Digital evolution, over the last 10 years, has been a steady move from offline to online. Since the mid-noughties until very recently, we’ve seen gradual increases in online sales compared to overall retail sales.
Then COVID-19 happened, and the world changed. But our desire to purchase didn’t. We still needed and wanted “things”, whether it was toilet roll in the first few weeks of the pandemic, or home office supplies, then barbecues or gym equipment as time went on. The desire to purchase remained – and for the most part, it had to be fulfilled using online channels.
So, whilst we’re seeing a V-shaped return to form for retail, we must analyse the unique effects that this has had on the sector in general, in addition to examining how it may affect the future of e-commerce, and what this bounce-back really looks like for online shopping. The past decade for retail has been largely even, a flat trend – but the last four months have seen more fluctuation than ever before.
Given that the lockdown began in March, it’s unsurprising that April saw a considerable drop in retail sales (-15.3%). But what quickly followed was a spike. In May and June there was yet more growth, which is surprising when you think how non-essential brick-and-mortar stores didn’t actually re-open until mid-June.
During this time, essential food stores showed a 5.4% increase in April, 6.25% increase in May and a 6% increase in June. So, whilst there’s an increase, these essential shops don’t single-handedly account for the spikes in retail sales that we saw. For non-store retail, we saw some of the biggest increases over the same period. This demonstrates that the desire to shop for non-essential items was still there, and people were just finding new places to purchase from.
Disparities between certain industries are also evident. Clothing, for example, saw the biggest overall drop in sales during the first months of the pandemic. Yet online-only sales reveal a very different picture, with clothing sales going through the roof in May and June.
So, although the market faced challenges, consumers clearly moved to online channels in their droves, highlighting how they likely felt safer shopping online, and had also adopted new shopping habits.
So, what does this mean?
If we take a step back from the graphs and the statistics, it comes down to the fundamental premise that people will always want to purchase new things, whether this is out of necessity or desire. In the past, changes to established ways of shopping have been gradual. Now, as we know, the status quo has been removed for all of us – but the desire to purchase is still there.
This process has highlighted the effectiveness of the digital offerings from established high street brands. And where some have neglected their digital channels, relying instead on footfall in physical stores, are struggling as a result.
Let’s consider some of the issues that have been affecting big brands since the Covid-19 lockdown:
- Administration. Multiple retailers, including fashion brands Oasis and Warehouse, have become casualties of the pandemic.
- Loss of profits. Numerous companies took serious sales hits, with Primark selling nothing at all.
- Virtual queues. B&Q customers were queueing online for over an hour to access the DIY retailer’s website.
- Substantial changes to long-standing promises of price matching. Renowned for being ‘Never knowingly undersold’, John Lewis had to pull this promise due to increasing competition.
- Seismic shifts in retail. Nike shifting to permanent online sales.
These changes are significant and can’t be ignored. And while we can’t say that COVID-19 is the only reason for many of these business decisions, the effectiveness of brands’ digital strategies and technical offerings in these times will definitely be contributing factors. There is no silver bullet to protect companies from the change which is coming, however, there are safeguards and plans that can be put in place to take advantage of the new landscape.
- Data. Getting clarity on data, and understanding what is important to brands is key. This includes things like attribution, analytics as well as information on how your internal teams and partners work together. Using data as a basis for any site changes is a must, so it needs to be relevant and clear.
- It’s not all about one team. Digital change requires all teams to work together. This means SEO sharing data with Paid and vice versa. Any team or department who has a role in making changes to the digital output from a brand needs to be brought on board and be pulling in the same direction.
- Partners. Having the right partners and suppliers and using them in the right ways is how the best brands can start to make a difference. Using the experts to complete relevant tasks is vital. You need these industry experts to provide their knowledge and expertise to surface risks and opportunities, and help with the plan, not completing tasks which can be easily completed with internal resources.
- Education. Education underpins all the above activities. For every company, resources are a valuable commodity, so it’s smart to get your teams to be able to complete the tasks which are pertinent to their roles. Being generous with knowledge across digital teams and partners means that we can get the right people doing the right things.
Even before the pandemic, the e-commerce marketplace was turbulent, with market share being taken from established brands by newcomers as well as giants like Amazon. Smaller, more agile brands were able to establish trust and authority in their niche and take advantage of larger brands’ slower response times, and they’re now reaping the benefits. Established brands, meanwhile, have had to use existing budgets and infrastructure to try to ward off this effect, with differing levels of success.
However, I suspect a sleeping giant may finally have been awoken. When brands look at the attribution for all sales this year, digital will be massive. Customers have experienced the reality of a digital-only shopping experience for weeks on end, and it will be very hard to put that genie back in the bottle. Brands will come to see digital as a saviour to their business or as a liability which requires investment; regardless, the way that e-commerce is viewed internally will be changed forever.
Recently, we’ve seen companies like Heinz swiftly reinvent their online offering and provide direct to consumer products for the first time ever – so why not other established brands too? I expect that many of these big brands, having seen their authority chipped away recently, will be reviewing their digital channels to stage a fightback.
The next six months will be an interesting time as big brands look to reclaim their digital market share from smaller online retailers and large marketplaces. This will have knock-on effects for the entire retail space too, with smaller online-only retailers likely to feel huge effects, plus potential changes to the high street and delivery strategies.
Companies must look at the upcoming changes as an opportunity. The current model of big brands relying on offline channels to survive has to change. Even when Covid-19 is (hopefully) a thing of the past, we’ll have all become accustomed to the digital shopping experience – even those who never shopped online before. We need to embrace this change and make sure our online channels are able to fulfil our digital ambitions, because when the sleeping giants awaken, there’ll be big changes on the horizon.
By Simon Dale, strategic account director at Organic