With the COVID-19 outbreak, the entire world has been turned upside down. But this turmoil is not just about the lifestyle changes we’ve been obliged to make in order to prevent the spread of the disease; it’s also about the impact the virus is having on the global economy. The conversation is no longer about whether we are going to be hit by a recession, but rather, how hard it will strike the average business and its end customers.
Yet, if we have learned anything about this world, it is that where there is a crisis, there is also an opportunity. We can already see some trends emerging on the e-commerce landscape and predict how they will dictate the future rules of the game.
In the following article, we will share our top predictions and recommendations for e-commerce businesses to better cope in the new post-COVID-19 reality.
Impact of Coronavirus on e-commerce around the world
Before we proceed, let’s take a look at the current global Coronavirus landscape. China’s Wuhan province, for instance, has been reporting no new domestic infections day after day, while the rest of the world is either experiencing or preparing for the epidemic’s peak. With this in mind, it’s becoming clear that e-commerce players need to localize their activities.
The pandemic didn’t strike each country at the same time or with equal magnitude. Some regions are just beginning to feel the impact of the pandemic, while others are already on their way towards the so-called ‘new normal’.
According to Nielsen, the COVID-19 pandemic can be divided into 6 stages. Currently, the majority of the world falls anywhere between stage 4 (Quarantined living preparation) and stage 6 (Living a ‘New Normal’).
Rapid growth of e-commerce: Reach, Frequency, and Monetary Value
There are three factors that can help us understand how Coronavirus impacts online sales:
- Reach: we expect that e-commerce penetration across the globe will reach extraordinary levels. Many consumers – who were previously dedicated fans of offline shopping – will turn to online outlets for safety reasons. Another result will be that more seniors will shop at e-commerce stores. Once someone starts shopping online, they’re more likely to do it again. Which leads us to the second factor…
- Frequency: for many consumers, pre-Corona virus e-commerce shopping was limited to discretionary categories, such as fashion or electronics, while everyday must-have products were bought in brick-and-mortar stores. Due to the current situation, many customers will now also shop for groceries online. While the shopping cart size will increase, the purchasing frequency will be lower. Which takes us to…
- Monetary value: anonline shopping cart’s value is, on average, higher than that of offline shopping. As customers stay at home and don’t need to walk around the store, they may also spend more time browsing through categories and reading about items. Another reason why we spend more time on completing our order is limiting shipping costs for each delivery.
So, taking this into account, what can we expect to see on the e-commerce landscape in the coming weeks?
Here are our top 7 predictions:
Prediction 1: A change in purchasing habits post-COVID-19
Shoppers will focus their online spending on must-have products – most importantly, FMCG and healthcare items. Luxury brands are expected to be hit particularly hard, even after the outbreak ends.
Buyers will also shift their attention from industries immobilized during the lockdown – i.e. travel, entertainment, and outside dining.
How can we predict global consumer behavior in the upcoming months? It’s worth looking at Kantar’s research on Chinese shopping patterns during the outbreak, as well as the predicted behavior in the ‘New Normal’:
A change in media consumption
Consumers’ screen time is already higher than before the pandemic.
According to Kantar, more than 40% of Chinese consumers admitted to spending more time on short video apps and digital video platforms during the lockdown. They also reported turning more frequently to TV (an increase of 33% from the levels before COVID-19) and visiting digital news platforms to learn more about the ongoing situation.
Social media and online music channels also became more popular (an increase of 34% and 26%, respectively). Now it’s up to e-commerce companies to make the most of this opportunity and create compelling campaigns.
Prediction 2: A higher demand for e-commerce – even post-COVID-19!
As many as 86% of consumers admit to having changed their shopping habits to minimize the risk of contracting Coronavirus. Other changes include avoiding crowds, improving personal hygiene, working from home and not eating raw or uncooked meat. All of this works in favor of e-commerce.
While we predict that in the post-Coronavirus world the demand for e-commerce will drop, we don’t see the demand lowering to its pre-pandemic levels. This might potentially lead to problems.
This situation won’t change if we don’t take major steps to take the pressure off of shipping and distribution.
Additionally, deliveries will have to meet higher hygiene standards to prevent the return of the pandemic. Some food delivery companies like Postmaster and DoorDash are currently testing contactless delivery options. A similar mechanism could be applied to e-commerce deliveries to limit human interactions and to keep consumers and deliverers safe.
Prediction 3: Acceleration of d-commerce (digital commerce)
While “traditional” e-commerce is based on web pages, more companies want to stand out from the crowd and use digital commerce solutions to go beyond them. This is especially important now, during COVID-19. D-commerce can be divided into:
- m-commerce (mobile commerce) – buying through mobile apps
- s-commerce (social commerce) – buying through social platforms
- i-commerce (image commerce) – shoppable images – put on social platforms, delivered through mailing, etc.
- v-commerce (video commerce) – shoppable video
- g-commerce (games commerce) – buying initiated in games
- a-commerce (automated commerce) – buying through voice assistants such as Amazon Alexa or Google Home
- IoT-commerce (Internet of Things commerce) – buying through connected devices, such as Amazon Shelf (which replaced Amazon Dash)
Even before the COVID-19 outbreak, it was predicted that 73% of online transactions would be initiated from mobile devices. Yet, many customers didn’t want to install retailer apps, which became part of the ‘anti-app’ trend. While most consumers have 60-90 apps on their phones (source: Buildfire, 2019), they’re reluctant to download new ones.
However, between February 15th and March 15th, 2020, we saw a surge in worldwide grocery app downloads. Below is a study by Apptopia that shows an increase in popularity for three online retailers on the U.S. market:
IoT-commerce includes not only B2C e-commerce sales, but also B2B sales. In November 2019, Amazon began trials of a wifi-connected, weight-sensing shelf which automatically restocks office supplies as they run out.
The device can be set to re-order automatically or alert a member of staff. In times when businesses are limiting the number of employees who need to physically come to offices, such devices may help relieve admin personnel in their daily work.
Limiting human contact
We all know that to stop the virus from spreading we must limit human contact. This explains the sharp rise in demand for contactless interactions, which goes hand in hand with advancements in robotics, which gave birth to automated commerce (a-commerce).
a-commerce lets retailers optimize their shopping experience thanks to the use of algorithms and smart devices. One of the brands that has already taken advantage of retail automation is Ocado. They use robots for collecting and packing grocery orders in their warehouses. The concept isn’t entirely new: in 2017, Tesco tried out an automated delivery system, while Amazon is working towards launching a fleet of courier drones.
And so, it’s safe to say that the automation trend is here to stay.
Prediction 4: The line between physical and digital will fade
Consumers say they will continue to spend more time shopping online, as the fear of the epidemic will stay with us for a while – as can now be observed in places like the Chinese city of Wuhan. Additionally, more people will start to appreciate the convenience of online shopping, and the ease of accessibility will become too hard to give up.
However, this doesn’t mean that consumers won’t miss the experience of actual in-store shopping, with its ability to see, touch, and try on products.
Buyers will also desire the same level of customer support – and there’s no way around it – it involves human interaction.
In fact, the Coronavirus pushed Lin Qingxuan – a Chinese cosmetics company – to close 40% of its stores. However, instead of treating it as an obstacle, the retailer used it as an opportunity to innovate. The company took 100 beauty advisors from the shutdown stores and turned them into online influencers, who use WeChat to engage with customers online and to drive sales.
Their solution has proven very effective, and they have achieved sales growth of 200% in comparison to last year.
Another attempt to merge the physical environment with digital capabilities is using augmented reality. There are sites and apps that let you try on makeup or check whether a couch will match your living room decor. These solutions are no longer technical novelties and might be the only way to try out products if the outbreak extends further into 2020.
Prediction 5: Global adoption of shop streaming – a live streaming and shopping experience
The digitalization of shopping will lead to the rise of shop streaming, which is a combination of live streaming and online shopping. This practice is already in full bloom in China, and is an inseparable component of the annual Chinese shopping spree known as Singles’ Day.
Local celebrities demonstrate products live and answer questions that viewers might have on the spot, which leads to increased engagement and a significant boost in sales. In 2019, Alibaba broke a new Singles’ Day record of $38 billion in sales, which further demonstrates the effectiveness of shop streaming.
Prediction 6: Economic nationalism – people might turn to buying local products
Economic nationalism is a trend that was already gaining momentum in the years before the COVID-19 outbreak. It also falls in line with the notion of sustainability and the call for choosing local produce to reduce our carbon footprint.
It is expected that the trend for supporting regional manufacturers and farmers will only strengthen as countries recover from the economic loss experienced during the illness.
A Nielsen survey on disloyalty in 2019 found that customers’ choices are heavily influenced by a product’s place of origin. Some 11% of global consumers admitted to buying products manufactured exclusively in their countries. Meanwhile, 54% of respondents said that their shopping carts were mostly nationally-sourced, with only a few exceptions.
After the Coronavirus pandemic, consumers are expected to favor locally sourced fresh produce (such as eggs, dairy, or meat). This won’t be seen as an effort to reduce CO2 emissions, but rather as a way to support the country’s economy.
When it comes to long-shelf-life food, cosmetics, and home-care products, customers are still likely to choose the brands they trusted before COVID-19. The location of production plants won’t be the primary factor in influencing customer choices for these categories.
Prediction 7: We don’t know how long the COVID-19 pandemic will last. We can expect countries to enter the ‘New Normal’ phase at different times.
While some states, such as China and South Korea already seem to have it under control, others like Poland and Germany are just beginning their fight against the epidemic. This might prove challenging for e-commerce and will require marketing localization.
A leading Chinese dairy company is a great example of how this issue can be dealt with efficiently. The company created multiple segments based on regional and city discovery dynamics, its supply chain infrastructure, and salesforce density. The factory supply was moved from badly impacted areas to those in safer regions in a phased approach. They also modified their marketing activities, messaging and budget to account for regional differences in expected recovery speed, consumer sentiment, and needs.
Without a doubt, the Coronavirus crisis revealed weaknesses in the current e-commerce model – and major players are already working on fixing them.
We’re about to witness an unparalleled change in the global economy. While this isn’t the first pandemic to happen in the Internet era, it is the first to have seriously disrupted the way we conduct day-to-day operations.
The key areas that require an adjustment to the new reality are:
- The efficiency of structure. The delivery capacity of most stores as of April 2020 is severely lacking, if not entirely immobilized.
Currently, the increased demand is causing disruptions to the supply chain and to delivery. Ocado is running out of delivery slots, and customers are being forced to wait a few days or even weeks to have their shopping delivered.
As a result, people have started searching for e-stores ‘off the beaten track’. If the key e-commerce shops are not able to keep up with delivery, they might eventually lose out to competitors.
- Logistics chain. Managing timely deliveries is just one piece of the puzzle. The more important question is how to offer a safe and effective way of reaching producers. Traditional e-commerce companies might currently be incapable of stocking up on items or raw materials for in-house production.
- Inflexible production & supply chain. Even if logistics and delivery efficiency are taken care of, e-commerce might still be impacted by disruptions in manufacturing. This can be caused either by internal difficulties of the manufacturer or by national restrictions. For instance, in late March 2020 all but necessary production plants were shut down in Italy. This will likely have severe economic consequences in the coming months
Top recommendations for the post-coronavirus e-commerce reality:
The Coronavirus pandemic is causing serious disturbances for businesses worldwide. Yet, we strongly believe that with the right steps, its harmful impact can be minimized.
Listed below are all the top actions we believe e-commerce firms should take immediately.
Immediate actions: to be taken ASAP.
- Maintain balanced channel management
Don’t neglect e-stores which had a relatively low number of visits before the crisis. Once people fail to find their favorite products in mainstream stores, they’ll turn to smaller retailers.
Monitor Google Shopping to find out where competitive products can be found and ensure you cover those channels as well.
- Keep older consumers in mind
Assistolder consumers who are unfamiliar with online services such as e-grocery shopping by offering them tutorials and one-to-one walkthroughs (and acquire new customers in the process).
Also, consider partnering with charities and other organizations that offer emotional and practical support to seniors in self-isolation at home.
- Offer special deals and discounts on first-need products
FMCG companies should capitalize on living in the new, post-COVID-19 norm by offering special deals and discounts on first-need products. For FMCG companies, it’s an opportunity to strengthen their brand loyalty.
- Turn to creative advertising
Think outside of the box and consider promoting your product/business on one of the “food delivery” apps – Postmasters and DoorDash. The number of these kinds of apps will increase, and so will your opportunity to advertise.
Mid-term recommendations (to be implemented within the next 2-3 months):
- Set up a direct-to-consumer (DTC) channel.
If you don’t have a D2C channel in place, set one up as soon as possible. In the long term it may be the only way to maintain control over the whole customer experience, while directly managing the logistic and supply chain processes. It requires adjusting logistics and supply chain management, which is worth it, as most customers can only shop online. Of course, setting up your own D2C store doesn’t mean that all consumers will buy directly from you from ‘day one’. It just means adding your own channel to the mix – just like airlines sell their tickets via travel companies but also directly.
Your store may be run directly on your company website. However, as more than half of global traffic in 2019 came from mobile devices, make sure you also have a mobile e-store. We recommend that you build it based on PWA (Progressive Web Apps) technology, which offers quick store loading and reloading time.
- Implement a recommendation engine in your DTC store.
An effective recommendation engine knows when and what to offer customers. Especially at a time like this, you need to make your clients feel safe and keep them stocked up for several weeks. By reminding your customers that they need to buy an item, you’ll be more than just an app that offers a good customer experience. You’ll become their go-to e-commerce outlet and retain them well into the post-Coronavirus reality.
- Take efforts to capitalize on demand, even when there are out-of-stock issues.
One way of approaching temporary shortages is by offering a way to sign up for a waitlist. A great example of this approach is the hand sanitizer brand Touchland. They decided to offer a pre-release order list instead of displaying an ‘out-of-stock’ message.
This way, they assured their customers that hand sanitizers would be shipped as soon as they were manufactured in late-March:
- Take note of people changing their habits.
It’s often said that it takes 21 days to change or create a new habit. In e-commerce terms, this means you need to stay in touch with your new customers. Depending on your model, this might mean paying greater attention to user onboarding or offering incentives such as loyalty programs. All these actions need to happen early on in the customer journey.
- Consider a subscription model.
If your e-commerce sells products that are purchased cyclically, consider implementing a subscription model as an alternative to one-off purchases. You can offer your customers a lower price per unit on batch orders. This might work especially well if your goods don’t currently have a favorable price: value ratio.
From a company perspective, offering subscriptions means getting a boost in recurring revenue. This will let you maintain stability in the post-pandemic economy and help your operations make more accurate quarterly predictions.
- Analyze the steps of the customer and delivery journey to see which areas can be automated.
Automation will become necessary for e-commerce dealing with a large volume of orders. Review which areas don’t require human work and consider moving your employees into departments where human-to-human interaction is as important as ever. This might mean, for instance, investing in live-stream sales or emulating the real-life shopping experience known from brick-and-mortar stores.
- Be transparent about the origins of your product.
This advice is particularly applicable for e-commerce that offer fresh produce, as well as fashion & beauty items. If you can influence where you source items from, consider stocking up on locally produced goods. If you do so, underline this in your communication. You will increase your chances of success if the economic nationalism trend comes true.
A post-Coronavirus reality
In the COVID-19-stricken world, everything has moved online – from day-to-day business operations to entertainment and shopping. Some changes are certainly here to stay even after we win the Coronavirus battle.
Now is the time to scrutinize your pre-Coronavirus business strategy and verify your market positioning. Depending on your business, this might mean addressing any or all of the following:
- Revisiting your target audience – has it stayed the same since the outbreak? Perhaps the demographic proportions have significantly changed and you’re now dealing with a group of older customers? If so, make sure you pay attention to User Experience (UX) and accessibility of the sites and maintain proper channel management.
- Who your direct competition is – are there any new players who have emerged during the crisis? Or maybe some of your pre-Coronavirus competitors have gone out of business? This is crucial to your post-COVID-19 positioning.
- Making sure your offer is relevant to the COVID-19 reality – demand has changed, and you need to keep up. This means having an operational capacity to deliver products to users quickly and safely, all the while offering a great Customer Experience (CX).
- Finding new ways of reaching customers – consider live streaming sales, advertising in food delivery apps, or raising your budgets for social media ads. Now is the time to monetize all the additional social isolation screen time!
As this article has illustrated, the COVID-19 outbreak has truly shaken up the established order of things. Everything from how we live to how we shop has changed dramatically. By implementing the recommendations found above, your business will be both ready and able to survive and thrive in the new reality.
Hungry for more tactics on adjusting your strategy to the post-Coronavirus business world? Download our special COVID-19 report to find out what you can do for your business in the next 6 months
Examples of e-commerce companies responding to COVID-19:
Touchland is a hand sanitizer brand – already popular prior to the pandemic. On the one hand, rising health concerns created a boost in demand for their products in Q1 2020. On the other, they quickly found themselves incapable of restocking their goods in a timely way. However, shortages haven’t stopped the company from making the most of the situation.
As an alternative to an email notification, Touchland decided to introduce a “pre-order” option that lets users purchase items even before they’re back in stock. This way, their business generates revenue upfront, which facilitates scaling their business to meet the current demand.
Nike is not giving up on their fight against Coronavirus; their sales in China have started to return to normal. Some 80% of their stores in Greater China are already open and their online sales are in full bloom. How did they manage to overcome the crisis? With effective use of technology and good decision-making. Other retail brands will definitely have a thing or two to learn from Nike’s business prowess.
Big brands like Louis Vuitton feel obliged to help with the fight against Coronavirus. The luxury brand will use their perfume and cosmetics production lines to produce hand sanitizers which will then be distributed to health authorities free of charge. This is a huge help, especially considering the massive global shortages of hand sanitizers and the difficult situation that France is currently in.
Nissan, Fiat, General Motors
Nobody can remain indifferent to the intense suffering that the Coronavirus pandemic has brought upon the world. Car manufacturers, including Fiat, Nissan and General Motors are offering their help in tackling the COVID-19 spread. They will use their competencies to produce ventilators and face masks which will support those most in need. Fiat Chrysler declared that they will repurpose one of their Chinese factories to start mask production.
The article you’ve just read is just a glimpse at what e-commerce companies can expect as the COVID-19 situation continues to unfold. To help you adjust your operations, marketing, and sales strategy we’ve created a comprehensive report that features our predictions and recommendations, based on years of experience in supporting e-commerce businesses. Follow the link below to redeem access and learn how you can support your business throughout and after the pandemic.
Initially, Lin Qinqxhuan – a popular Chinese beauty brand – got hit pretty badly after the Coronavirus outbreak, just like many similar companies in the industry. The company was forced to close almost half of their brick-and-mortar stores, which were a big source of their revenue. However, this didn’t mean all their employees were going to be sent on unpaid leave. Read on to find out how the brand leveraged Alibaba’s e-commerce platform to re-engage customers and how they reached a 200% boost in revenue in comparison to the results from last year.
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