E-commerce in the Time of COVID-19
The Evolution of the Online Marketplace
The concept of e-commerce surfaced in the 1960s, but only in 1994 did the first transactions take place. Over the decades, buying and selling through data transmission has transformed commerce as the technology and capacity of the net has grown beyond all recognition.
As brick and mortar locations become more costly for retailers to operate and as consumer traffic increasingly moves online, e-commerce has been a fantastic way for companies to adapt themselves to changing market conditions and remain profitable.
This is especially true in the context of the global pandemic, as COVID-19 has accelerated the rate at which consumers are utilizing e-commerce channels.
In the United States alone, over 306 million Americans were impacted by the stay-at-home orders of the lockdown, a major portion of the country’s 331 million. E-commerce was a saving grace, as physical distancing and other requirements of the lockdown forced many stores to shutter, and left consumers with little choice but to join the lines of the stores that remained open with limited stock.
Or – shop online.
Rush hour online
During the pandemic, consumers were shopping with the same sense of urgency typically seen during sales events like Cyber Monday. Even with some storefronts closed, as of April, U.S. retailers reported a 68 percent year-over-year (YOY) growth in online revenue. The online retail segment experienced a whopping 146 percent growth.
This spurt was in part due to panicky bulk buying at the pandemic’s onset, but the longer people were forced to stay home, the more e-commerce became ingrained in consumer behaviour.
E-commerce orders in both the U.S. and Canada have experienced 129 percent YOY growth. In Canada, between February and May, total retail sales fell 17.9 percent as retail e-commerce sales nearly doubled.
Total retail sales experienced record declines, shrinking to $33.9 billion in April, which represents a 29.1 percent decline from February and a 26.4 percent decline over the previous year. E-commerce experienced an increase of 63.8 percent in April, while in-store sales decreased by 25.3 percent.
Retail e-commerce sales reached a record high of $3.9 billion in May, chalking up a 2.3 percent increase over the month before and a 99.3 percent increase over February’s numbers. YOY figures for May show a 110.8 percent increase, which is nearly double the previous year’s.
However, total retail sales did start to show some recovery in May as the economy began to open up. The number of online shoppers has already diminished from June to July, but it will still be some time before the economy rebalances.
A global shift
Even before the pandemic, e-commerce was growing at a solid rate. According to the United Nations Conference on Trade and Development (UNCTAD), global e-commerce sales grew at 8 percent between 2017 and 2018, from $23.8 trillion to $25.6 trillion.
In 2018, B2B and B2C e-commerce sales represented 30 percent of global gross domestic product (GDP). Approximately 1.4 billion people shopped online that year, representative of just a fraction of the market’s potential given that only half of the world’s population is connected to the internet.
New online buying habits are being reinforced and sustained by changes in e-commerce and vice versa. According to PYMNTS.com’s 2020 Remote Payments Study, 72 percent of consumers are shopping online and placing orders using their mobile devices, proving that the way consumers are choosing to shop has changed and demonstrating the urgency for retailers to adopt a greater e-commerce presence.
Not only is e-commerce convenient, enabling consumers to shop from the comfort of their computers and smart phones and receive the order wherever it’s most convenient, the risk of coronavirus transmission, or exposure through products or packaging shipped at ambient temperatures, is low. So altogether, it’s a more protected and safer way to shop, limiting exposure to others and thus, the virus.
Another major market change that has emerged from COVID-19 was ‘buy online, pickup in store’ (BOPIS). While this trend was emerging prior to the pandemic, circumstances have certainly accelerated adoption of this new business model, melding e-commerce with the in-store experience, which consumers continue to take advantage of even after storefronts have reopened.
New take on safety
Morning Consult found that in early April a quarter of the 2,200 U.S. adults it surveyed were not ready to resume normal shopping activities and that they would not feel comfortable in a mall for at least six months. Another 16 percent of respondents would not feel comfortable entering a mall for three months.
Consumer safety is going to be retailers’ number one priority for some time, not only in terms of physical distancing and disinfection practices, the growth in online activity means more needs to be done to protect the personal information of those who choose to shop online. With all of the challenges that exist, a privacy breach does not need to be one of them.
Further to heightened security, it is also prime time for companies to adopt, integrate, test, and launch new experience-driven mobile apps, updated websites, and touchpoints to reach a greater number of consumers than ever before. Consumer safety is going to be retailers’ number one priority for some time,
Since most purchases are taking place on mobile devices, companies need to be sure that their e-commerce platforms are mobile-friendly to reduce the friction experienced by the consumer. Companies have to adapt if they want to remain profitable. They need to do more than just participate in the e-commerce market; they need to find a way to stand out amongst many.
With intensified competition companies can look at new ways to engage with their customers and grow using a digital platform to offer loyalty and subscription programs and promotions to attract and retain customers for the long term.
Greater availability and adoption of artificial intelligence (AI) and machine learning algorithms are also playing a role in customizing and optimizing a customer’s e-commerce experience. For example, the virtual fitting room (VFR) market is expected to reach $10 billion by 2027 which shows great promise and offers a way for retailers to adapt to the new market reality.
The emergence of augmented reality (AR) technology has improved the quality and accessibility of VFR experiences, which will enable consumers to interact with the products and make informed purchases, especially while fitting rooms remain shuttered due to poor ventilation, the propensity for crowding and the difficulty associated with disinfection between uses.
Small can be good
Small businesses, especially, are increasingly turning to e-commerce and finding innovative ways to leverage these platforms in their favour to enable them to increase their capacity to serve customers and appear larger than they appear.
There are countless opportunities online to be a part of communities and platforms like Etsy or Shopify which help connect them with their customers and provide them with the infrastructure to grow scalably. Interestingly, it is a time for makers and crafters to shine, as homemade goods are seeing a substantial increase in demand, especially for items like homemade masks and home furnishings.
How companies choose to respond to changing consumer behaviour and adapt to the market, will be the difference between those who fail, survive, or thrive. To be successful in the digital age, especially as COVID-19 persists, companies should explore the adoption of a digital business model and embrace the digital marketplace to bring their products closer to the customer, reaching them wherever they are.
There are many ways that companies can adapt to the changing market landscape, but any strategy should start with the growth of a digital platform to take full advantage of the opportunities and potential offered by e-commerce platforms, including investment in technology, the skills necessary to manage and advance this platform, and the infrastructure required to satisfy demand.
Customer experience still tops
Perhaps one of the most important things to consider is the availability of resources and the logistical capacity to sustain demand and offer an unmatched customer experience. Further to investing in an online platform, companies might also have to consider creating relationships that will help their products get where they need to go, when they need to get there.
Logistics partners are an ever-important part of the e-commerce platform, as they help companies get their products to the customers who ordered them in a timely and professional manner. Distribution companies are experiencing backlog and last-mile congestion on top of the challenges of physical distancing to keep both customers and workers safe.
The emergence of new players and new services signals the potential in the market for growth, that just needs to be tapped into. A company like PUDO Inc. responds to the changing market by investing in PUDOpoint Counters which is a carrier neutral pick-up and drop off counter that will be available for missed deliveries and will reduce costly second attempts and package theft.
Without a doubt, COVID-19 has accelerated the rate at which e-commerce has been adopted, necessitating major changes that reflect the new consumer reality and are likely to have a lasting impact on how the market operates.
Companies that take this challenge as an opportunity to grow, that are willing to invest and innovate and embrace the changes that are taking place are likely to position themselves as the next generation of market leaders for that time when COVID-19 has ceased to be a threat.