Newsletter #176 The Pandemic and E-Commerce
E-Commerce is one of the few winners as the COVID-19 pandemic sweeps the globe. There have been variations in the scope of ‘lockdowns’ throughout the world but several patterns have emerged:
- People are making fewer trips to physical stores
- Consumers are spending a higher percentage online during the pandemic. Traditional chain stores in the US recorded a massive 80% increase in online sales compared to the same 2019 month.
- Many countries are in some sort of lockdown and there is a general unease within the economy as the predictions of recession abound. This has a negative effect on total consumer and business spend. In the UK there was a 23% drop in total retail sales in April compared to 2019.
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It was natural that e-commerce and other cloud-based remote working tools such as Zoom and Slack would perform strongly but there are other businesses that have pushed on to new levels, adapted quickly or found a way to help the community.
According to Wired, Everset, a New York-based furniture rental startup, lost much of customer base in the city - mostly students who ordinarily would be moving into Manhattan. However, its business is nonetheless up due to richer New Yorkers moving out of the city into surrounding suburbs and not wanting the hassle and cost of buying furniture.
Many local New Zealand companies have repurposed their traditional content into Webinars, Waikato brewer Good George used one of their distilleries to make 1000 litres of hand sanitiser and Dannevirke engineering company Metalform switched to making see-through face shields.
The E-Commerce and general takeaways we have as we look forward are:
- The surge in online sales will ease as life returns to normal. There will be an uptick in general E-Commerce usage but it won't be anywhere near the increases noted above. The pandemic has accelerated the general trend to online buying and selling.
- Discretionary product offerings, higher on Maslow’s Hierarchy, will suffer as recessions bite. People have got used to doing without and with less money and negative economic outlooks, the medium term outlook for businesses offering discretionary products and services is poor. How do you change your value proposition if you’re in that sphere?
- Many businesses were caught short by China's shutdown early this year and you should be looking to diversify supply chains. The pandemic has shown how fragile the capitalist ecosystem is. Have you looked harder for local suppliers and considered doing more in-house?
- Contactless pickups is another key trend that will carry on even as the pandemic subsides. Consumers are now more aware of how viruses and diseases spread and these types of pickups assuage those fears.
- The rental economy normally does well in times where people are unsure of the future and as countries recover even transportation-based industries like car rental companies will bounce back. The market will evolve but will generally be better for businesses based on the rental model.
There’s doubt whether Winston Churchill ever said ‘Never let a good crisis go to waste’ but in this environment it’s a mindset that would serve all businesses well.