Getting Ready for the E-Commerce Market Expansion Due to COVID-19
The coronavirus crisis has changed all aspects of shopping and e-commerce. In a short time, we've experienced the early rush on hand sanitizer to Amazon.com packages being a lifeline during quarantine. In an exclusive look at Yotpo’s aggregated e-commerce order trends, indexed to the week of Jan. 27, 2020, the signals are there of a recovery from late March into April.
As we look into the data, early trends are emerging about what the future of shopping will look like. Shopper priorities are changing. This is a great chance to learn how you can build economic resiliency by adapting to post-COVID-19 behaviors.
E-Commerce Trends During the Coronavirus Outbreak
The first change in shopper behavior occurred during the virus’s rapid growth and peak.
For China, this occurred from January to February. In March, these shopping trends were seen in New York and other virus hotspots. These shopping behaviors may be forthcoming for other locations that haven't yet reached their virus peak.
Here's how e-commerce changed in China during the virus's peak:
- More Older People Shopped Online: Between January and the end of February, there was a shakeup in the distribution of e-commerce consumers. In January, those aged 31 and above made up 49 percent of online consumers. This leaped to 60 percent by the end of February.
- Mid-Tier Cities Also Turned to Online Shopping: In an effort to acquire goods, there was strong e-commerce activity beyond the top-tier cities like Beijing and Shenzhen. Among shoppers living in cities classified as Tier 3 and below, e-commerce activity accounted for 69.2 percent of the total share during the outbreak. That was an increase of 12 percent from January.
- Food Demand Increased and Went Online: During the early stages of the virus, there was a spike in food buying that changed to online grocery shopping after people were homebound. One online grocery retailer reported a 215 percent increase in sales since the previous year, and a vegetable delivery supplier saw a spike of 600 percent during the Chinese New Year period.
In a Yotpo survey about retail priorities since the coronavirus, we found that the strongest interest was in survival essentials. Shoppers were most interested in the following:
- Food: 8 percent
- Health & Wellness: 5 percent
- Pets: 8 percent
Online Shopping Habits Are Formed
Following the virus peak, the shift to online shopping proved to be pervasive. It continues to be a safe and convenient way to shop. Metrics show that around the globe, e-commerce been a strong driver of sales. In Italy, for example, e-commerce transactions increased 81 percent from the end of February to April.
According to McKinsey, here's how consumer buying patterns will evolve after the peak and during the coronavirus recovery:
- Older generations continue to shop online: They're now comfortable with the technology and have enthusiasm from positive experiences.
- New online shoppers grow comfortable: There are no longer barriers of entry such as account setup, and there's a convenient pathway toward additional orders and brand loyalty.
- Persistent interest in on-demand food and grocery delivery: Not only is it preferred by consumers, but contactless delivery gives workers added safety. A recent report from Mary Meeker said that on-demand food and grocery delivery "may be gaining a permanent market share in these unusual times.”
In a Yotpo survey of consumers in the U.S., U.K., and Canada, 43.2 percent plan to do more of their shopping online in the coming months. This is a strong behavior change that can be an opportunity for retailers that are ready to meet their needs.
Shopper Preferences and Priorities Are Changing
As Warren Buffet explained in his annual shareholder's meeting, recent coronavirus events are "changing people’s psyche." The impact has the potential to last in people's minds long after the actual effects of the virus.
Retailers need to be prepared for a new type of shopper.
Interestingly, product availability has altered brand allegiance and made consumers more adventurous. Yotpo found that because of the coronavirus, 40.6 percent of consumers are willing to consider less familiar brands when their top choice is unavailable.
For brands that have available products, this is a major opportunity to win potential customers. Conversely, brands that don't have product availability may need to work harder to retain customers.
A survey by McKinsey has revealed how much shopper loyalty is changing. Up to 18 percent of Americans have changed their retailer or preferred brands during COVID-19. Top changes include switching to store brand, shopping on new websites, and shopping at new grocery stores. For most shoppers, these changes will persist as new loyalty relationships are formed.
Behaviors That Shoppers Intend to Continue After the COVID-19 Crisis
- Switched to store brand: 64 percent
- Shopped new website (non-basics): 56 percent
- Shopped new grocery store: 56 percent
- Shopped new website (basics): 50 percent
Consumers are also looking for retailers that are addressing consumer uncertainty. At least one Wall Street CEO says that feelings of safety will preempt economic recovery.
One study found that 30 percent of consumers will buy from reassuring brands. After the crisis, there will be a "trend toward sustainability and the desire for more responsible consumption," said McKinsey, "reinforcing the need for companies to provide clear, detailed information about their processes and products."
Every Brand Needs to Have an Owned E-Commerce Presence
Now is the time to boost your e-commerce presence to maximize access to customers.
Third-party retailers may be a part of your online strategy. However, it's important to understand the risks. For example, if you completely relied on Amazon as your only e-commerce presence, its logistics disruptions could mean that you'll lose revenue or have dissatisfied customers.
As one longtime Amazon seller told Vox: “Part of the problem with Amazon is that this little thing that maybe no one at Amazon realizes is happening can wipe out people’s entire business.”
However, when you host your own e-commerce site, you're in control of your entire customer experience. This means you can own the online presence of what you're selling, including the ability to communicate product availability, share reviews, and display order status.
You'll also have full control over customer data. This can help you create a strong pipeline of repeat customers while also helping you lower your costs via precision marketing.
E-Commerce Success During the Coronavirus
During this turbulent time, several brands are seeing rapid e-commerce growth. This has included the food and beverage sector, which has traditionally relied on in-person retail.
In one case, King Arthur Flour's direct-to-consumer (D-to-C) e-commerce business has seen exponential growth. The coronavirus baking boom has meant that grocery stores have been sold out of flour for weeks. Consequently, between March and April, Google searches for King Arthur Flour increased by 186 percent (see the chart below).
To meet demand, King Arthur Flour has flour mills working around the clock, and it added another mill to its supply chain. It's also actively managing online product availability. This transparency helps customers know what to expect and how they can get in the queue for product delivery.
This spike in new purchases on King Arthur's website presents an opportunity for the brand to retain these customers. During uncertain times, shoppers may prefer their baking supplies as a convenient delivery rather than facing the erratic inventory at a grocery store.
King Arthur Flour has been incentivizing repeat purchases through a loyalty program that offers free shipping and free promotions based on purchase amounts. Technology can automate this type of e-commerce innovation, making it easy to implement a program that benefits brands and shoppers.
Another e-commerce company that's doing well is Haus, the D-to-C alcohol brand. Sales increased by 450 percent in just two weeks. This extreme growth far surpassed industrywide growth in alcohol beverage sales, which are up 55 percent year-over-year.
As online shoppers try Haus' exciting flavors, online reviews have been a helpful way to communicate both enthusiasm and flavor profile. By showcasing feedback, satisfied customers have helped the brand to make new sales.
Not only is Haus providing on-trend products, but it launched an inspiring initiative in response to COVID-19. It partnered with restaurants around the country to offer custom blend spirits and donate 100 percent of the profits back to the restaurants. This positions the brand as a strong industry supporter while also getting help from restaurants to earn new customers.
Digital Innovations Create New Online Shopping Experiences
High-tech solutions provide a long-term strategy of how to adapt to the new normal.
E-commerce has also seen a ramp-up of livestream shopping. In China, online retail giant Alibaba’s e-commerce platform saw livestream sessions double in February.
Virtual shopping experiences aren't just for small-scale items. Both the car industry and real estate agents are offering remote shopping experiences. A car dealer in Costa Mesa, CA implemented a virtual showroom, and within a month online sales were already "picking up steam" despite total sales being down 50 percent since the pandemic struck.
The new markets post-COVID-19 will favor digital tools and processes. By relying on technological resources and shopping innovations, brands and retailers will be poised to thrive.
Raj Nijjer is vice president of brand marketing for Yotpo, a leading e-commerce marketing platform based in New York.
Raj Nijjer is vice president of Brand Marketing for Yotpo, a leading eCommerce marketing platform based in New York. Yotpo’s solutions for reviews, user-generated content (UGC), loyalty, and referrals help brands accelerate growth by enabling advocacy and maximizing customer lifetime value. Prior to joining Yotpo, Raj spent over three years at Yext in multiple leadership roles through its IPO in 2017. Raj also spent over nine years at Godaddy in leadership roles launching innovative products with over nine patents issued and leading to a buyout, inclusive of an eventual IPO.
Raj received his Bachelors of Science degree in International Management and his MBA from the W.P. Carey School of Business at Arizona State University. In his free time, Raj is an avid angel investor and advisor to startups and founders.