The Impact of the COVID 19 Pandemic on the 2020 Holiday Retail Season
We’re at the halfway stage of the year. But it’s not too soon to term COVID 19 as the most defining event of 2020, and that it will have far-reaching implications. Meanwhile, every sector of the economy is trying to embrace the new normal.
The retail space is one of the hardest hit by the ongoing pandemic. The amount of people deemed safe to buy from physical stores has seen a downward trajectory from thousands, to dozens, to ten. According to the research giant Technomic, 32% of people are afraid to leave their homes while a further 52% are avoiding crowded places. To say that the retail industry is living in a volatile period feels like an understatement.
As more and more retail stores are going under partial shutdown, eCommerce sites are experiencing a surge in traffic, and customers are generally shifting from bulk-buying to online shopping. Limiting purchases for all but essential products are becoming the norm. Brands are having to tweak their offering and be flexible to changing consumer demands.
This resource intends to provide insight so that you can make the most viable decision for your brand. We’ve collected some facts and statistics around how the novel Coronavirus is likely to affect the upcoming holiday retail season, and how you can lessen the blow.
Coronavirus: eCommerce Industry Impacts
As news of COVID 19 took center stage and stay-at-home orders were enforced, shoppers responded by stocking up. They purchased household essentials like bread and toilet paper and medical supplies like masks and hand sanitizers. Soon, both retail & online stores were struggling to keep with the skyrocketing demand.
In a recent analysis of brick-and-mortar & online stores, Digital Commerce 360 established that brands that recessed on their marketing spend are struggling with their eCommerce sales. Those that maintained their spending have seen their eCommerce sales peak after an initial dip. Brands that rapaciously pushed their spending have seen an incredible spike in growth.
US retailer’s online YOY revenue growth was up 68% by the end of April, eclipsing an initial mark of 49% experienced at the beginning of the year. Despite e-commerce brands growing at an impressive rate of 149%, both retail and wholesale channels continue to underperform during these uncertain times. Brands able to rapidly ramp up their direct-to-consumer (DTC) strategies instead of leaning more on wholesale and physical outlets have seen unprecedented growth in online sales.
Changes in Shopping Urgency & Preferences
According to Quantum Metric, online conversation rates surged 8% in February alone, depicting a level of shopping urgency normally seen during Cyber Mondays. While stay-in-place orders will eventually dissolve, millions of customers continue to create and practice new online buying habits.
One implication is that customers are afraid of resuming their old buying habits for fear of contracting the scourge. A recent Morning Consult research highlights this reality. 16% of customers said they would feel comfortable shopping in a mall for the next three months, while 24% of customers said they wouldn’t feel comfortable for more than six months. Customers are more willing than ever to shop online and stay at home, creating the perfect market conditions for brands to fast-track, experiment, and launch experience-driven sites, touchpoints, and mobile apps across their platforms.
Meanwhile, consumer discretionary spending has taken a 50% dip. People are spending less on non-essential products, and brands are capitalizing on this shift by placing healthy discounts and ads on essential products.
As the pandemic rages on, eCommerce impacts continue to change based on the industry. Around the end of March, these top 5 categories saw an inevitable fluctuation:
Toys & Games
Arts & Entertainment
Food, beverage & tobacco
Office supplies
Sporting Goods
The COVID 19 pandemic has been marred with unpredictability and general fluctuations, and the impact it has on different brands is no exception. Looking at YOY order count projection from January to May can equip brands with an additional perspective.
Eliminating Friction in Online Shopping is Key
According to eCommerce security and fraud prevention dealer Signifyd Inc, eCommerce sales were about 40% higher for the week ending June 1, compared to two months earlier for the week ending March 1.
Many of these online purchases across different categories were typically buy online pick up in-store. Brands are having a hard time managing the spike in online orders, leading to bottlenecks such as canceled orders and faulty packages.
But retailers have tried to adjust to the COVID 19 fallout by eliminating friction in the purchase cycle. They have been able to achieve this by offering:
Personalized web content
Fair pricing
Customized marketing through DTC offers & promotions
Intimate shopping experiences through user segmentation & characterization
Adaptive, real-time account verification
With consumers having a lot of time on their hands, many shoppers are opting to avoid shipping, especially if shipping merchants or retailers quote delay in non-essential items and long delivery windows. This poses a significant challenge for eCommerce businesses that want to streamline their fulfillment process. How they choose to react will shape the future of eCommerce. Many are choosing to eliminate the friction that exists in the fulfillment process, and they’re partnering with experts in eCommerce fulfillment services and logistics.
Rakuten Super Logistics streamlines fulfillment services for brands looking to outsource their shipping requirements. We offer timely delivery to consumers within major metropolitan areas and valid shipping for both outbound and inbound shipments through our vast, strategically-placed centers across the US. Our eCommerce fulfillment services include multichannel order fulfillment, return management for online orders, and freight management. If you are looking to scale operations during the COVID 19 pandemic, trust us to complete the supply chain- right from the dock to doorstep.
Forecast for Holiday Retailing Amid the COVID 19 Pandemic
As retailers find themselves entangled in the COVID 19 scourge, their realities often depend on the categories they sell in, along with the liquidity of their firms. Irrespective of the circumstances, this is the ideal time of the year for brands to think about their holiday plans and brace themselves in what promises to be yet another unprecedented holiday season.
Retail sales for the third quarter of 2020 will be historic. Not only will brands want to regain the losses from closures due to the Coronavirus, but they will also have to deal with new pressures to adjust to shopping habits that have substantially changed as a result of the pandemic.
Shifts in fulfillment and shipping preferences may persist. On the flip side, retailers may have to contend with entirely new shopping habits. Either way, retailers – across all tiers, geographies, and verticals- must focus on building loyalty and trust with their customers as shopfronts gradually reopen. They must continue to deliver offerings that align with consumer demands and preferences.
The Outlook Isn’t Promising.
Discretionary spending made by consumers in light of the pandemic may continue into the holiday season if the findings by Coresight Research are anything to go by. The reason is simple. Until a COVID 19 vaccine is produced, social distancing rules will remain intact, and holiday shopping crowds will be sparse.
The two most likely scenarios will be reduced in-store holiday shopping and increased online holiday shopping.
“Prior to Covid-19 hitting the US, department stores were in trouble because they had failed to keep up with shoppers’ changing tastes. These retailers had been investing in ways to win back customers. But now their stores are closed to halt the spread of the virus. And no one knows exactly how long this will be the case. The situation is dire.”
Lauren Thomas (@laurenthomas)
As we saw with Easter, the novel Coronavirus will continue to change how the population celebrates and shop for holidays.
Future Holidays: What Retailers Can Expect
In a recent survey by Coresight, it was found that 70% of respondents anticipate their purchasing habits to go back to normal in about three months. Nearly a fifth of the same respondents (18%), however, expect to delay their normal purchasing habits until after six months, which would be beyond the holiday season.
This new reality spells trouble for retailers.
Black Friday, Cyber Monday, and Christmas are some of the holidays expected to witness a significant drop in shoppers. Digital 360’s study of 107 brands highlights the uncertainty that lies ahead. For instance, in 2019, during the 5-day shopping stint from Thanksgiving to Cyber Monday, US shoppers spent over $138 million on online purchases but ultimately failed to reach the ceiling some experts had projected.
Retailers are in a point of reckoning, which will force them to reevaluate their advertisement, marketing, and fulfillment strategies.
According to Dave Bruno, chief of retail insights at Aptos, brands should focus their efforts on optimizing the five P’s- personalization, price, promptness, promotion, and presentation- as Coronavirus recovery gathers momentum.
Price. While many consumers were previously open to paying a premium if brands offered the ideal retail experience, during the Coronavirus recovery, retailers will have to offer personalized experiences as well as a price that fits a population that has recently experienced an economic downturn.
Promotions. The impact of promotions on buying decisions cannot be underestimated. Retailers should brace themselves to leverage promotions to their full benefit. Over 80% of consumers say that promotions entice them to enter a storefront, which means retailers will need to work extra hard to roll out localized promotions as we approach the lucrative holiday season.
Presentation. During the last holiday season, 44% of consumers indicated that they would leave an untidy store to shop elsewhere. It’s safe to say that a vast majority of the American population will be highly aware of a store’s cleanliness once lockdown ends. To gain shopper’s trust in this aspect, brands should keep their storefronts extremely clean and maintain high levels of hand-hygiene.
Personalization. A retailer’s associates is a make-or-break factor when it comes to providing unique shopping experiences. People are seeing the value of front-line retail workers now more than ever. More than 50% of consumers say they would leave a retail store if they felt the sales associate wasn’t helpful or available. As COVID 19 recovery takes shape, the sales associate will continue to be an essential aspect of the retail cycle. New technologies and the insatiable need for purchasing data will push brands to better understand, personalize, and influence consumers’ brick-and-mortar interactions.
Promptness. Reliable and prompt fulfillment was separating the industry leaders from sluggards before the COVID 19 pandemic. Consumers are now drawing a line between those brands that continue to operate and ship merchandise amid the pandemic, and those that can’t. We expect a multichannel acronym of “contactless” fulfillment services to gain ground post-COVID 19, and well into the holiday season.
The Bottom-line
As the world poses in distress and optimism, uncertainty and hope, we know that eCommerce will emerge at the other side of the pandemic, and just in time for the retail holiday season. Retailers need to have consumer behavior at the heart of their long-term plans by taking into account data insights and digital product creation. Although it’s not entirely clear which aspects of eCommerce will be most impacted by the Coronavirus pandemic, a long-term strategy that incorporates the five P’s will help retailers have a more productive 2020 holiday season.