Op-Ed: The End of Stores? The Ecommerce Tsunami Is Coming | 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.
- Consumer spending among ecommerce brands is up
- Retail brands that rely on stores for sales are bracing for massive financial losses
- Now is the time for all brands to prepare for growing sales when people can leave home
Since the coronavirus pandemic has forced people to stay home, consumers are increasingly buying online. These new environments are changing what’s important to them, which is causing them to spend more money on items that help them adapt to the new normal. The longer they’re home, the more consumers will purchase online. As this habit becomes the new normal, we will see an even greater shift away from the in-store experience and towards a more convenient option: ecommerce.
The number of people buying online is increasing week over week, according to recent studies. Since social distancing has become a way of life, the number of online shoppers in New York, specifically, has increased by 37 percent since the beginning of March 2020. New York was one of the first states to go under a stay-at-home mandate. We expect a similar trend in other states who were later to impose similar social distancing policies.
And with more shopping comes higher spending. Since March 6, 2020, the amount of money spent by New Yorkers with brands in the Klaviyo customer community is up 25 percent.
Not only has the need for self-isolation changed how consumers shop, it’s also influenced what consumers are looking to buy—and the emerging focus is on New Essentials. As a supercategory, New Essentials are experiencing dramatic growth compared to Essentials and Non-essentials.
Even consumers who are recently laid off are spending—in fact, consumers who are recently unemployed report that they’re more likely to buy electronics than those who are employed.
Consumers Will Discover New Products from DTC Brands
Amazon introduced the concept that nearly anything you need can be bought online. This has massively increased the number of consumers who shop online. But they go to Amazon for items they are already looking for. Much of what people buy there are commodities or items you know you need that you can easily and quickly find by searching.
Amazon’s customer experience and sourcing strategy of having as many SKUs as possible to create a global marketplace has made them a reliable destination to buy anything you need—similar to big-box retailers like Costco, Walmart, and Target.
But what Amazon hasn’t mastered is brand discovery—it’s hard to browse Amazon and find new products that drive both an emotional connection and brand affinity.
Physical stores handle discovery well. There is an element of exploration, walking the aisles and touching products you hadn’t seen or considered before. The consumer desire to discover new products hasn’t gone away, but stores as a source of discovery have. Where are consumers discovering new products now? They’re online finding new brands to connect with.
Low Online Ad Prices Will Fuel DTC Growth
Social media and online content are also seeing engagement rates that are at an all-time high, presumably due to the fact that consumers are spending much more time at home and are looking to the internet to entertain themselves. In fact, all digital marketing channels are seeing increased engagement, except ad spending.
Many consumer packaged goods (CPG), travel, and business-to-business (B2B) brands have cut back on ad spending in an attempt to be more conservative with their marketing budgets amid the current crisis.
This decrease in competition has led to a massive reduction in cost per thousand impressions (CPMs) and an increase in return on ad spend (ROAS) for brands that are buying online advertising. What brands are increasing their ad spend? You guessed it: ecommerce brands.
“At the macro-level,” says Aaron Orendorff, VP of Marketing at Common Thread Collective, “we’ve seen CPMs on social drop -13.38 percent. Even though onsite conversion rates declined initially, that reduction in cost has pushed ROAS up 27.89 percent and revenue 56.53 percent. It’s not a one-for-one—and definitely requires creative adjustments to coronavirus impact on online shopping—but it’s still a profound opportunity across the board.”
With sales increasing among ecommerce brands, cash flow is starting to grow. With cash flow up, brands will invest more money in online ads. With the cost of ads down, sales will become more efficient, making the entire customer purchase cycle move even faster.
— Brian De Groodt (@bdegroodt) April 9, 2020
This will grow ecommerce brands’ customer bases. And as customer bases grow, brands will shift their energy from third-party advertising to the channels they own—email, SMS, websites, and direct mail—both to save money and have more control over the customer experience. This will begin a slow, secular shift in reducing ecommerce brands’ reliance on online advertising as a means of growth.
The Spotlight is on DTC Brands
It’s never made more sense for ecommerce brands that sell in-demand items to put their foot on the gas and grow. Now is the time that late-adopting consumers are exploring the option of buying online. Meanwhile, consumers who are already familiar with buying online are expanding which categories they’ll purchase from.
Case in point—toy and hobbies sales are up 130 percent in New York City over the last month. Searches on Google for ways to “entertain kids” are up even more. Although some people may have preferred to buy from this category offline prior to the coronavirus crisis, they’re clearly now more comfortable making these purchases online.
What’s more, after the government-imposed lockdown is lifted, online spending is likely to continue increasing. In China, the province of Wuhan recently relaxed their stay-at-home restrictions. There has been a corresponding increase in online shopping contributing to “mountains of cardboard boxes” piling up outside apartment complexes, according to The New York Times.
Why? Stores are still closed and consumers have new needs as they emerge from their homes and transition back into society.
Meanwhile, delivery orders in the epidemic epicenter of Hubei province increased three times during the month of March compared to February, according to JD.com. And recently, as the coronavirus has progressed, consumers have shifted from buying daily necessities and indoor fitness equipment to buying clothing, cosmetics, and travel accessories. The same thing is likely to happen in the United States.
Just like a tsunami, this new wave of shifting consumer behavior will permanently reshape the shores of the global economy.
Brands must plan now
Many brands have been operating hour by hour, day by day. With so much uncertainty around a global viral pandemic, the idea of “planning” has been a cruel joke to many business owners and marketers.
But the future is becoming less opaque. Brands need to start planning for the opportunity to capture the increase in online spending coming over the next month and next quarter.
Of course, how you strategize going forward largely depends on what you sell and how you sell it. Brands that sell non-essential items like jewelry, automotive, or travel goods must focus on building relationships now so they don’t have to fight back market share later. Brands that sell primarily offline need to modernize their digital operation immediately in order to meet consumers where they are.
What All Brands Must Do Now
All brands must start anticipating what’s on the horizon for their customers after shelter-in-place restrictions are lifted. It’s uncertain when people will be able to safely leave their houses, but we know it will happen, and brands must prepare for it.
Brands must get ahead of the curve to understand what products people want, what prices they expect, and what their reasons are for buying. The better you understand what your customers want, the sooner you can start to take action, and the better prepared you’ll be to deliver a relationship-growing customer experience when the tides turn again.
Understanding your customers’ wants and needs can be as simple as sending a survey asking people what they love about your brand and what they want to see from you once they can leave their homes.
What Brick and Mortar Brands Must Do Now
Brands that primarily sell through physical stores must move online and adapt, immediately. The longer people stay at home, the more brands with no ecommerce presence will suffer. Meanwhile, the brands that have optimized their online sales experiences will thrive.
Chip Bergh, CEO of Levi’s, said, “We’re going to potentially see competitors go out of business.” Meanwhile, Nordstrom recently reported that their financial situation could become distressed “because of coronavirus-related store closures.”
When stay-at-home restrictions are relaxed, will consumers immediately go rushing back to stores? Chances are, the public health concern will lead to a slow roll back to stores as consumers focus more on staying healthy.
Brands that rely on a majority of their sales to come from physical stores must not only adapt to the current climate, but also for the future of their business.
Brands must update their messaging to address consumers’ new reality and position their products to empathize with consumers’ current conditions and needs That means brands need to enhance their owned marketing stack to appropriately segment, target, and communicate with consumers in the modern, personalized way they expect.
New strategies will become exceptionally important—targeting email lists by geography, managing automated sequences across multiple channels, updating logic and content to reflect the changing times, and relying on plain-text communication over perfectly crafted imagery as production teams are limited in their resources while working from home. Brands that don’t have fast, flexible, and affordable online marketing tools will likely be left behind.
What Online Brands Must Do Now
Online brands must put their foot on the gas now. Amazon is facing fulfillment issues keeping up with the demand for essential products while consumers are starting to expand what categories they buy from. This means that shoppers are going to continue spending money, but not all of it will be with Amazon.
If you’re a direct to consumer (DTC) brand, run ads—they’re cheaper and more effective than ever. Expand your usage of pop-up forms and dynamic onsite content that enhances your onsite experience and collects email addresses—people want to connect. Grow your email list—your customer acquisition costs (CACs) will go down as you drive more sales through owned channels like email where you don’t have to pay for clicks or impressions.
Position your business and product as the right solution for what consumers need right now. Brands that rely on selling offline or through third-party channels will continue to have less control over fulfillment. Consumers have started to notice delays in shipping or a shortage of inventory, so make sure consumers know you exist and that you’re open for business so you can capture that sale.
Ask your customers what you can do for them. Understand what they like about your brand and use this in your positioning to find new customers. See if there are new products they might want from you. It’s an awesome time to work on product development, especially if sales are down.
Set yourself up to expand distribution channels. If you can demonstrate that you had strong sales during a downturn, you may be able to use that to pitch third-party retailers and secure partnerships going forward.
This can only improve your distribution and help your sales, especially if you aren’t reliant on those channels. Setting up your brand story by increasing your sales when the economy is shrinking is key to that pitch.
Above all, endear yourself to customers, visitors, and social-media followers during the crisis. This is particularly crucial for “non-essential” products. Look for partnership opportunities with thoroughly essential and humanitarian organizations. Seek out disproportionately affect groups like those in the events, food, and sports. Build relationships now—even if someone can’t buy from you today, those are the moments they’ll remember tomorrow.
Consumer Spending Will Never Look The Same
Now is a once-in-a-generation moment. More and more consumers are learning how to buy online and are becoming comfortable with it. Not only are they purchasing more products from ecommerce brands, but they’re also expanding the types of items they order online.
Public health concerns are likely to keep people in their homes and consumers are likely to be wary of returning to stores in droves. The longer the world stays inside, the more consumers will rely on buying items they both want and need online.
Consumer spending will not look the same after this and fortune favors the prepared. The brands that start planning now will be the ones that emerge the victors later on.
Keep checking our COVID-19 insights page for the latest results of our brand and consumer surveys, as well as effective marketing moments.
For more marketing strategies best practices, head on over to our COVID-19 resources page, where you’ll find guides, blog posts, and other content designed to help you grow.Back to Blog Home