The pandemic is rapidly changing our behavior toward online channels and there is no surprise when the COVID-19 crisis has led to a big increase in e-commerce around the world. This has created a great opportunity for the development of the e-commerce industry, but also brought great challenges for businesses to catch up with this shift.
The COVID-19 crisis is unlike anything the world has ever seen. The country, institution, and business leaders are facing tough choices with unprecedented levels of uncertainty. While short-term orientation is key, it is becoming increasingly clear that the crisis will permanently shape the societal and economic order of the future, as has been the case with other historical crises. Societal trends related to how we work, how we learn, how we shop, and how we use technology are changing rapidly. While these trends were already unfolding before the crisis, we are seeing an acceleration that will lead to a new normal coming out of the crisis. While a short-term reaction is needed to survive, a long-term view will make winners.
The remarkable growth of the e-commerce industry opens up great opportunities
As the pandemic has reshaped life as we know it, it’s also accelerated many trends – but the biggest of these trends may be e-commerce. The shift toward e-commerce was happening before COVID-19, but according to new data from IBM, the pandemic has accelerated consumers’ shift toward e-commerce by five years.
While global retail sales are expected to dip by 5.7% this year due to the coronavirus pandemic, global Amazon sales on the other hand went up by 26% in Q1 and 40% in Q2, and e-commerce spending in the U.S. grew from 11.8% in Q1 to 16.1% in Q2. Our Sana Commerce customers are also being impacted: some construction suppliers have reported an uplift in B2B e-commerce sales, while luxury and cultural goods customers are seeing a decline.
E-commerce is projected to grow by nearly 20% YoY in 2020. This growth was even more pronounced at the beginning of the pandemic, with U.S. retail e-commerce up 44.5% YoY in Q2. Also in Q2, Walmart’s e-commerce sales were up 97% YoY and Target grew its same-day fulfillment services by 273%.
The top categories consumers have gravitated toward during this shift are alcohol, home improvement materials, and groceries (up 16%, 14%, and 12% respectively), with apparel seeing significant declines.
With market share being ceded to retail giants and big box retailers like Amazon, Target, Walmart, and Best Buy, department stores and malls have slowly but surely been on the decline for decades. Department stores accounted for 14.3% of retail sales in 1992, which was down to 3.7% in 2019.
According to new data from Digital Commerce 360, online spend with U.S. retailers grew 30.1% – that’s $60.42 billion – year-over-year for the first six months of 2020 to reach a total of $347.26B. From 2018 to 2019, e-commerce sales grew just 12.7%.
Total retail sales were up 4% YoY, with online spending representing 18.6%
of this growth.
In Q2 2020, $1 of every $5 spent by U.S. consumers came from online orders. Online spend with U.S. retailers grew 44.4%, with a total of $200.72B spent during this period.
The impacts of COVID-19 on e-commerce
In a recent analysis of retail and online brands, Digital Commerce 360 found that brands that pulled back on marketing spend during COVID-19 are now seeing their online sales struggle. Brands that stayed on course with their spending have seen online sales steady out after an initial dip. Brands that aggressively pushed their spending are seeing unprecedented growth. Besides, retailers who double down on their direct-to-consumer initiatives instead of leaning more on brick-and-mortar stores and wholesale have seen online sales growth.
These growths and declines have been happening while consumer discretionary spending has dropped over 50%. With consumers spending less on transportation, travel, restaurants, and childcare in light of coronavirus, and strong discounts and ad placements being placed near essential items being sold online, non-essential e-commerce has continued to fare well despite this dip.
What is the long-term opportunity for e-commerce?
In light of coronavirus, nearly one-quarter of shoppers are looking for contactless payments or delivery options, with 36% of shoppers saying they won’t return to brick-and-mortar stores until a vaccine is available, according to a recent survey of 3,558 consumers from Salesforce Research. Online shopping is also slightly more prevalent among high-income households during the COVID-19 pandemic, with 71% saying they see more online shopping in their future and 65% of lower-income households saying the same. In other words, COVID-19 has formed the habit of online shopping for everyone
What led to this habit?
As more and more consumers discover the convenience of e-commerce, concerns about product quality and security will likely dissipate. Moreover, the introduction and use of mobile apps tracing the progress of the COVID-19 outbreak have shown that personal data can be used and stored safely, removing concerns about the security of online shopping.
Another factor lies in the sheer number of retail stores likely to close as a result of the pandemic, making it that much harder to purchase goods offline. Experience in China has already shown that even after the lockdown there lifted, consumers are not rushing back to physical shops. This will force all kinds of businesses to reinvent themselves online.
However, this shift also brings to e-commerce some challenges. So, how to solve those problems?
Safety concerns:
One challenge for e-commerce businesses is the idea that customers stop buying online because they are worried about their packages accidentally carrying COVID-19 virus. Of course, it's important for customers to feel safe when making a purchase, so the business must do all it can to quell fears and prove itself hygienic. You should have a section on your e-commerce website detailing the new measures your business is taking during a pandemic to minimize the risk of spreading the virus. It can be a great idea to put this in a prominent position on your website so that potential customers can easily access this information.
The timeliness of the product:
COVID-19 presents many challenges for businesses of all sizes. One aspect of this is that it has changed some of the customer preferences. There may be no bigger challenge than the idea that what you're selling is no longer relevant to your customer base. Therefore, your business must exploit new and market needs. You should take some time to consider which of your products are still relevant and what types of options are available that might attract customers under current conditions.
Besides, the demand for safe and health products as well as durable goods and groceries is increasing.
Return process:
During the COVID-19 pandemic, you may experience changes and fluctuations in demand for and paying for certain products. You may also find that customers in financial trouble are looking to reclaim some of their spending.
So make sure to make the return process stress-free for your customers. If possible, allow them to authorize an online store return and monitor progress on their own. This will not only be more convenient for your customers, but also prevent any increase in calls and emails to your service team.
Last but not least, customers protection policy:
Most people who have not yet shopped online have a mindset that e-commerce is unsafe for their information and the quality of goods. So, there are some ways to improve:
Display relevant information: Your e-commerce platform must deliver accurate, complete, and real-time information, from product and parts to inventory and distribution tracking.
Provides optimized functions: Ensures your customers can quickly and easily pay and check, but can also track orders, manage profits, and pay bills online .
Dealing with the complexity of B2B orders: Your online store should have the right structure to handle complex orders, including those based on a discount and pricing structure. complex.
Order error prevention: Product information, pricing and inventory levels must be correctly displayed in the 24/7 online store. And customers should have access to order history and online store account data to assist them in avoiding entry and selection errors.
IN CONCLUSION,
In just a few months, the COVID-19 pandemic has changed the way we live, work and shop - at least for now. For now, it is still unclear what changes will prove to be the longest. However, there is no doubt that the impact on e-commerce will last in the future. The choice, convenience, and speediness offered by online shopping have proven essential to consumers worldwide and will likely accelerate its adoption in almost any category. product.
References
Beukelaer, O, D. (2020). B2B e-commerce and COVID-19: The challenges, solutions and opportunities [+ examples]. Sana. https://www.sana-commerce.com/blog/b2b-ecommerce-covid-19-challenges-opportunities/#3
Hunter, T. (2020). Challenges and Opportunities: Ecommerce and COVID-19. Astound Commerce. https://astoundcommerce.com/2020/06/12/challenges-and-opportunities-ecommerce-and-covid-19/
(2020). E-commerce And COVID-19: The Challenges And The Opportunities. Floship. https://www.floship.com/ecommerce-and-covid-19-the-challenges-and-the-opportunities/
Escudero, R. and Alves, F. and Ehmler, M. and Goel, K. and Filonov, V. (2020). Can Delivery Companies Keep Up with the E-Commerce Boom? BCG. https://www.bcg.com/publications/2020/can-delivery-companies-keep-up-with-the-ecommerce-boom
Kituyi, M. (2020). The intricacies, impact and opportunities of e-commerce for trade and development. UNCTAD. https://unctad.org/news/intricacies-impact-and-opportunities-e-commerce-trade-and-development
Howe, J. (2020). Blog: The e-commerce response to COVID-19. International Trade Center. https://www.intracen.org/covid19/Blog/The-e-commerce-response-to-COVID-19/
(2020). E-COMMERCE, TRADE AND THE COVID-19 PANDEMIC. World Trade Organization. https://www.wto.org/english/tratop_e/covid19_e/ecommerce_report_e.pdf
Jakobsen, H. (2020). COVID-19 & THE OPPORTUNITY OF ECOMMERCE. VAIMO. https://news.vaimo.com/covid-19-the-opportunity-of-ecommerce
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