E-commerce: Not just a nice to have but a necessity, is this the end of bricks & mortar businesses?
I think it’s fair to say that Covid 19 is affecting all of our lives as we learn to cope with the challenges of social distancing, home schooling and working from home whilst the pandemic devastation unfolds around us directly effecting many lives.
Without wanting to sound too dramatic, I think it’s fair to say Covid-19 is not only going to be the defining event of 2020, but of our life-time.
“Covid-19, the defining event of our life-time.”
But what will be the long term effects? Not just to our health and lifestyle but also in business. How will Covid-19 affect us as consumers in our shopping behaviours? Will retail (as we knew it pre-Covid-19) be the same? How will businesses adapt? Will employers promote home-working as the new norm rather than the exception?
The UK retail sector has already had to face many challenges in the last few years from recession leading to lower brand loyalty and the rise (and acceptance) of budget retailers such as Aldi and Lidl. Not to mention the political challenges of Brexit. However there is no denying our current challenges overshadow all previous events and throws us all into unprecedented uncertainty.
As bars, restaurants and many shops have been forced to close their doors temporarily, most of us have gone on-line. According to GlobalWebIndex, around 90 percent of Gen Z consumers and 75 percent of Baby Boomers surveyed have actively, and rapidly, changed their day-to-day lifestyle in order to adapt to the new normal. On-line queues are now expected and deliveries are no longer next day; that is if you can get a delivery. For high street brands, the significant disruption of global supply chains is causing concern. According to Retail Economics, 24 percent of retailers across all categories are struggling to keep up with demand and 45 percent of brick-and-mortar retailers are reporting a decline in sales in store.
If you’ve not been able to get to a supermarket since lockdown you won’t have experienced the queues to get in, the one-way systems and the awkwardness of social distancing in aisles. It is no surprise that there’s been a huge growth in on-line grocery activity, 74% growth in average compared to same period (March 2019) – ACI Worldwide, and all majority retailers are struggling to meet the demands of product availability and delivery slots.
Ocado sales have spiked and even with their vast knowledge and experience they too are struggling to keep up with demand.
Nielsen now predicts that following a lengthy quarantine, consumers will continue about their daily routine, but with e-commerce now permanently embedded in our buying behaviour and our view on retail changed entirely. However, with over half of consumers in both the UK and US believing this disruption will spark a new global recession (GlobalWebIndex), the effects could be more widespread than just buyer behaviour.
With so much uncertainty, what can retailers learn from all this?
One thing is for sure, the scales have tipped (probably permanently) with on-line sales and delivery out-weighing ‘traditional’ sales. However, it’s not just the location of our purchases that’s changing but what we buy. Stocking-up / panic buying has created shortages in toilet roll, rice, pasta, flour and many tinned products, so what effects will we see on what and how we shop going forward? Will American style bulk packs now be the new norm?
So what is the ‘new norm’? Nottingham Business School says ‘after lockdown, UK Retail will continue to see significant increase in online sales – especially in grocery as shoppers seek to avoid busy supermarkets’. I would also predict increased use of contactless payments, so what is the benefit of ‘tradition’ supermarkets… Shopping experience… Impulse buying… Inspiration? I’m not sure the shopping experience will out-weigh health and convenience again and with the expected recession looming will we have the available money for as many impulse and luxury items?
What about packaging? The crude demand for packaging is rising in line with demand for ecommerce but consumer perceptions are changing too. Packaging has been in the spotlight in recent years as concerns about sustainability and waste management have entered popular conscience but recent initiatives to limit the use of single-use plastics have in many cases been abandoned over safety concerns. Reuse is suddenly associated with the transfer of germs and consumers are re-evaluating the safety of packaging substrates. Studies have shown that a virus can remain ‘live’ for longer on certain substrates, namely plastic and glass (up to 72 hours) as opposed to 24 hrs on paper, cardboard and fabric which in simple terms makes these substrates a lot more attractive in light of this pandemic.
Businesses signed-up to environmental commitments will still be held accountable and yet the emphasis on ‘responsible’ packaging will have to shift subtly to meet the needs of ecommerce and deal with consumer concerns over safety. These are compatible in many ways but need planning for.
As retail faces new challenges one thing is for sure, ecommerce is here to stay and investment is needed to meet a whole new set of consumer demands including availability, choice, delivery, safety and sustainability.
Will ‘traditional’ supermarkets still exist? Not in their current format. We, as consumers, don’t forget easily and out of every major historical event there is a legacy and the changing face of retail will be one of the legacies of Covid-19.
It’s not just retail that needs to embrace the new digital world, it is also businesses. Government have ‘encouraged’ home working and many companies and organisations have imposed mandatory work-from-home policies to protect their staff in this increasingly ‘no-touch’ world. The sudden move to remote digital working, overnight and en masse, has the potential to accelerate changes in how work is performed and the way we think about our working arrangements. It was only a few months ago I would have flown round the world for a crucial client meeting, insisting skype / zoom / teams would not suffice but now these meetings are successfully conducted remotely on a daily basis.
AA President Edmund King says ‘if commuters spend just one day a week working from home after the crisis - or commuting later - the roads will be as empty as they are in the school holidays….. People travelling up and down motorways just to hold meetings is inefficient, expensive and not good for the environment. I think use of roads and rail and indeed bus will be reduced after this crisis.’
The benefits are not just cost and environmental impact but also efficiency and work-life balance. I have always thought I was needed in the office, this has shown me that I’m not. I just need to communicate, and communication comes in various forms. Once this wave breaks, lockdown is lifted and confidence rises again, our mentality will no doubt have changed. E-commerce will make a considerable leap forward, consumers will look to spend differently, working from home will not be the exception and 2020 will forever hold historical significance as the year that super-charged the digital evolution of business and retail.
Covid-19 is a defining moment in history that may set in motion a new standard.
Is that a bad thing? Not necessarily. Retailers will have to build on these changes or adapt to them. Businesses will have to reassess their demands on location.
Our world may be confined physically to our home at present but through the power of the internet we have never been as globally connected. Let’s learn from this and grow.