The Big Digital Recovery – e-commerce
May 15th 2020
Our first Big Digital Recovery webinar panel comprising Nick Chiarelli (Head of Trends, Unlimited Group), Robin Phillips (CEO, Watchshop), Elly Pitt (Founder, Stitched) and Ben Ireland (Head of UX at Splendid Unlimited) discussed how e-commerce had adapted to the challenges of the Covid-19 outbreak and how it might continue to evolve post-lockdown. You can listen to the whole discussion here.
Lockdown has created retail “winners” and “losers”
COVID-19 represents an unprecedented challenge to global governments, health services, individuals and, of course, to retailers. However, it has been far from a uniform situation as retailers in different parts of the market have had very different experiences.
While it is perhaps insensitive to think in commercial terms in the midst of what is an unprecedented global health crisis, it is clear that lockdown has been harder on some than others. Some have suffered or are struggling along as best they can. Primark which famously has rejected the online model has gone from making £650m in sales a month to nothing as the coronavirus has forced it to close in Europe and the US. And, some have thrived because their existing business models happened to fit the demands of the market with the food and drink sector being an obvious beneficiary – overall sales in the sector are up £10.8 billion on the same time last year, but alcohol sales, loungewear and pharmacy have all seen sales spike.
Others have done relatively well because they were able to pivot their approaches quickly. Tesco CEO Dave Lewis spoke in the last day or so about their doomsday planning exercise done 4 years ago that gave them a degree of preparedness, in the form of remote working models, the impacts of a shutdown of their HQ, rapid scaling up of their online offering, and so on. UberEats and Deliveroo moved rapidly to support small, local food service businesses by waiving the fees they normally charge for listings.
Our panel and, indeed, a contributor to one of our previous webinars (link) all agreed that digital-first businesses were, and are, in the best shape to provide business continuity at this challenging time:
“ The businesses who may come out of this in the strongest position, under the circumstances, are likely to be the ones who haven’t had to pivot massively in their business models - like those who have been automation first from the outset.”
Leila Hajaj, Ocado Technology
“ Those businesses that have perhaps under prioritised their digital experience will struggle to meet the new customer expectations quickly enough, not just in lockdown but afterwards too.”
In particular, it is those businesses that have inherent scalability – of their websites, of their warehouse processes and/or of their supply chain capacity – that have, so far, been best able to cope with the changing scale, nature, frequency and timing of demand created by life under lockdown.
“ I think that coming out of this we’ll see brands and retailers taking a good look at themselves, asking, is my website good enough, is it scalable, does my supply chain have enough capacity? Should these capabilities be part of my core skill set? Or should I focus on what I do best (e.g. looking after brand, product and innovation) and get a third-party expert to help with the rest.”
Lockdown has put huge pressure on retailer fulfilment processes
COVID-19 has put fulfilment very much in the spotlight. Delivery drivers are among the key workers gaining widespread appreciation for keeping society going, keeping people fed, getting supplies to hospitals. But suppliers have been focused on optimising the whole of the fulfilment cycle from manufacturing to delivery, and on ensuring that they have the necessary staff resources and tech support in place at each stage.
In many instances, manufacturing and production processes have had to change where existing sources of supply were simply closed off, perhaps due to factory closures, either here or abroad or to shortfalls in imports.
“ We had to find an alternative to our usual factory manufacturing route as that was effectively closed by lockdown so we’ve turned to an army of local makers with small workrooms who were being prevented from working with their usual customers by social distancing rules, so they were happy and we were happy.”
When it comes to delivery too, there has been significant and rapid implementation of new practices. For example, supermarkets have been frantically trying to staff up to keep up with demand. Tesco has reached its target of offering 1.2m slots a week (from about 0.6m pre-COVID) and is now aiming to offer 1.5m within the foreseeable future. The company hired 12,000 new pickers and 4,000 extra drivers. It added 400 extra vans and emergency changes in regulations allowed van drivers to work longer shifts.
Brands have also been experimenting with new processes, both for dropping off products to customers, but also with collecting returns of unwanted products, all with human to human contact operating within the new distancing guidelines of reducing contact where possible.
Returns pick-up and click and collect
“ The pickup piece, particularly with non-contact rules, is one of the many models that have surfaced to circumvent the problems we are facing at the moment and some of these will surely stick around as increased flexibility for the end consumer is expected and demanded.”
With resources stretched the early days of lockdown saw much publicised issues of under capacity, with very long online wait times, customers having to book delivery slots for grocery orders many weeks ahead or of brands adopting practices to try to manage or even in extreme cases to suppress demand. Again, we’ve seen considerable experimentation with new processes but the belief within the industry is that we’ll soon see “delivery promises” migrating within the online ordering process, away from being something that is done at the back end once all choices have been made, to something that happens upfront, even ahead of product browsing and choices:
“ We’re seeing retailers start to change the purchase process by finding out upfront where potential customers live and flagging what the feasible delivery promise is going to be, before they even get to filling baskets and checking out.”
Lockdown has created new audiences for digital services
COVID-19 has enforced lifestyle changes in consumers. People who had been wary of certain new innovations (e.g. online grocery ordering and delivery, web conferencing, media streaming services, online banking) have found themselves having to adopt them. For example, one survey in the US suggesting that some 26% of consumers have either tried online grocery shopping for the first time or have tried a new supplier in that space for the first time (perhaps unable to get delivery slot from their regular provider).
Moreover, there is (of course) a strong hope that many of these new entrants to the digital space will remain there once lockdown is over and some of the evidence supports this view – some 28% say they will shop online more frequently after outbreak (GWI), and this in the UK which was already advanced in global terms for online shopping.
“ Because people have seen their day-to-day lives being augmented by Zoom or Houseparty to have family quizzes and the like, this will surely lead to a greater desire for more personal online retail experiences in the future.”
While new audiences are clearly hugely desirable from a revenue point of view, they also represent challenges too. Many had genuine reasons for not having adopted digital practices previously. As likely digital non-natives they are less au fait with digital shopping practices that, by now, have become commonplace to digitally savvy frequent online shoppers. Often, digital experiences had evolved over time by adding widgets so that became fully featured in line with user needs. For digital natives, this progression happened iteratively and provided every deepening experiences and capabilities. Asking new users to leap-frog straight to where we are at right now may be so big of an ask that they find it too daunting and the whole process over-burdened. Because of this, newbies may require either significant hand-holding, particularly through their troublesome first order, or even, in severe cases the reintroduction of long-discarded retrograde features or capabilities:
“ We’ve definitely seen new consumers come into our business and they may have different preferences for how they want to do things. As one example, we’ve reintroduced telephone ordering for our products because many of the older customers prefer it.”
New audiences will also, likely, not have the depth of the experience with your brand, meaning that as well as supporting them through their digital learning curve, brands may also have to support in other ways too: providing content that is either engaging (such as competitions, puzzles, treats, etc) or authentic and informative (such as reassurance about the way the brand is supporting its workforce, adopting social distancing, and so on). Of course, the hope is that these new audiences, having overcome their reservations and then found digital experiences to be better than they had expected, can be persuaded to remain post-lockdown and post-COVID:
“ We can expect customer behaviour trends, both in the short-term and the medium-term, here to follow other countries that are further along the infection curve than us, like China, where we’ve seen a massive growth in the appetite for online retail.”
Accelerating the adoption of new retail technologies
Lockdown has excluded many from the physical side of their retail experience – touching products, talking to sales staff, getting the full brand experience, etc.
“ Digital routes to market are effectively cheap compared to bricks and mortar but they come with a different set of challenges – you can’t feel, smell or touch products or see them as well as you can in a store, or try them on.”
Even before COVID, brands had been experimenting with digital alternatives, such as virtual mirrors, VR & AR solutions, even beginning to talk about haptics. The current crisis is accelerating the adoption of new digital technologies, in three key ways. Firstly, some are leveraging readily available app technology to try to maintain continuity of service, such as pubs and restaurants pivoting to offering their food and drink for customers to come and collect. Secondly, it is providing shoppers excluded from physical store environments with a chance to immerse themselves in the product experience more deeply than they otherwise could. And thirdly, by demonstrating that consumers are starting to understand the clear benefits such technologies can bring they are making it easier for tech innovators to make a compelling business case for further innovation and implementation. We are seeing this making its way into a new wave of online offerings, such as Watches and Wonders and Cartier’s Watchmaking Encounters and surely more will follow:
“ The New Normal brought about by COVID is absolutely helping to accelerate the adoption of augmented reality technologies in retail.”
“ Brands and exhibitors are busy building virtual showrooms that can do justice to their products and replace the conferences and trade shows where launches would typically happen but which just aren’t feasible right now.”
There is, of course, a proviso: technology is the means, not the end. But, where solutions such as high resolution 3D modelling to represent products as immersively as possible, or offering booking concierges to come to your doorstep to demonstrate high-end luxury products, either help to maintain continuity of service, or ideally, offer a better experience, they will be successful. Bearing in mind the earlier comments about the democratisation of online shopping audiences, such innovation should be used as part of a fully-inclusive feature set, ranging from the low (or no) tech all the way through to the very latest that is on offer. Ultimately it is about consumer choice:
“ The bottom line is that technology for technology’s sake doesn’t really solve the problem – it’s about understanding the context of the customer and providing appropriate choice.”
A very challenging retail landscape ahead
Even before COVID we’d become used to hearing about the “Death of the High Street” for several years. With so many physical stores operating right at the limits of their financial margins, and all forecasters suggesting we’ll stagger straight from our COVID crisis into a severe recession, it seems more than likely that the High Street will look quite different and no doubt much smaller than we remember. Some of the projections here are quite alarming, and indeed we’ve already seen casualties, with Oasis and Warehouse suggesting that they will not be reopening stores, even when able to do so:
- Half of UK retailers face closure if coronavirus lockdown continues until August.
- Experts estimate non-food retailers could see decline in sales of 17% in 2020, which would equate to more than £37 billion of lost revenue across UK high street
- Even after government support, more than half of major non-food UK retailers will run out of cash within six months.
“ Brands will likely be asking themselves whether they can rely on a third party retailer in the future or is this something that I really need to do for myself and, if so, who can I do it with.”
“ We’re already seeing brands that we wouldn’t have thought of as seeing digital as a primary channel exploring various new avenues with a view to their long-term post-lockdown future.”
Ultimately, there are difficult times ahead. Technology cannot create demand for products and services out of thin air, but it can help move people along the purchase funnel, it can ensure that they have as seamless, immersive and fulfilling an experience as possible and it can give your brand a head start in the battle for both eyeballs and spend.
Get in touch with firstname.lastname@example.org