How Coronavirus Is Impacting eCommerce and Retail — and How to Respond
It wasn’t long ago eCommerce brands and retail stores were struggling to cope with holiday demand. Now many are struggling to survive. The coronavirus has caused everyday life to grind to a halt. Countries are shutting down and entire populations are leaving their homes only when absolutely necessary. As a consequence, the retail industry is changing before our eyes.
We are living in an unprecedented time. If you’re worried about the future, you’re not alone. Worrying isn’t going to solve your problems, however. Understanding the coronavirus eCommerce impact and how the wider retail industry is being affected can help you put plans in place to weather this storm and, possibly, emerge from it successfully.
Customers Are Shunning Stores and Heading Online
The coronavirus has completely changed the way consumers think about making purchases. Across the world, they are less inclined to visit a physical store to buy almost anything.
A March 2020 report by Coresight Research found almost one-half (47.2%) of US internet users were avoiding shopping centers and malls with nearly one-third (32.7%) not going to any physical stores at all. If things get worse, some three-quarters (74.6%) would avoid malls destinations and more than one-half said they’d steer clear of all stores.
Naturally, many stores and shopping centers are closing as a result. Simon Property Group, the largest mall owner in the U.S., announced it would close all malls on March 18, 2020, reports Michael Wade, Professor of Innovation and Strategy at International Institute for Management Development. Many stores are choosing to close — or being forced to — across Europe and Asia, too.
Even though consumers still need essential supplies like groceries, many are choosing to buy them online where possible.
In China, for instance, eCommerce giant JD.com saw a huge jump in traffic. Adweek’s Lisa Lacy reports that between January 24 and February 2, 2020, sales of rice and flour saw a fivefold increase. The company has taken several steps to ensure it can continue to service customers including keeping warehouses stocked and working with suppliers to increase the production of in-demand goods.
In the U.S., Amazon has been swamped by demand, writes Bloomberg’s eCommerce reporter Spencer Soper. On Monday, March 2, 2020, Amazon told Prime and Pantry customers availability was limited and deliveries would be delayed. This happened despite Amazon continuing to run a full service.
In fact, the company is expecting such an increase in demand it is hiring 100,000 employees, writes Evan Niu, Senior Technology Specialist at The Motley Fool. This is unprecedented outside of the holiday season. What’s more, Amazon is also giving all U.S. workers a $2 an hour raise.
The Virus is Putting Pressure on eCommerce, too
On the face of it, eCommerce brands appear to be coming off better as the coronavirus spreads across the world. Dig a little deeper, however, and even online-only brands are facing issues.
For one, many eCommerce supply chains are strained to breaking point. This is a particular problem for multichannel brands that are facing greater than usual online demand. For instance, Digiday’s Seb Joseph reports Procter & Gamble have a limited supply of products for online sales and are struggling to meet demand.
The problem is exacerbated by a breakdown in global logistics. Even if you’re still able to sell products, sourcing them will be significantly harder than usual, writes Sourcify CEO Nathan Resnick. Supply chain issues that started with the closing of Chinese factories are worsening as countries close borders and transportation links are cut off. Even brands that manufacture their product in the U.S. could face issues if any part of the production process comes from outside of the country.
Eventually, DTC brands that have not yet witnessed a fall in traffic or revenue could be hit. Take fashion brands, for example. The staff at Modern Materials Handling writes that if lockdowns continue, these brands will struggle to get the materials they need for their summer and fall lines. Inventory levels would decrease drastically at the same time logistics and shipment costs double while the brands do their best to deliver products.
Worse still, brands could be hit doubly hard with the looming recession. This scenario is looking more likely, writes Aaron Orendorff, VP of Marketing at the Common Thread Collective. “In the U.S.,” he says, “recession language has shifted from ‘if’ to ‘what shape?’”
It’s no surprise retailers are uncertain about their fortunes. A Digital Commerce 360 survey of 304 retail executives found just as many looking on the bright side as those thinking the worst. In total, 37% of retailers believe eCommerce sales will be slightly or significantly up, while 35.9% think sales will be slightly or significantly down. Just over 27% say eCommerce sales will be as projected.
The Virus Could Change Retail For Good
Despite the strain on supply chains and the genuine financial threat to many businesses, it’s clear brands with a strong eCommerce presence are better placed to weather the impact of the coronavirus than traditional retail brands.
Though traditional brands will understandably try to accelerate digital transformations in a bid to catch up, omnichannel brands have such a head start that many may fail to ever catch up.
Even brands with in-store and online presences are able to pivot much more successfully. BCG’s Martin Reeves et al gives the example of a Chinese cosmetic company, Lin Qingxuan, which had to close almost half its stores but turned their in-store beauty experts into online influencers. By doing so, it increased sales in Wuhan, ground zero of the coronavirus, by 200%.
Ultimately, the coronavirus could leave a lasting impression on the way we shop.
Consumers are being forced to change their shopping behavior, writes retail industry consultant Shelley E. Kohan. People are buying products online that they never have before and this behavior could stick. If consumers could get even more comfortable with online shopping, eCommerce adoption rates could increase faster than previously projected.
Amish Jani, founder and managing director of venture capital firm FirstMark, also says eCommerce growth will be boosted by the coronavirus. People who never believed they’d want to order groceries online will be forced to try. Many may find they like it and do it again in the near future. “It will be a net positive for all digital commerce, especially grocery and household supplies and things like that,” he explains. “You’ll see a bump from this and that behavior will persist going forward.”
In other words, even if consumers aren’t buying your specific products online during this pandemic, they might start buying them online in the future.
What Can DTC Brands Do?
All this begs the question, what can your eCommerce brand do right now to put itself in the best position for the future?
Communicate Clearly With Customers
The important thing is to be honest with your customers, writes Rob Zaleski, Head of Brand at ShippingEasy. Let them know if you are experiencing or expecting delays. People understand some factors are out of your control but it’s important they know you’re trying to solve the problems.
That may seem obvious, but many brands leave customers in the dark, the team at Floship writes. “Don’t simply assume they’ve watched the news and can make the connection, thinking, oh I’m sure it is delayed because of the virus,” they explain. “Send out an email, notify them of the situation and promise your business will be on top of matters and make sure the consumer receives their orders as soon as possible.”
Take the Necessary Precautions
It’s important to keep your team, their families and the wider community safe, writes Jake Rheude, Vice President of Marketing at Red Stag Fulfillment. If someone is feeling unwell, send them home immediately and then take further precautions. “If that happens, document [that] the person arrived and left, plus who they came into contact with at work — employees and anyone who might’ve visited — and how they got to work,” he says. “This can help medical professionals who are already going to be stretched thin.” Rheude accepts this will cost your business money, but it could save lives.
If you are still operating, you should also take action to prevent the spread of the virus. Chain Store Age’s Dan Berthiaume notes that several retailers, including Wayfair, are already following advice from the Centers for Disease Control and Prevention by increasing their cleaning routines for all facilities and delivery vehicles daily.
Be Ready and Take Action
Now is not the time to sit back and wait, writes Greg Sterling, Vice President of Market Insights at brand marketing services provider Uberall. He recommends brands take action now if they want to stay in business. In particular, he advises brands to sustain or possibly even increase their digital marketing efforts to drive consumer demand.
You need to be ready to take action and roll with the punches, writes Nicole Mezei, CEO at retargeting service OptiMonk. Meet with your logistics partners now to understand your capabilities and be ready for restrictions to shift at any moment so that you can pivot to keep delivery commitments.