year of remote learning. Year-over-year purchase of computers in July surged a whopping 288%.
Other categories, however, suffered greatly. The luxury goods industry took a big hit, with companies like LVHM experiencing a drop in net profits of 84%. Such changes are due in large part to a worldwide halt on international travel and subsequent drop in digital travel sales; eMarketer estimates that 2020 sales will top out at $115.27 billion – almost $100 billion less than last year’s $208.44 billion.
With no clear end in sight to the pandemic, perhaps the greatest lesson for eCommerce companies is the need for resilience. Companies know how to plan for seasonal spikes, stocking up their inventory in advance of expected sales. The pandemic, however, surprised almost everyone, leaving companies scrambling to source inventory as supply chains faltered and consumer demand in certain categories spiked. By leveraging historic performance data and forecasting opportunities that can come of unforeseen circumstances, companies can prepare for the next major disruption. When a crisis occurs, they’ll be able to manage the upfront costs of sourcing inventory and capitalise on increased demand to generate a massive spike in revenue.
Beyond Brick-and-Mortar: What the World of Retail Will Look Like Going Forward
Stores might be reopening, but our relationship to them has changed dramatically. Rather than going into stores and browsing around, we’re far more likely to identify the items we want online, purchase them digitally and swing by the store to pick them up. This buy-online-pickup-in-store (BOPIS) model increased 23.3% between June and July, and a significant portion of consumers (31%) say they like this model better than having their items delivered. Some experts have suggested that this model may be here to stay, even after the pandemic ends.
This represents a huge opportunity for brick-and-mortar stores as they move past addressing urgent crises and begin to consider their long-term strategies. While some consumers will relish the return to browsing freely without having to worry about health and safety, others will continue to demand the immediacy and efficiency of BOPIS. Companies that invest in the digital infrastructure needed to support this method will have a critical edge in the months and years to come.
The shift to eCommerce also represents a huge opportunity for mom-and-pop stores and other small businesses. According to research from Main Street America, over two-thirds of these stores do not have an eCommerce sales platform, and those that did only received less than a quarter of their business from these platforms. Small businesses that can successfully build out an eCommerce platform will not only be able to reach consumers, but they will also be able to generate new insights on sales that can inform revenue-based financing and marketing. This in turn can strengthen the business, ensuring that companies invest their money where it will have the greatest impact.
The New Normal?: Rethinking the Narrative on Online Retail
There’s no denying that the past several months have brought major changes to the retail space. But consumers’ ongoing enthusiasm for eCommerce in spite of global economic downturn suggests that we may not be encountering something completely new. Instead, we’ve merely sped up a transition that has been steadily unfolding over the course of the past decade. Recent data from the Census Bureau shows that in 2011, eCommerce sales took up just under 5% of total retail sales, but by 2019 had doubled to more than 10%. Yes, the pandemic did cause a spike, but that spike occurred because consumers had already migrated their spending from in-person to digital platforms and companies had invested in robust digital infrastructure to meet this demand.
As companies continue to think about how to navigate an uncertain future, they must continue to look to the past as well. Recent data can serve as a roadmap for future planning, guiding companies’ spending on marketing and inventory. Digital infrastructure challenges that emerged as consumers flooded websites and apps can help businesses identify what aspects of the user experience need improvement. Consumer preferences for delivery vs. pickup vs. in-person browsing can equip businesses to build retail models that meet the needs not only of the present, but the future as well. 2020 has certainly been a difficult year, but retail companies that learn its lessons will be ready to thrive in the decade to come.
Next Steps to Consider
So how can retailers use the lessons from 2020 to adapt their strategy for the future? Use the actionable advice below to help your brand resonate with consumers even during trying times.
- Relationships matter, whether they’re customer relationships or relationships with the suppliers you’ll need to help you fulfill a spike in inventory demand or provide more generous payment terms. Focus on building strong relationships with all your key stakeholders.
- Offer free shipping and free returns for orders over a certain threshold. Be generous with return periods offered and extend them, if necessary, when there’s a shelter-in-place order. Supply a pre-printed, prepaid return label. Make it easy and stress-free to shop online.
- As long as you can deliver goods to customers, don’t switch off your online marketing. Many businesses paused all social marketing campaigns during the peak of the pandemic, a period that showed a significant rise in eCommerce. Those that continued to advertise won new customers and built repeat business. Do adapt your advertising creative to reflect the situation, so that your brand is not seen as tone deaf to the reality of everyday life.
- Review your financials and revise your forecasts on a regular basis. Plan ahead and ensure you’ve the financing in place to meet inventory and marketing requirements. Even if you don't need funding now, it's still worth signing up to a service like Wayflyer. It only takes 3 minutes and we'll send you funding offers at the start of each month for you to consider.
- Be transparent about employee and public safety measures. Offer up a short post on your website around the full measures your brand is taking to manage COVID-19 and the health and safety of employees and customers.
- Update your website FAQ. As times change, so too will consumer questions about your brand. Be sure to share how COVID-19 may affect shipping times or supply of each product.
- Be a force for good. Whether this means donating a portion of profits to communities, health care workers or small items for every item purchased, being a force for good can resonate with customers and know you’re there to support them, not just make money.