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Brand manufacturers can no longer rely on the commerce status quo. With recent upticks in online sales attributed to the ongoing COVID-19 crisis, brands must face a new reality: Shoppers are now evolving at an unprecedented pace, embracing the digital shelf like never before.
Most brand manufacturers have multi-year plans predicting how markets and buying behaviors might change over time, allowing them to prepare and plan for changes accordingly. But these plans are now being rolled out in a matter of months — not 10 or 15 years — due to these accelerating digital trends.
Even after this crisis has ended, this evolution will have a long-term impact on commerce. Welcome to the new digital reality.
Rob Gonzalez is the co-founder and CMO of Salsify. Gonzalez is also one of the founding members of The Digital Shelf Institute (DSI), a community of manufacturing executives from across the commerce ecosystem. The DSI hosts live and virtual events focused on commerce innovation and strategy and publishes a wide range of content, including its Unpacking the Digital Shelf podcast, focused on driving digital strategy forward.
Gonzalez shared how brand manufacturers must think about the long-term impact of the acceleration of digital trends during a recent Digital Shelf Virtual Summit session. Using the latest market and consumer data, he offers a look at the durability of this digital shift and insights on how to accelerate digital commerce strategies best.
This shift is not without precedent, as the acceleration of consumer trends has historically been a defining feature of economic crises. In the early 2000s, for example, emerging niche consumer packaged goods (CPG) brands saw slow — but consistent — market share growth by selling to smaller up-and-coming retail chains, such as Whole Foods.
At the onset of the Great Recession in 2008, one would have expected these brands — which had less cash in reserve — to not fare well during economically dire times. But they were actually able to gain significantly more market share through the recession than expected.
Between 2011 and 2020, the average time between the theatrical release of a movie and its general availability to consumers decreased from 120 days to 90 days, according to Gonzalez. During this ongoing crisis, many entertainment conglomerates, such as Disney and Universal Studios, have taken the release time down to zero — with many major releases occurring on direct-to-consumer (D2C) streaming services like Disney+.
The trend for consumers to purchase niche CPG brands already existed. The trend for movie studios to cut the time between theatrical release and at-home viewing already existed. Economic crises were simply responsible for accelerating the growth of these existing trends.
Before the COVID-19 outbreak, the number of people who tried and liked online grocery shopping stood at about 6% of the overall market. That number is now 12%. This growth is a doubling of overall market share within weeks — not years. The total value of products sold on the alcohol delivery platform Drizly is up 500% compared to this time last year, with new customers making up a sizable share of those sales.
The cost of acquiring new, loyal users has traditionally been the largest hurdle for new platforms like Drizly and Instacart. But with shoppers afraid to gather in densely crowded areas, the cost of acquisition has gone down tremendously, as there are few other options available. These platforms were already seeing a steady increase in adoption before the outbreak of COVID-19 likely could not have predicted triple-digit sales growth within a few weeks.
“Whatever your internal models said about the rise of ecommerce over the next five years — they’re happening overnight,” Gonzalez said.
This ecommerce growth will result in short-term growing pains. Some brand manufacturers currently seeing sharp upticks in online ordering may be forced to slow growth to deal with supply chain or resource shortages. But the brands that can move past those pains will be best prepared to win long-term.
Gonzalez stressed that the brands that can “ignore the growing pains” and focus on setting themselves up for success in the post-COVID-19 “new normal” will be the ones that find success against the competition.
From an execution perspective, this successful ecommerce strategy requires four steps:
Crises accelerate existing trends, and this current crisis is accelerating the adoption of online shopping by many years. Similar to the outcome of the Great Recession, there will be brands that come to prominence by taking advantage of digital trends. These brands will set their teams up for success and will gain a larger market share while others fade away.
Watch the full session, "COVID 19: Accelerating Digital Trends," and sign up for upcoming Digital Shelf Virtual Summit sessions.
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