Coronavirus Retail Trends Point to a Sea Change for E-Commerce
Retail executives have been fixated on the dramatic increase in e-commerce sales in the weeks since COVID-19 led to non-essential physical store closures and widespread shelter-at-home orders around the world.
The growth is dramatic: Online sales are up nearly 40 percent since late February, according to Signifyd’s Ecommerce Pulse data. The more interesting story is not just a readout of what the numbers tell us about the last few weeks, but what they tell us about the next few years.
The movement of consumers to e-commerce channels has propelled the shift from physical retail as much as two years into the future for existing models. Pre-virus projections had 2020 e-commerce sales growing about 15 percent in North America and 16.1 percent worldwide.
Comparing sales from the same storefronts on our Commerce Network, Signifyd saw more than double that year-over-year growth, 34.4 percent, in the first month the World Health Organization labeled COVID-19 a pandemic. In recent weeks, our network has seen sales to first-time online shoppers reach Black Friday and Cyber Monday levels — except now it’s been sustained for more than 10 days.
Does that mean 2020’s e-commerce growth will be over 30 percent for the full year? Probably not, though it’s not out of the question. That amount of growth over a year seems ambitious given the lack of overall consumer and market confidence. However, even at this relatively early stage in the pandemic, we remain confident that 20 percent is achievable as new buyers who would have never shopped online, but for COVID-19, are now doing so.
Based on the totality of transactions passing through Signifyd’s network and our ability to authenticate transactions for thousands of merchants, we see that this cohort of new users are buying online for the first time, and then returning to shop online again at the same or another merchant within one month. This may be because of necessity rather than preference, as there are few other shopping choices due to the closure of brick-and-mortar stores. Regardless of the ultimate reason, returning to shop in short order is the way that consumers form new spending habits and share-of-wallet shifts.
Consider one category, grocery, in which we saw one of the most dramatic spikes in March, up 110 percent from the week the pandemic was first declared. That number certainly included some panic buying, and some of it via phone and not online. However, the grocery figure is up so materially over pre-pandemic norms that even if only a portion of the new users become repeat purchasers, the industry will be years ahead of schedule for e-commerce adoption.
We’re not the only ones seeing this trend — a number of analysts, like eMarketer’s Andrew Lipsman, have said the shift to online grocery shopping will last.
“I do think that online grocery ordering, both for click-and-collect and for delivery, is a permanent change that will come out of this,” Lipsman said on eMarketer's Behind the Numbers podcast. “Once they have learned how to do it, habituated to the behavior, that will form a habit going forward that will ultimately represent a profound shift in a massive consumer category.”
Grocery has historically been one of the hardest industries to switch consumer behavior from physical stores, so the trend will happen in other categories, too. We’ve seen double- and triple-digit growth since late February in all categories except for luxury goods, high-end fashion, and travel accessories, and even those three have rebounded from their lows in mid-March. There's no reason, in fact, to assume these new buying habits will be confined to any particular category.
So, what does all this mean for retailers going forward? As difficult as it might be, with all the challenges brought on by COVID-19, this is the time to shine. If you aren’t there already, you need to kick into holiday mode and capture as many of the new online buyers as possible.
You're seeing — and will be seeing — shoppers visiting your site for the first time.
Among other things, this upheaval is an unprecedented opportunity to serve customers in need and win them over for the long term.
In the midst of a crisis, consumers are likely to be forgiving, but you still want to provide as seamless an experience as possible. Look for points along your order management and fulfillment systems that you can automate to better respond to unusual order spikes and unusual order volumes for specific products. Video games, indoor exercise equipment, baby products, and health-related products come to mind.
Obsess over clearly communicating with customers about things such as out-of-stock items, delivery delays, and order cancellations. And amid the bad news, focus on the positive: You have products to sell and there are people who want to buy them — in fact, more people every day.
J. Bennett is vice president of operations and corporate development at Signifyd, the world’s largest provider of guaranteed fraud protection.