Winning times for e-commerce

Alex Garden examines the impact of the Covid-19 pandemic on e-commerce platforms and other cloud-based remote working tools.

E-commerce has been one of the few winners as the Covid-19 pandemic crossed 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 making a higher percentage of their spend online during the pandemic. Traditional chain stores in the US recorded a massive 80 percent increase in online sales in April 2020 compared to the same month in 2019. (digitalcommerce360.com)
• 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 percent drop in total retail sales in April compared to 2019. (econsultancy.com)

Online merchants in essential businesses around the world have faced unprecedented increases in demand and supply chains have been strained. Customers have had trouble booking delivery slots, product is out of stock and websites have been crashing.

In March in the US the likelihood that a shopper will use a [particular] service again plummeted from 74 percent in August to 43 percent in March, according to Brick Meets Click. (brickmeetsclick.com)
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.

One is Shopify, the Canadian-based e-commerce system whose share price has surged a massive 90 percent (at 1 June) since the start of the year. In May it became the most valuable public company in Canada, passing the Royal Bank of Canada.

When the effects of the pandemic on the economy started to become apparent Shopify extended its free trial offer to 90 days from the previous 14. It was mainly to help financially-strapped small merchants but it also made the system a no-brainer for other small businesses looking to quickly get their products or services online.

In times of stress those products that fit into the physiological bottom tier of Maslow’s Hierarchy of Needs: air, water, food, shelter, sleep, clothing and reproduction will do best and the non-essentials will suffer. The luxury end of market is driven by the psychology of affluent consumers and right now no-one feels confident and assured about the future.

Covid-19 takeaways

The e-commerce and general takeaways we have as we look forward are:

• Because many customers’ experience has been poor 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.
• 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.
   

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 New Zealand businesses well.

Alex is NetGuru at NetInsites, specialists in web design and general web strategy.