Has COVID-19 changed the eCommerce landscape forever?

The COVID-19 global pandemic has been the defining event of 2020, with implications that will last well into the decade. Businesses have needed to adapt, diversify and often pivot completely in response to government directives. Store closures, together with the ‘stay at home’ messaging has meant an increase in the number of people heading online in order to get what they need. eCommerce has therefore been one of the industries most affected by the pandemic - but has it all been positive uplift? And more importantly, will it last?

When 2020 began, online sales were expected to account for 16.1% of all global retail . 6 months on, and the percentage currently sits somewhere between 25%-30%. No graph shows this rapid penetration growth quite like the below:

Even as lockdown has eased, Signifyd Inc. reported that eCommerce sales were still approx. 40% higher for the week of May 26-June 1, compared with the pre-pandemic benchmark week Feb. 24-March 1 (based on online sales data from 10,000 retailers).

However, if we look closely at that same data week over week, eCommerce sales were actually down 8% for the week May 26-June 1 vs. the previous week, and after only having increased 1% from the week before that. This would suggest we are starting to see a levelling of sales increases. So has the eCommerce landscape changed forever, or did we simply see an eCommerce ‘pandemic peak’, that is now starting to plateau?

"Yes, of course".
The argument for...

For some retailers and brands, particularly in the food and drink space, COVID 19 has been an accelerator to open up new business streams that will certainly continue post-pandemic. This ranged from local neighbourhood bars batching and selling their cocktails online, through to wholesale food distributors selling B2C. Even big FMCG brands like PepsiCo and Heinz were making changes; the latter launching their full D2C proposition “Heinz to home” in a matter of weeks . With many consumers unable or unwilling to venture to supermarkets, coupled with both a spike in demand and poor availability, the eCommerce arm for Grocery and FMCG brands has benefitted hugely from the pandemic.

Grocery is a particularly interesting category. In a recent Accenture survey , one in five respondents who said that their most-recent grocery purchase was done online were ‘first-time’ online grocery shoppers — for older consumers, this was one in three. And while 32% of consumers’ current purchases of all products and services have been online, that figure is actually expected to rise to 37% going forward. This suggests (for Grocery at least) the online shopping boom during the pandemic is indicative of longer-term behaviour.

By the end of May, ‘non-store sales’ in the UK accounted for 33.4% of all retail sales, a month-on-month growth of 19.7%, according to the Office for National Statistics . A total percentage of all retail stood at 19.6% in February, rising to 22.3% in March, before soaring to 30.7% in April. As more people move online to shop, there’s little reason to revert habits. We are seeing friction and pain points removed and even Social media companies are hedging their bets on digital shopping being part of the “ new normal ”, with the platforms providing an accessible entry point for a lot of brands who shifted online during the pandemic. The roll out of Facebook shops further removes some of the barriers to online selling and empowers smaller businesses to be able to sell online, with no traditional eCommerce website required.

To further predict whether pandemic eCommerce trends may lead to long-term changes we can also look to China.

As China returned to their ‘normality’ ahead of most other regions of the world, consumer eCommerce habits during Covid 19 have very much continued, despite many physical stores having now been open for some time. For the first four months of this year, retail sales in China fell by 16% year-on-year, while online sales rose by 8.6% to $360 billion. On the first day of JD.com’s 618 Grand Promotion in June, its online supermarket JD Super saw a 100% year-on-year sales increase, with a significant proportion of these online sales being driven by the younger generation. The more younger consumers that shop online, the more this becomes an ingrained habit for the future and digital commerce becomes ‘the norm’.

Brands are also using eCommerce to actively respond to both the live environment, and how consumer tastes are changing. Through their D2C proposition, they can create and sell new products, as well as evolve existing product ranges in order to very quickly test, learn and then adapt to these changes. What we’re seeing now is the brands who are listening to their consumers, whilst staying true to their offering are coming up as the winners. 

Covid 19 has certainly accelerated this trend. We’ve seen alcohol brands move into hand sanitizer production; coffee shops commence subscription services and Flying elephant , an event production company, successfully ‘pivot with a purpose’ to sell flat packed desks and then outdoor furniture made from their excess timber supplies. With the closure of all their stores, Ministry of Supply , unable to sell their key product categories of travel- and workwear responded by creating a buy one gift one Mask programme that still held their brand values at the core and introduced a lot of new people to their online store.

Post Covid these new brand fans aren’t going to disappear; and nor will brands entirely shut down the eCommerce arms that they’ve seen such success with. For some industries, whole inventories have now gone online and they have shifted with long-term eCommerce in mind. One example here is second-hand vehicles where there was no choice but to take a very traditional physical retail proposition and pull it quickly online. A Google survey conducted in May has revealed that 8 out of 10 car shoppers would now consider buying a vehicle online, rising from 7 out of 10 since before the coronavirus outbreak began. Nearly one in five (19%) said that they would look to purchase a vehicle sooner if there was an online option available to do so - which signals quite the change in the eCommerce landscape for this industry too.

A final suggestion that the eCommerce landscape has been forever changed comes from GlobalWebIndex’s ninth release of its coronavirus research, which has revealed that nearly 50% of global consumers do not expect to resume shopping in brick-and-mortar shops for ‘some time’ or ‘a long time’ once lockdowns ease. Just 9% of shoppers, on average, expect that they will return to stores ‘immediately’ once they are allowed to. However, it should be noted that in the UK home market, people are more likely to do so (14%) than those in Japan (5%) or China (6%).

"Probably not".
The argument against...

Which takes us quite neatly into the counter argument. Yes, the pandemic has seen significant increases in online sales, BUT, given the option, would people still prefer to shop in physical retail? Has the peak simply been in response to short-term circumstances, rather than signifying a drastic, long-term behavioural change?

We do need to apply nuance and consider the product categories that have driven the pandemic eCommerce growth. There have been obvious winners (medical supplies, DIY, household goods, grocery and fitness equipment) and obvious losers (luggage & travel, office supplies, swimwear, formal wear and vehicle parts) It has been argued that eCommerce sales are not higher across the board , but being driven by certain industries that are seeing significant upticks.

Our current circumstances are also likely to be impacting the uplift. There is a removal of friction due to the work from home situation: we are all available to receive deliveries. As the country returns to workplaces and out of homestay, so does the behaviour of including a shopping trip as part of a commute, or as a weekend activity. 

According to research from Deloitte , 59% of UK consumers have shopped in more local stores since lockdown, in order to help support them. While restrictions on travel may have certainly played a part in these retail habits, it appears that consumers are becoming more mindful of the impact of their spending in their local communities. If we’re applying the rule to eCommerce that because something started in lockdown it may continue, we can’t assume that counter behaviours (like this) won’t also remain - especially as 57% of those surveyed said that they were more likely to buy from a brand that sells products that are locally sourced after lockdown has ended, than they would have been prior to Covid-19.

Another survey of US and UK consumers found that 96% of Millenials and Gen Zs are concerned about the pandemic and its effects on the economy. This concern is leading them to change their behavior more dramatically than other generations which includes cutting back on spending, stocking up on items, and spending less on experiences. If the younger generation are shopping less, we may see the plateau in eCommerce growth post-pandemic if older generations return to pre-pandemic shopping habits.

There is the argument that brands too will look to revert their business models to again reflect circumstance as physical stores reopen. Heinz on their Heinz To Home and D2C venture have openly stated, “There will never be a sales target for this channel, that’s absolutely not the purpose. This platform in the future is probably not a sales channel but a data and insight channel.” If brands aren’t committed to the long-term eCommerce pivot, then consumers may also return to ‘familiarity’.

And if top research firm Forrester are stating that non-grocery offline sales will see a 20% decline in growth overall in 2020, while ecommerce growth will remain ‘mostly neutral’ then we have to query whether the pandemic peak is permanent. Forrester have further predicted that the global loss in the retail sector will likely hit $2.1 trillion in 2020 and will take four years to overtake the levels of growth seen before the pandemic.

It’s therefore not out of the question that as lockdowns ease, we return to the steady eCommerce growth we were experiencing pre-Covid 19, with the spike in sales penetration from this channel being only temporary and circumstantial.

In Summary; some final thoughts...

Purchasing patterns are shifting. The pandemic has been a wake-up call for companies to ensure they have the agility and capability to remain relevant to consumers; with a portfolio of products, services and sales channels that match the current climate and consumer demands.

Whichever way you look at it, Covid-19 will have a dramatic long-term impact on consumer shopping habits. It has certainly accelerated the shift to online retail and shown what is possible to consumers who previously only dabbled in digital commerce. A new study from Kantar has revealed that not only has the share of people who undertake 50% or more of their total purchases online grown by between 25-80% since the virus has developed, but there has been a shift in intent too. Six in 10 consumers intend to continue buying as much online once the pandemic has passed as they do now.

Lockdown has changed consumer assumptions surrounding online shopping - it has normalised a lot of eCommerce such as the ordering of food, drink etc. online, where people would not have done this previously. eCommerce platforms like Shopify are also ensuring fewer entry barriers for brands selling online than ever before. They have introduced capital to get brands started selling online and an ‘express theme’ for one page sites to get up and selling as quickly as possible, with the ability to then develop and grow over time. If eCommerce is easy for brands and easier for consumers then the growth will logically continue.

The scale of the changes identified by Accenture do clearly suggest that this is a long-term shift. Head of Accenture’s global Consumer Goods practice, Oliver Wright effectively sums up the eCommerce landscape change we are seeing: “While we have been seeing these trends for some time, what’s surprising is the scale and pace — compressing into a matter of weeks changes that would likely have taken years. The new consumer behavior and consumption is expected to outlast the pandemic, stretching far beyond 18 months and possibly for much of the current decade.

It is the acceleration that has been key, and may well cause greater investment into eCommerce over the next few years as the channel becomes increasingly important to every business.

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