Covid-19 Pandemic Shifts Online Shopping into a New Gear

Stephen DeAngelis

March 31, 2020

Even before the Covid-19 outbreak, consumers were increasing the amount of shopping they did online. Since the pandemic hit and some stores closed, retailers with omnichannel strategies are better placed to survive the emergency. Samantha McDonald (@samanthaanne_mc) writes, “As Americans hunker down in their homes to stem the spread of the coronavirus, retailers have already begun to see gains in shoppers’ online spending over the past few weeks, one study suggests. … According to the study, U.S.-based retailers with both brick-and-mortar and e-commerce channels have experienced a 52% revenue growth rate online between the fifth and eight weeks of 2020 (Jan. 27 to Feb. 23) — the period when the illness began its rapid spread outside of Asia. What’s more, the analysis found an 8.8% increase in conversion rates, compared with the same period the previous year, indicating that many more of the shoppers who were visiting websites actually made a purchase.”[1] Many brick-and-mortar retailers fear the move towards e-commerce will outlast the pandemic and doom their physical retailing activities. Retail industry expert Shelley E. Kohan (@retailshelley) writes, “Self-quarantines and emerging consumer worry about public places will provide opportunities for the e-commerce business to thrive over the next few months. As consumers turn to digital options as a means to circumvent physical shopping environments, the change in behavior may impact longer-term comportment. Consumer behavior is influenced by technological advancements, but also by environmental, economic and sociological factors, all three of which are evident with the current COVID-19.”[2]

 

Retail outlook is not great

 

Despite an uptick in online sales, consumers are likely to curtail spending as the economy enters an inevitable recessionary slowdown. Members of the Trump administration have admitted unemployment could approach 20% as quarantines force businesses to close. Large corporations have already laid off thousands of workers and more redundancies are expected to be announced. Nevertheless, even in quarantine, consumers require essentials which is why meal kits and online grocery services are likely to demonstrate strong sales. As for other products, McDonald writes, “Although researchers at [Quantum Metric] forecast a potential revenue boost from consumer stockpiling to certain retailers’ Q1 reports, [they] suggested that the impact might not be enough to churn out a ‘great’ quarter. This is because many companies have already announced widespread store closures, resulting in a loss of foot traffic and a subsequent dent in their bottom lines.”

 

Based on past experience, Kohan predicts behavioral changes adopted by consumers during the pandemic will have lasting impact. She writes, “Consumers who purchase using e-commerce and mobile devices during the holiday season continue to use these behaviors going forward — and an increase in the percentage of digital sales is seen post-holiday.” The post-Covid-19 era could follow this same pattern. The news isn’t all bad. Kohan reports Target believes changing consumer behavior will enhance the bottom line. “In Target’s recent investor call,” she reports, “the company discussed how creating convenient ways for people to shop with pick-up, drive-up and same-day delivery has changed the behavior of its shoppers creating higher spending and a more loyal customer.” As the response to the pandemic lengthens, Melissa Fares (@faresmelissa) and Uday Sampath Kumar report, “Several retailers are dangling site-wide discounts and free shipping to entice people stuck at home to shop.”[3] They add, “Retailers are desperate to make-up for zero foot traffic after the rapidly spreading coronavirus forced them to close dozens — and in some cases hundreds — of stores.” Kohan concludes, “Categories more prone to increase during times of physical retraction of a population are health and beauty, grocery and consumer product goods. Short-term discretionary spending on fashion merchandise may decline while Americans look to make sure needed goods are well-stocked in their homes.”

 

Omnichannel strategies gain in importance

 

Although the Covid-19 tunnel to recovery may be long, there is a light at the end of that tunnel. When recovery does begin, retailers armed with a strong omnichannel strategy will likely recover sooner and be in a stronger position than those that don’t. Redickaa Subrammanian (@redickas), co-founder and CEO of Resulticks, explains, “Modern consumers are tech-savvy channel agnostics in a constantly expanding world of digital devices, touchpoints, and channels. Despite behavior that defies traditional linear concepts of the customer journey, one need remains a constant: the insistence on personalized experiences. Succeeding in omnichannel requires marketers to roadmap the customer journey, cultivate a comprehensive customer view, and embrace new channels. With a holistic approach, omnichannel orchestration will leverage the most relevant and appropriate channels and interactions to deliver a seamless experience reflecting the individual customer’s tastes, habits, purchasing patterns, and more.”[4] Cognitive technologies, like the Enterra Shopper Marketing and Consumer Insights Intelligence System™, can help achieve omnichannel goals by helping retailers understand consumers preferences with regards to both products and shopping channels.

 

Supply chain expert Kumar Singh writes, “Customers in the Digital Age have become increasingly mobile and channel-agnostic. There is a constant flux from one channel to another — from online to offline and vice versa. Not only this, customers also expect a seamless and consistent experience without a noticeable disconnect. Organizations that are trying to catch-up with this omnichannel explosion are well aware that their traditional marketing channels are not always organized to allow a smooth cross-channel transition. In fact, they are often segregated in many organizations, where each marketing channel has their own sets of goals and strategies.”[5] Siloed organizations often find themselves internally misaligned as each segment of the organization pursues separate strategies. Singh insists, “An optimal omnichannel strategy needs to be supported by an aligned product and supply chain strategy.” He’s correct. Cognitive technologies, like the Enterra Concurrent Planning Intelligence Solution, can help. Enterra’s solution can address the misalignment challenge by creating a balanced measurement function. With even a small number of different departmental goals it is difficult for business users to define a function that intercombines these goals in order to avoid adverse effects. A balanced measurement function is able to trade-off cost, revenue, volume, income, machine maintenance, storage space, labor requirements, and so on. Enterra’s Concurrent Planning Intelligence Solution intermixes departmental goals to create single balanced measurement function at the enterprise level, which encapsulates overall corporate directives. Once this enterprise level measurement function is defined it can be used to help find misalignments in departmental measurement functions. We oftentimes refer to this as ‘overlay optimization’ since the departmental objective function is being driven by the enterprise level objectives.

 

Subrammanian concludes, “As brands leverage opportunities offered by omnichannel marketing and further embrace the technology that unlocks each channel’s capabilities and insights, they will give customers the personal experiences they crave. Beginning the journey toward true omnichannel can be daunting, but the immense value it creates for both customers and brands far outweighs the rethinking, reinvention, and innovations it demands.” Omnichannel strategies developed before Covid-19 outbreak may need adjustment, but retailers with strategies in place will enter the recovery phase much more quickly and successfully than retailers without an omnichannel strategy.

 

Footnotes
[1] Samantha McDonald, “This Is How Much Online Retailers Are Gaining in Sales Amid Coronavirus Fears,” Footwear News, 17 March 2020.
[2] Shelley E. Kohan, “Coronavirus Fears May Drive U.S. E-Commerce Sales Beyond 2020 Projections—And Change How People Shop In The Future,” Forbes, 6 March 2020.
[3] Melissa Fares and Uday Sampath Kumar, “Retailers offer discounts, waive shipping fees to boost online sales,” Reuters, 20 March 2020.
[4] Redickaa Subrammanian, “Three Essential Steps toward Omnichannel Success,” Street Fight, 21 January 2020.
[5] Kumar Singh, “Successful Omnichannel Marketing Strategy Needs and Aligned Supply Chain Strategy,” Smart Supply Chains Blog, 14 March 2020.