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The only certainty within ecommerce right now: Consumers are buying online at an unprecedented rate. While the extent of impact for individual brands varies considerably based on the industry or target audience, there is no debate that shelter-in-place and social distancing guidelines have ushered in a historic surge in online shopping.
But most brand manufacturers are now asking the critical question: Will these new online shoppers adopt digital habits — or will they go back to their previous buying behaviors once this crisis has ended?
Sucharita Kodali, vice president and principal analyst at Forrester Research, believes brand manufacturers must expect radical changes. Sri Rajagopalan, former vice president of commerce at Revlon and Johnson & Johnson, believes in the digital revolution.
Kodali and Rajagopalan — joined by Christian Hassold, vice president of EMEA at Salsify — tackled this question at a recent Digital Shelf Virtual Summit session.
Their live debate features insights into how brands and retailers are reacting to the ongoing COVID-19 crisis, actionable next steps for brands hoping to navigate shifting consumer demands, and perspectives on what may become the "new normal" for commerce.
There's no debate needed: COVID-19 will ultimately increase the adoption of digital shopping. But certain red flags may indicate that rapid, sustained acceleration may not be in play.
"Experience in essentials shopping has been pretty terrible" during this crisis, Kodali stressed.
Consistent out-of-order alerts, delayed shipments, and recommended substitutions have cast a pall over online shopping for many first-time online buyers. These pain-points have been especially prevalent within industries like grocery that were not equipped to handle this sudden surge in demand.
While some brand manufacturers hope these shoppers will keep online habits after this crisis ends, based on these lackluster shopping experiences, there is little room for wishful thinking, Kodali contended.
The economics may simply not be there to sustain a high level of ecommerce activity. Click-and-collect orders cost grocers an average of $7, and delivery orders cost an average of $20, said Kodali.
These significant investments are slimming margins to the point of being untenable for many retailers. Many brand manufacturers who have traditionally viewed their business economics purely in terms of profit versus loss may not be willing to subsidize that loss for retailers, Rajagopalan said, even if it would pay off in the long-term.
Early data from China supports the argument that ecommerce growth will be slower than some more aggressive forecasts indicate. Kodali spoke to retailers in China that have roughly seen a one-year increase in adoption due to the COVID-19 crisis — not the five-year acceleration many stateside analysts predict.
Before COVID-19, many forecasts saw online shopping making up between 27% and 30% of overall commerce by 2030. Rajagopalan believes we will now reach this number within five years — a significant acceleration.
Citing previous growth trends for online shopping within Baby Boomer and millennial demographics, Rajagopalan argued that previously existing changes in consumer behavior would become new permanent habits, just as it has historically during times of crisis.
But this adoption will not be uniform across industries — or even across brands within industries — according to Rajagopalan. The primary dividing line between brands that can adapt to the new environment and those that cannot is how they view the role of the customer within their business economics.
"Manufacturers have traditionally not put the customer at the center," Rajagopalan said. "They have to be at the heart of everything you do."
Brands must throw away old models based purely on profit and loss (P&L) and commit to investments today that could benefit customers — even if it results in a temporary loss. Brands must also test direct-to-consumer (D2C) models and learn what works across channels to gain valuable customer data that will fuel future optimization.
Brands that have already embraced ecommerce and moved towards customer-centric strategies will accelerate their efforts for digital growth — and, therefore, their results — Rajagopalan stressed.
While Kodali and Rajagopalan have differing viewpoints on the scale of impact on future commerce from COVID-19, they agreed that change is already here. They advised on three key steps brand manufacturers must take to respond to this new growth.
Brands need a digital strategy, and this doesn't mean just "put your stuff on Amazon." Kodali's research indicates that 95% of shoppers are multichannel shoppers. Brands that focus on one channel will lose opportunities for brand exposure and new customer acquisition.
For example, if brands invest in search, they should invest in Google in addition to Amazon. If brands want more customer data, Rajagopalan stressed, they must test D2C channels in addition to retail channels.
The result will be more sales from more customers, giving brands the justification they need to find additional investment in their digital shelf programs.
Kodali argued that one of the primary hindrances in the modern ecommerce ecosystem is rogue distribution and supply chain mismanagement, which result in manufacturers that lack full control over their brand online.
Kodali pointed to companies like Nike, Apple, and Dyson that have been able to control their brand identity through more substantial D2C investments.
Rajagopalan noted that there is an incredible opportunity for brand manufacturers to leverage the product content they create for online retailers to reinforce their brand identity and narrative. Digital shelf programs are an essential investment for ensuring content is telling a compelling story across all online channels.
A customer-first approach is non-negotiable. If online shopping in new categories like grocery doesn't take off, it will be because the consumer experience during COVID-19 has been subpar, Kodali said.
For brand manufacturers to reach long-term success, they must invest in customers today.
"You need to throw in the garbage can 'above-the-line versus below-the-line' thinking," when it comes to customers, Rajagopalan concluded.
Watch the full session, "Live Debate: Is COVID-19 a Leap Forward for the Digital Shelf?" and sign up for upcoming Digital Shelf Virtual Summit sessions.