The Importance of E-Commerce in a Post-Pandemic World

By May 4, 2020 May 19th, 2020 COVID-19 Insights
The Importance of E-Commerce in a Post-Pandemic World

As we all navigate the everyday challenges presented to us during the coronavirus pandemic, it is important to not only commit short-term actions to mitigate the impact of government shutdowns and shelter in place orders. Rather, as times gradually become less volatile we must begin to assess what recent changes may become more permanent. One of those changes is the shift in consumer behavior.

It is no secret that as many brick and mortar stores have closed their doors for the time being and shoppers look to minimize risk by staying in their homes, more consumers have turned to online shopping to obtain the items they need and want.

To address the current changes and increased digitalization of the marketplace, we spoke with James Boyd, the Founder & CEO of Treasure, a digital marketing and consulting agency focused on the e-commerce space. Based in San Francisco, Treasure helps brands navigate and manage e-commerce channels and grow their businesses through digital advertising.

How has consumer behavior changed since the start of the pandemic?

As COVID-19 continues to disrupt industries and businesses around the world, the broader consumer industry finds itself operating in unchartered territory. Amid widespread health concerns, federal travel restrictions and local movement limitations, the industry is facing the greatest, and fastest, change in shopping behavior ever.

→ Download Now: An Overview of the CARES Act [Whitepaper]

Buyer adoption of online CPG shopping has consistently increased over the last two years. Yet while factors like improvements in technology, infrastructure, and experience have resulted in pervasive consumer behavior changes, COVID-19 has caused another steep change in the way consumers shop.

According to data from Nielsen, for the two weeks ended March 21, 2020, total U.S. CPG sales (in-store and online) increased $8.5 billion from the two weeks prior. For context, that is 15x the average rate of change from a typical two-week period. During that same two week period, upwards of 35% more people had shopped online for CPG items compared with a typical week. While grocery was a leading driver for the week ended March 14, non-consumable items carried the mantle the following week.

This all means that the industry is now at a critical juncture. If historical behaviors hold true, the growth of online shopping will hold steady into a new normal following the pandemic. In order to adapt to the new reality, brands will need to develop new online capabilities to win the digital shelf and ensure a positive customer experience, including everything from conveying their value propositions in new ways online to learning to manage the back end of a digital operation (fulfillment, avoiding out-of-stocks and delivery delays, managing digital advertising, etc.).

[Back to Top]

What should I be doing right now to increase my online presence?

As consumers go searching for products online, it is important that you meet them there. If you’ve been a brick and mortar brand, you no longer have the daily foot traffic of customers on the street walking into your store. They’re now online and they’re looking for goods to purchase. So how are you going to create access to that customer base quickly? And what are you willing to invest to get your products in front of them?

In the e-commerce space, there are a number of opportunities to pursue to accomplish that objective and they continue to evolve. You can launch a direct-to-consumer business, driving customers to your own website where they can then learn about your brand and make a decision to buy. There are also opportunities to get in front of large volumes of consumers through online marketplaces (Amazon, eBay, Walmart Marketplace, etc.). Shopify also recently launched Shop, to create broader product discovery for brands selling on its platform.

Right now, brands need to get their products in front of customers. The infrastructure of services like Amazon allows large numbers of customers to quickly find products.

So what about smaller and independent retailers? What can they do? There are options. For example, for small and independent grocery stores who have struggled to remain competitive against increased investments in grocery by Walmart and Amazon, this moment in time presents the challenge of how to create access to customers shopping online. Services like Mercato, a grocery delivery platform that focuses on small and specialty food stores, has seen an increase of 5000% in orders over the last month and has been signing up anywhere from 30 to 50 new grocery stores for its platform each day. Some restaurants have also reverted to selling grocery products as part of their overall offering through delivery services such as Postmates and Caviar.

Similar to Mercato, there are other retail marketplaces for brands and independent stores to land on. For example, after being deemed as an essential service, alcohol delivery has accelerated during this pandemic, increasing by 250%. Services like New York-based Minibar Delivery, which currently operates in 90 U.S. cities, partners with independent shops to offer a marketplace of alcohol products. The platform has seen overall sales increase by 149% since mid-March.

Even before the pandemic hit, consumers were already shifting toward platforms. Nearly one-third of online shoppers search a marketplace first before targeting a specific merchant or retailer. Now more than ever, you should find your way onto a digital marketplace so you can get in front of consumers.

[Back to Top]

If I have an existing presence online, what steps can I be taking?

For brands with a presence across e-commerce today, you want to think about where to focus your spending and how to express the brand in a way that drives conversion and moves inventory. This means considering the digital landscape and assessing how you can maximize your dollar across your digital channels.

You should employ a fine-tuned approach as you analyze your digital advertising strategy and critically scrutinize what you are spending across your own website and paid social campaigns versus the dollars allocated for your existing marketplace presence.

It is also important to strategically and actively adjust your content and listings to keywords that consumers are searching for. This approach drives search visibility across different browsers and marketplace algorithms.

[Back to Top]

What about those who have a presence on e-commerce marketplaces? What can they do?

If brands are already set up with a strong e-commerce marketplace presence, then they’re a step ahead right now. The biggest challenge they’re now facing is continuing to manage the platforms successfully. One of the most critical components of that is staying in stock. As a marketplace seller, running out of stock means you drop in sales ranks, which can drive weaker performance over the long-term. It can also mean a significant decline in advertising efficiency.

It’s critical to stay in stock to continue to drive sales moving forward. In situations where brands are facing volume spikes, they need to think about strategies to provide back-up fulfillment options via Merchant Fulfillment. It’s also super critical for brands to be more engaged in managing their marketplace ad spend right now. Brands need to adjust their ad campaigns to remove out of stock items and also adapt them to include new Merchant Fulfilled listings where necessary.

[Back to Top]

What can smaller grocery stores do to compete with the online dominance of Amazon and Walmart right now?

Going back to the example of grocery stores and Mercato, small and independent grocers are now challenged with finding ways to win over new customers by adjusting their biggest selling points. Right now, many consumers are not choosing their grocery store based on brand loyalty, but based on which ones have the quickest delivery times, as well as have the most pantry staples in-stock.

As such, that provides an opportunity for smaller grocery stores to win over shoppers who previously flocked to big-box chains if they can provide a better experience for first-time shoppers. Previously, those grocers featured on Mercato found that specialty food items were typically their biggest selling point. However, that was pre-pandemic.

Now, these smaller stores have to find new ways to market their brand on this digital platform and capitalize on this unique opportunity to win new customers. For instance, instead of pushing those specialty items like before, Mercato is advising new grocers on their platform to make their pantry items available for delivery as soon as possible. Consumers are searching for everyday essential items and finding them at their local independents. If they are searching for certain items, you should focus your listings and advertising on that.

Furthermore, even if these smaller retailers can’t beat national chains on delivery speeds, they may be able to advertise other benefits of buying goods from their stores. For example, they may be able to offer their customers a more accurate delivery window or better communicate about the available substitutes for out-of-stock items. They are finding the challenges big chains are struggling with and capitalizing on (and advertising) those. This goes back to the idea that once you have drawn potential customers to your site and platform, how can you make the user experience a positive one.

Local grocery stores may also be able to quickly adapt content on their websites to meet customer’s needs. (This also applies to retailers operating in other sectors.) In a recent report on grocery stores, researchers found that while 80% of grocers included recipes on their sites, only 40% included meal planning guides. Therefore, one avenue for local grocers might be to include meal planning guides on their website as a way to cater to consumers who are doing their grocery shopping for one to two weeks at a time.

Alcohol delivery sites are adopting similar marketing strategies. Minibar Delivery, mentioned above, offers cocktail recipes and tutorials through its site. They also have plans to include brand spotlights and more home mixology how-to guides.

ReserveBar, another alcohol delivery platform, offers concierge services on custom engraving and gifting. They also added timely features to their rewards program, such as bulk buy-related promotions that offer cashback on purchases of multiple bottles. Each of these digital strategies are key for creating added value for customers and increase the chance of retaining them in the long run.

As you assess your online strategies, dive into the data regarding key search terms, and understand what national retailers may be struggling with. Can you adapt your website or other channels to demonstrate you have those items available to purchase? Can you offer quicker delivery times, prompt communication, and more? Make sure your digital presence clearly represents what is important to consumers at this given time.

[Back to Top]

How should I plan for the post-pandemic consumer environment?

One of the most critical considerations moving forward is to question how consumer behavior and habits are going to change coming out of the current crisis. If brands are able to survive the immediate future, the next question becomes how are you preparing for what the world will look like when we emerge from this?

By nature, we are creatures of habit and inevitably shoppers will discover and develop habits around purchasing behavior that will continue into the future. What it comes down to is how you and your business are going to react to these more permanent shifts in behavior.

James Boyd suggests that as opposed to focusing your growth strategy around any one channel, brands will have to take a more nimble approach. As retail brands emerge, we will likely see some of their brick and mortar locations close permanently. This means brands must pivot to pursue those incremental, more variable opportunities to drive sales growth and attract new customers online.

It will be a vastly different environment that will require a more comprehensive approach to navigate.

[Back to Top]

For more information on James Boyd and Treasure, please visit his site.

Disclaimer: This material has been prepared for informational purposes only, and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional tax planner or financial planner. All information is provided “as is,” with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information.

An Overview of the CARES Act Banner

Related Insights

New PPP guidance on owner-employee compensation and nonpayroll costs
Accounting

New PPP guidance on owner-employee compensation and nonpayroll costs

On August 25, 2020, the U.S. Small Business Administration (SBA) and Treasury issued an interim final rule addressing Paycheck Protection…
IRS provides guidance on payroll tax deferral
Accounting

IRS provides guidance on payroll tax deferral

On August 28, 2020, the Internal Revenue Service (IRS) issued guidance (Notice 2020-65) regarding the payroll tax deferral outlined in…
How Manufacturers & Distributors Can Build a Cash Flow Culture
COVID-19 Insights

How Manufacturers & Distributors Can Build a Cash Flow Culture

It is no secret that the COVID-19 pandemic has ushered in a host of challenges for manufacturers & distributors throughout…