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The COVID-19 Effect: A New Era for E-Commerce

Thomas Rankin
April 7, 2020
Last Updated On

In the face of COVID-19, consumers across the world are shifting to online shopping faster than ever, which will fuel a new wave of growth for the e-commerce industry and the emergence of a transformed retail landscape.

Meme with the Tiger King about stress-shopping
Sweatsuits are considered essential right?

The Tipping Point for E-Commerce

As the world grapples with COVID-19, businesses across industries are faced with uncertainty. But one thing remains clear: e-commerce capabilities are vital to survival. Consumer behavior is shifting. As people around the world conform to a new normal, online shopping has quickly become essential to embracing social distancing norms. From bulk hauls to retail therapy, consumers are changing what, when, and how they’re buying. This leaves brands with new opportunities and unique challenges moving forward.

Online shopping has been a rising trend across industries for the last decade. Today’s marketplace is creating a set of conditions that will accelerate the growth of e-commerce and the downfall of traditional brick and mortar. The uptick in online shopping is already noteworthy—Common Thread Collective reported a +28% increase in online sales of consumer goods since mid-March. And both the OGs of e-commerce and emerging startups are seeing revenue climb. E-commerce pioneer Amazon reported a 47% increase in sales over the last two weeks of March. Madrid-based knitting brand, We Are Knitters’ sales growth surged +235% globally, pushing the brand to quickly pivot operations to keep up with a flood of new customers. Drizly, an online alcohol delivery platform, saw a +300% rise in sales over the month of March.

With the closure of physical retail spaces, brands are relying heavily on their existing e-commerce operations or quickly pivoting from a physical storefront to a digital one. While the short-term impact of COVID-19 on retail is widely unknown, Nielsen predicts that businesses will see long-term growth in online purchasing as a result. While the gains will vary across industries, the brands that invest in the new technologies that are necessary to operate today are the ones that will thrive in the long run.

Online Shopping Goes Mainstream

Brands in the fashion, beauty, and consumer electronics industries were some of the first to capitalize on the transition to online shopping and have seen the biggest gains as a result. E-commerce in the U.S. has steadily hovered around an 11% share of the market. Former eBay CEO Devin Wenig expects to see e-commerce reach a tipping point this year, predicting online sales to hit 20% by the end of Q2.

It comes as no surprise that sellers of essential goods and recession-proof items are seeing an immediate spike in online sales as a result of the novel coronavirus. Well-positioned brands in the CBD, fitness, and fintech industries have seen online sales surge over the past month. A recent survey, conducted by L.E.K. Consulting and Civis, highlighted the shift in where and how consumers are spending their dollars. Monthly spending on fitness equipment increased +35-40%, with consumer spend also rising +20-25% on entertainment and +10-15% on pet supplies. The grocery industry, an industry that has experienced slower e-commerce growth than others at only 4% in digital sales, is seeing an unprecedented rise in online purchases. And the impact these companies are seeing will last long after the pandemic.

The push to convert shoppers to online channels has been top of mind for almost every major player in the grocery sector since Amazon acquired Whole Foods, pushing the industry to invest in e-commerce capabilities. Digital grocery shopping platforms are seeing adoption rates soar in the midst of the COVID-19 outbreak. New England’s Stop & Shop’s online grocery shopping and delivery service, Peapod, saw a 33% increase in orders the first week of March compared to the previous year. Walmart’s grocery app downloads increased by over 160% compared to the prior year. The brands that have already invested in the infrastructure to meet new demands will see the highest returns now and down the road.

The Digitalization of Retail

The short-term behaviors that consumers are adopting right now will undoubtedly become ingrained in everyday life. COVID-19 is forcing people not only to rethink hygiene, but also their shopping routines, lifestyle choices, and eating habits. A survey conducted by Valassis found that 42% of consumers are shopping online more than ever before. And it’s not only their go-to products they’re buying, people are engaging with new brands to fill their new needs. For instance, hair color kits have seen a +20% increase in sales over March.

Brands across verticals need to adopt innovative tactics to leverage the uptick in online traffic that is likely to climb and shift to a new digital marketplace. This period is crucial to building brand loyalty. Whether people are using new platforms to shop or in search of different goods and services to cope with COVID-19, marketers have an opportunity to create a deeper connection with their target audience.

With the closure of physical stores, cancellations of events, and a declining economy, social media channels are the only place where marketers can engage consumers. It’s a chance for brands to authentically market to their customers through organic storytelling and refreshing content that sparks inspiration and positivity. Brands need to stay engaged with their audiences and use this period to test new tactics, creative, and narratives to understand what their audience actually cares about. Marketers can leverage these insights to dive deeper into their audience’s tastes and preferences, consumer sentiment, and where they’re missing out on key demographics.

It’s a critical time to build awareness with new audiences and meet your customer in the comfort of their own home with a personalized shopping experience. When we return back to some state of normalcy, the brands that effectively engaged their communities and increased efficiency will be top of mind for consumers.

Why E-Commerce Capabilities Are More Important Than Ever

As we navigate these uncharted waters, it remains clear that e-commerce is the only path forward for businesses to weather the storm—and come out stronger on the other side. As we expect to see a new post-pandemic market emerge, adapting to shifting norms is essential for brands’ long-term success. It’s more critical than ever for brands to meet their customers’ needs and expectations. And that includes a frictionless shopping experience across e-commerce platforms and marketing channels.

The gains for e-commerce brands will be varied across sectors. But the brands that anticipate and prepare for what the post-pandemic market will look like will be the ones that come out on top.

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