For too long, ecommerce budgets have been spread thin, forcing ecommerce leaders to make tactical investments that cannot scale. In my years of working with these leaders, I have found this is often the case because ecommerce operations are set up under the premise of "let's see how fast we can grow ecommerce sales with a limited budget."
Economist Milton Friedman once said real change comes from a moment of crisis, whether it is real or perceived. This is a moment where consumer behavior is likely to change ecommerce and retail dramatically.
"Only a crisis — actual or perceived — produces real change."
— Milton Friedman
If there is a positive outcome of this crisis, it should be that ecommerce gets the investment it deserves to drive better consumer engagement and protect brand equity. We are already hearing that C-suite leadership at progressive brands are asking their ecommerce leaders to shrink three-year plans into one-year plans.
I am concerned, however, because we also see some brands cutting staff and budgets at a time that is almost certainly as significant as the introduction of ecommerce in the late '90s. It is from this perspective that we wanted to share the opportunity this moment presents for brands and why now — more than ever — is the time to lean into ecommerce.
How This Crisis Could Change Consumers and Ecommerce
Before this crisis started, ecommerce penetration of retail was estimated at 16%, according to data from the U.S. Department of Commerce. Since 2010, this number has grown by roughly one or two percentage points year-over-year.
Following the ongoing COVID-19 crisis, a recent Morning Consult poll found that 25% of consumers would spend more online because of coronavirus, while Adobe Analytics has reported ecommerce sales increased by at least 25%. Of course, consumers are persuaded to shop online because going outside is risky, or their retailer of choice is closed.
The real question: What lasting impact will this crisis have on ecommerce? In speaking with industry leaders, I have gathered that there are two opposing views on how this moment in time will impact ecommerce over the long term:
- Outcome A, lasting ecommerce impact: Consumers who had previously not experienced online shopping will become “digital converts” that take preference for buying online when convenience wins over experience.
- Outcome B, limited ecommerce impact: Due to poor experiences like stock shortages and delivery delays, consumers who were forced to shop online will be happy to return to shopping in stores when shelter-in-place restrictions are lifted.
Given the variables that underpin these views, I thought it would be interesting to dive into the rationale behind these two potential outcomes.
Potential Outcome A: Lasting Ecommerce Impact
The argument that this crisis will have a lasting impact on consumer shopping behavior is rooted in two ideas. First, by the time “shelter in place” recommendations are lifted, many consumers will have adapted to relying on ecommerce. If this crisis had been a one- or two-day event, it would be hard to take that position, but this will likely be a multi-month long event for millions globally.
Second, prior objections for not shopping online were due to a combination of perceived risks around trust, convenience, and speed. To be sure, a crisis where certain goods and services are in high demand probably put all of those things at risk, but we have ample evidence that people are enduring these perceived risks.
Recent IRI data observed a 36% increase in grocery ecommerce as a result of the crisis, for example. This study does not take into account the sharp rise in meal kit demand or the number of consumers that have resorted to buying directly from brand websites when their retailer of choice was out of stock. I have heard plenty of anecdotes to that effect.
Potential Outcome B: Limited Ecommerce Impact
The arguments that posture the current ecommerce surge as a short-lived event have been supported by two theories.
First, the myriad of delays, stockouts, and price gouging that have been a recurring element of the online shopping experience during these past few weeks is a deterrent. If a consumer was already hesitant to shop online, dealing with product-availability issues and long delivery wait times is not going to encourage a consumer to return to that experience.
The second idea is that after being locked down in a house for many weeks, consumers will increase their preference for brick-and-mortar experiences just to get out of the house.
Challenges for Potential Ecommerce Outcomes
While these theories are relatable and solid arguments on the surface, four facts challenge their durability:
- Despite the challenges with supply shortages and delivery delays, Instacart order volume is up 150%, according to the company.
- Consumers have been able to overcome delivery wait times by ordering online and driving to the store for contactless pickup. This shopping trend is actually on the rise, according to the Adobe Analytics insights, even beyond grocery stores.
- Social distancing rules have limited store capacity, resulting in long wait times to shop in a physical store. Not to mention the many people who fear virus exposure and would rather wait a week for an online delivery window than go to a store, pushing online grocery delivery services to expand their workforces.
- When shelter-in-place recommendations are lifted, it is almost certain people will be conditioned to avoid crowded places for weeks or months after this crisis subsides.
Other factors that play into favor with the “lasting impact” argument. Consider the broad set of categories that are largely convenience-over-experience purchases, such as toys and games, consumer electronics, and sporting goods. While each of these categories is at least 25% penetrated online, according to research from Activate Consulting, plenty of retailers make big business focusing on these categories.
But what happens to those retail loyalties when a catalyst event forces more than 100 retail chains and many thousands of brick-and-mortar stores to close for at least six weeks? It seems reasonable to project that a meaningful base of consumers will have developed new loyalties that drive future behavior toward online shopping.
What ‘Lasting Impact’ Means for Brands
The outcome of what consumers are experiencing today requires that brands act with urgency to speed investments in ecommerce to protect their brand and position for future growth. Even if one is not convinced that this moment is a catalyst event, it would be terribly risky not to evaluate possible investments now.
Of course, it is one thing to recommend shifting resources to better invest in ecommerce — it is another thing entirely to actually do that. On the Salsify blog, we have provided information on exactly how brands are treating this crisis as a pivotal moment for the digital shelf.
This is a republication of an article that was first published on LinkedIn. Click here to read the second part of this content series, “The Digital Shelf and COVID-19, Part 2: How Brands Are Responding.”
Register now for our April 29 webinar about the impact of COVID-19 on the digital shelf with ecommerce experts from Forrester Research, top-performing international brands, and Salsify.
