Missing the Forest for the Trees? What The New York Times Overlooked About Changing Spending Behavior | Coronavirus Series
Editor’s Note: This article is part of a series that explores the impact the coronavirus crisis is having on the world of ecommerce. Explore daily insights surrounding the coronavirus crisis or check out these additional resources to help you navigate your marketing strategy during this time.
In their April 11th article, “How the Virus Changed the Way Americans Spend their Money,” The New York Times missed a critical part of the story of changing customer behavior. In fact, they may have missed the key change in spending behavior happening underneath the surface —a change that will likely have a ripple effect long after the coronavirus is a terrible memory.
What did The Times miss?
Consumers are moving their spending online—today in droves and at breakneck speed. Some of these consumers who rarely or never bought online may never go back to shopping like they used to.
Emmanuel Eleyae, founder of Eleyae Systems, a Culver City, CA marketing agency, said what we are seeing in ecommerce sales right now “isn’t a temporary spike. It’s a monumental shift, and those that catch hold of it will be able to take advantage of a whole new customer demographic that did not exist for them before.”
Mark Fiske, an operating partner at H.I.G. Growth, a private equity firm, agrees: “When we’re on the other side of this, consumers previously uncomfortable purchasing online who made the shift will likely continue their online purchasing to some extent. It’s unlikely to be binary with consumers reverting entirely to their prior behaviors.”
Even before the current coronavirus, ecommerce sales represented the bulk of overall retail sales growth in the US—$600 billion in online sales were 56 percent of overall retail growth last year. And projections for where ecommerce sales are going are as high as $6.5 trillion in 2023.
Brick-and-mortar stores are hurting, but the story should not end there
Let’s be clear. The Times did not get their facts wrong.
There is no disputing that consumer spending broadly is down versus the same period last year as a result of the coronavirus crisis. There is also no question that many industries highlighted in the NYT article are hurting. The industry-by-industry graphics in the article are a sea of red ink.
The pain has been especially sharp for traditional brick-and-mortar stores. Economists expect March retail sales data being announced later this week to show the biggest month-over-month drop in history.
“It’s a day of reckoning for the economy,” said Chris Rupkey, chief financial economist at MUFG Union Bank. The collapse in traditional retail is eliminating jobs (46,000 lost in March alone) and driving some brands into bankruptcy. This is yet another impact of the brick-and-mortar crisis that may continue long after the public health crisis subsides. And it’s an outcome retailers with modest or no ecommerce presence are moving quickly to change.
It’s more an error of omission on the part of The Times for any piece discussing changing spending behavior.
The only reference to ecommerce in the article is a mention that “[s]ome companies like Walmart, Amazon, and Uber Eats have seen spikes in purchases.” At best, it’s incomplete to credit the continued growth in ecommerce to only the large marketplace businesses like Walmart and Amazon. With Amazon, in particular, this approach glosses over their well-documented challenges.
There’s a bigger story here—and it has some bright spots.
Some ecommerce categories have never seen a better stretch for sales
“Many of our clients are having their best sales ever over the last four to six weeks, even as compared to last Black Friday,” said Dean Dutro, co-founder of Portland, Oregon-based digital agency, Worth Commerce.
One natural skincare and beauty client, Naples Soap, illustrates the challenge—and opportunity—many businesses faced in recent weeks. The bulk of their sales until the last several weeks came from several retail locations. WIth those closed, the company had to move entirely online. Over the last 30 days, they have tripled online sales. Dean sees a common thread for the brands performing well in recent weeks: “They engage with their customers. They have a relationship.”
Dean’s experience with clients is not an outlier. In fact, nearly 40 percent of ecommerce merchants report increasing sales, according to recent studies.
The contrast with the data in The Times article is even clearer when you look at specific categories.
Although The Times’ data paints a bleak picture for the Toys category (down over 75 percent), Klaviyo data for ecommerce Toys & Hobbies brands tells a very different story. Since the implementation of stay-at-home orders during the weekend of March 15th, sales have significantly outpaced, even doubling some weeks, the same period last year. A children’s book brand reported sales going up 300 percent in the week after people started working from home and needed to entertain their kids.
A similar dynamic is clear in Sporting Goods with The Times data showing more than a 50 percent decline in sales, but ecommerce data for the same category showing consistent growth, including some weeks doubling sales for the same period last year.
These are just a couple of examples of ecommerce categories that the data suggests are currently thriving. It’s challenging to tell these stories, though, for at least a couple of reasons. Narratives, including The Times piece, often lump retail together as a monolith, leaving little oxygen for ecommerce businesses (beyond the giant marketplaces) to tell their story.
Moreover, there’s a human component: It can be hard to tout success when so many others are struggling. When describing the current success some of his clients, like Jackson Hole Buffalo Meat Co. are having, Emmanuel Eleyae put it this way, “[T]here’s a bit of a feeling of guilt. It’s frustrating to be winning when everyone else seems to be losing. How do we celebrate the success I have been having when others are in crisis?”
This is not a blip. The world’s response to COVID-19 is having an ancillary effect on consumer behavior that is unlikely to revert back to its pre-COVID state: Online spending is increasing dramatically. Brands will have to have a robust ecommerce strategy to survive. “It’s not that brick-and-mortar stores will go away,” said Drew Edell, head of retention marketing at marketing agency, MuteSix, “but they will change.”
Experiment. Alexa Engelhart, director of content and email at Power Digital, marketing agency in San Diego, highlighted the importance of businesses “trying new things out” at a time like this, like fitness companies now providing virtual classes, fitness portals, and other tools that maintain engagement with their customers. Are you worried about your own brand’s growth during these uncertain times? Consider how you can use digital experiences and relevant, brand-friendly content to keep your audience engaged. Some of these experiments will continue to be valuable when the crisis abates.
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