It spreads rapidly and threatens human life – these are the two commonly known facts about SARS-CoV-2. In addition to changes at the biological level, the virus also triggered an avalanche in the business world, also in the highly diversified eCommerce sector. Can e-stores get an opportunity for development during a pandemic? What threats are waiting for them? Which of the possible crisis strategies are most effective?
Modern history knows no precedent to what we’re experiencing right now. There have been many changes at every level of social life. Starting from the macro scale, entire countries, institutions, organizations and enterprises are changing. In terms of micro-scale, individuals, employees, and, finally, consumers are also changing. Increased confidence in online shopping is a trend that we’ve been seeing on the market for a long time. In Poland, online shopping attracts over 60% of the population, which spends PLN 70 billion by purchasing products online. Globally, the market is growing 18% year on year. Because of the pandemic, eCommerce is no longer a choice but a necessity for many business owners.
The advantage of eCommerce during a pandemic
A significant part of social life has recently moved to the internet. The newly introduced measures forced us to work remotely, and social gatherings moved from restaurants or bars to video communicators. We can deal with most of the official matters without leaving our homes. Shopping is no different – we are more and more eager to do it online. This is confirmed by hard data. Forecasts indicate that in 2020, we can expect almost 100% growth in global e-commerce.
Closure of stationery stores
Undoubtedly, one of the reasons behind the move from offline to online stores were the legal restrictions that affected the economy around the world. Stores selling goods that were not necessary for survival were temporarily closed. The ubiquitous #stayhome action and strong social pressure meant that some customers gave up on leaving their apartments completely, even to do grocery shopping. According to the E-commerce survey carried out by the Chamber of Electronic Economy, during the 2020 crisis, 14% of Poles bought food only via the internet, and 24% both online and in brick-and-mortar stores. In e-stores, as in their physical counterparts, customers experienced queues, and the delivery times of products have significantly increased.
However, eCommerce is not just about food. It is also a number of branches that have been forced to completely move to virtual reality. Compared to the same period last year, interest in opening an online store increased by 50%. On our home market, the following consumer good was interested in opening e-stores (apart from the food industry):
- multimedia (books, board games, computer games),
- gifts,
- health and beauty,
- house and garden.
Currently, stationary stores are mostly open. Did the periodic downtime affect the number of customers? In the first days of resumed operations, shopping malls recorded the return of 30-50% of buyers compared to the period before closing. Consumer buying habits have also changed – we not only approach shopping more carefully but also spend less money on non-essential products.
Minimizing the threat
Given that grocery stores didn’t close (and some of them even significantly extended operating hours), why did consumers move to the web? The answer is simple – fear. The outbreak caused significant panic, and people are afraid of going out, hanging out with friends, or just shopping. Security is currently more important than it ever was. Going to a store is a potential risk on many levels. First, we expose ourselves to contact with strangers. Secondly, we touch different goods. Thirdly, there’s the issue of payment. Although a large number of sellers support cashless payments, nothing can compare with the convenience and security of paying for purchases from home using online payment gateways.
New possibilities
The pandemic has also changed the way people spend their free time. The closure of cinemas, theaters, gyms, restaurants, and many other places resulted in the transfer of leisure activities to homes. Moreover, pandemic unlocked significant amounts of free time. This can be seen in consumer behavior. The following industries are reaping the benefits of this trend:
- health – disposable gloves, antibacterial gels, masks, or medicine for cough and cold are examples of goods that have been almost entirely selling out from many stores during the first weeks of the pandemic,
- training equipment – closing the gym and sports facilities prompted people to switch to home training,
- electronics – remote work forced many companies to provide employees with additional equipment: laptops, monitors, mice, and keyboards,
- books and games – they have recently become a very popular way of spending time.
Unfortunately, a significant number of product categories fell in popularity during the pandemic. They are particularly visible in the following segments:
- tourism – the closed borders and risks associated with travel have effectively deterred us from buying suitcases, backpacks, tents, and even swimwear,
- event – the ban on social meetings had an impact on the entertainment industry. The demand for party decorations and balloons decreased significantly,
- fashion – here we see a split here: some companies selling casual clothing managed to keep customers thanks to numerous promotions. The segment selling clothes, accessories, and typical outerwear or wedding footwear suffered.
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Challenges faced by eCommerce
The eCommerce activity during a pandemic is a multi-dimensional issue. In addition to the benefits mentioned above, there also exists a large group of threats that online retailers must be aware of.
Logistics facilities
Fluctuations in the number of orders depending on the season were visible in eCommerce from the very beginning of its existence. Even an inexperienced salesperson knew that they could count on sales increases around Christmas or Black Friday. However, no one was able to predict the global pandemic and its consequences. From one day to another, the demand in some segments increased by several hundred percent, and inventory was shrinking at an alarming rate. In other industries, there was a surplus in stock. This is confirmed by statistics – more than half of Poles who buy products online assess the availability of products as bad or very bad. This is a huge problem, especially if the goods we sell are easily available from our competitors.
Sellers with the omnichannel sales model found themselves in a different situation. Entrepreneurs with both online and offline channels often made decisions regarding the transfer of all goods from stationary stores to warehouses. It was also necessary to optimize the supply chain – managing an increased number of orders, contactless delivery of parcels, or payment for cash on delivery parcels.
There is a good chance that during the current crisis, the perception of logistics will change in the context of all the processes carried out by the company. While before the pandemic logistics was treated by some only as a cost generator, now an efficient and well-organized logistics system is a competitive advantage and added value to the company’s offer.
Brand recognition
Less experienced entrepreneurs often treat marketing as an unnecessary cost in times of crisis and abandon it partially or even completely, shifting capital to other areas. This carries a massive risk, especially for online stores. In the case of a stationary store, there is always a chance that a consumer enters the store “from the street”. Before buying, they can carefully view the product, become familiar with it, and if the product meets their expectations, buy it – even without knowing the brand before. eCommerce operates by different laws. First of all, the customer may not find a given brand at all if it doesn’t run any advertising campaigns. Secondly, even if the consumer finds an online store, they may have concerns about the purchase itself.
How to attract the interest of consumers?
- Offer attractive price promotions, free delivery days or more favorable prices of products sold in sets,
- Stay in touch with your clients – send newsletters where offer the latest information on a regular basis,
- Take care of social media – show what your work and store look like today,
- Invest in advertising campaigns – it’s not only a chance to attract new customers but also an idea to remind those who already know you about your offer,
- Optimize your store for SEO – it’s particularly important now for customers to be able to find you easily,
- Don’t forget about the website – this is a good time to check if it’s intuitive and transparent, or to add valuable content to it.
Strategies for surviving the crisis
We already gave you an overview of the current situation in the eCommerce industry. What are sellers doing to survive the pandemic crisis?
Prevention
This strategy is usually chosen by companies in the most difficult situation and involves minimizing operating costs as much as possible. In this case, you can expect layoffs, renegotiations of contracts, resignation from all areas that are not strictly necessary for the organization’s activities. It’s often caused by fear and a vision of an uncertain future. Even if the company managed to survive the first months, it’s not able to predict how much longer it will have to operate in the changed model. That’s why the company is looking for security for the future.
Promotion
This is a strategy for the brave. Its supporters take advantage of the temporary freezing of the market and attract consumers by adding new products to the offer. They dominate areas related to their activity and boost marketing. They notice the need to improve customer experience – they rebuild websites, approach the packaging of products with greater care, and try to personalize their offer even more. These entrepreneurs are aware of the great importance of the online channel. Some of their activities may even seem aggressive – increased frequency of sending newsletters, greater expenditure on remarketing, and in some cases, even telephone contact with consumers. All this to attract people who are currently actively looking for products on the internet. It requires significant financial outlays, but it may turn out to be a great counteraction to general trends.
Pragmatism
This is a combination of the two approaches described above. On the one hand, it requires cost optimization, but not as drastic one as in the case of the preventive strategy. The money saved is invested in business development. Oftentimes, new products for which a greater demand is noticeable are added to the offer. On the one hand, the skillful application of this strategy avoids drastic moves (like mass layoffs), and on the other, it maintains financial and operational liquidity.
Progression
This is an idea for the most innovative companies. It requires extensive research and evaluation of almost all processes to draw conclusions. It allows you to effectively adapt to new conditions based on hard data, not intuition. In practice, this may mean, for example, opening new product lines. We have seen this case in the fashion and beauty industry – many stores have introduced protective masks to their offer, and drugstores have taken care of a larger selection of antibacterial preparations. The segment offering advertising gadgets is not lagging behind – popular anti-stress balls or pens have given way to personalized gels and masks.
Source: Webinar “Digital Transformation in Europe during Covid_19”, a statement by Valentin Radu
A temporary trend or a new reality?
Although we don’t know how long it will all last, it’s certain that the pandemic will end one day. Will the eCommerce world return to its pre-crisis state? Or maybe it will use the lessons learned and evolve into a completely new form? You can see that many processes that have been in online commerce for some time have now accelerated. Companies that switched to the online channels pay more attention to consumer shopping experiences. They approach customer experience with greater care, ensure supply chain capacity, and strengthen the technological facilities. Those who try to stay on the market by playing on the old rules might not survive to see the post-crisis reality.
Summary
We’re in the process of huge changes at every level. Despite many disadvantages, eCommerce received a massive opportunity for development. What is currently only a temporary trend can stay in business for a long time. It’s key to be flexible and closely follow its development to keep up with the dynamically changing world.
