The Short-Term Impact of COVID-19 on Digital Commerce

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by Anando Naqui | April 9, 2020 4:53 pm

As COVID-19 sweeps its way through communities around the globe and the world stays at home to help stop the spread of the virus, it has become abundantly clear that significant structural changes are inevitable across society. Businesses of all types have closed at a shocking rate, and while the impact of these closures varies by the nature of the businesses, the trend is universal. Digital commerce has filled much of this void, with online sales up 25% in March, and other categories such as hand sanitizer, gloves, and masks up as much as 800%, according to Adobe Analytics.

The goal of this article is not to recap widely discussed statistics from the last month, but to explore what changes are likely to continue in the near-term, and how businesses can adapt to a rapidly shifting commerce landscape. The strategy to respond to these changes depends on a number of factors including business size, types and variety of products sold, and go-to-market strategy.

Short-Term Impact

The most apparent short-term impact to digital commerce in the wake of the COVID-19 pandemic has been unreliable product availability. Customers have made runs on specific categories of products (namely household staples), leading to widespread shortages. And if certain product categories were not wiped out by category demand, they may still be affected by the broader impact of fulfillment centers being closed or operating at reduced staff.

While there is little most retailers can do to resolve issues with the supply chain, transparency to customers around expectations is incredibly important. Customers have become accustomed to certain norms in the digital commerce industry, and this homogeneity from site to site is often taken for granted. As each business has been impacted differently, customers can no longer rely on their pre-conceived expectations.

For example, it is routine for orders to be shipped within 1-2 business days, if not in the same day, of a customer checking out. But with demand increasing while businesses are operating at limited capacities due to social distancing recommendations, shipping times have been severely impacted and vary widely from site to site.

Short Term Steps to Take

  1. Focus on Customer Communication & Messaging – If your business has been facing fulfillment challenges that lead to product unavailability, or longer-than-normal lead times, provide this information up front to customers in the form of homepage messaging, site banners, and customer emails. It’s important to set customer expectations before they begin shopping to minimize frustration. And rather than making customers click to read yet another “What We’re Doing about COVID-19” message, provide concise messaging that doesn’t require a click. Some examples we’ve seen include:
    1. Amazon
      1. The Good: Yes, we know the cliche that Amazon is the gold standard in eCommerce, but they provide clear messaging that their well known Prime fulfillment timeframes are impacted by COVID-19.
      2. The Bad: It would be nice, however, to have the exact categories that Amazon is prioritizing. Beyond site messaging, Amazon has been emailing customers regarding subscriptions or future orders that may be delayed.
    2. Ravensburger Puzzles
      1. The Good: While it is certainly not ideal to shut down their B2C business (they are likely swamped with wholesale orders to vendors as people are in search of home-based activities), Ravensburger clearly states that they are not taking orders.
      2. The Bad: The UI leaves a little bit to be desired, but the intent is there. One major area of improvement would be to fully disable the shopping cart functionality for customers who might have missed the messaging
    3. Discount Tire
      1. The Good: As Discount Tire provides important services, they reiterated their service offerings, as well as the steps that they are taking to keep their employees and customers safe: https://www.discounttire.com/customer-safety
  2. Be transparent about inventory – As consumers are mostly shopping for household necessities, many of these products are going out of stock online due to delays in the supply chain. It can be incredibly frustrating for customers to scroll through pages of out of stock products, or even worse, find a desired product only to be told later that it is out of stock. Under typical circumstances, it is routine to place the product on backorder and fulfill the order once the item is back in stock. However, since many of these products are needed urgently, and the timeline for a new supply is unpredictable, forcing customers to wait is not a viable strategy. The combination of exposing inventory availability on the site with the ability to search, sort, and filter on availability is a good step towards providing purchasable products and a non-frustrating user experience. In addition to allowing customers to find products by inventory status, consider implementing quantity limits on essential items to avoid customers hoarding certain items.
  3. Prioritize products with digital fulfillment – Items that can be fulfilled digitally, including software, subscriptions, and gift cards, are minimally impacted by the pandemic and can be prioritized. This is also a good way to soften the economic effect of the virus on businesses unable to continue normal operation.
    1. If you already offer digital subscriptions, consider allowing customers to suspend the subscription rather than cancel. This will increase the likelihood of customers returning to quickly restart a subscription rather than starting a brand new subscription.
  4. In the near term, consider uncertainty – In times of high demand and traffic, it is important to reduce operational complexity in order to prioritize critical tasks related to your business’s COVID-19 response. Anything that could lead to site instability, including new experimental features, a change in back-end integrations or other modifications should be reassessed to determine if they are truly critical. Once trends have stabilized, these new site enhancements can be prioritized.
  5. If you haven’t built a web store yet, do it (now) – It has never been easier for small businesses to launch web stores, thanks to simple platforms such as Shopify and SquareSpace Commerce, plugin solutions like WooCommerce (for WordPress), or a myriad of options like LightSpeed Commerce for restaurants and bars. Larger enterprises will likely need more complex platforms with longer lead times for development.
  6. Embrace creativity – Though you should avoid taking on too much risk, now is the time for creative solutions. The businesses that will make it through this period are the ones that are unafraid to challenge convention. Michelin-starred restaurants are pivoting to delivery and carryout, sports equipment companies such as Fanatics, Bauer, and New Balance are manufacturing masks, gowns, and face shields for hospitals, and a number of companies are promoting major sales on items that will help their customers work from home. These types of calculated risks—designed to fit with minimal disruption into these companies’ capabilities—help to build valuable marketing capital and goodwill.

B2B Considerations

While B2B commerce is significantly different and influenced by different factors than B2C commerce, it is certainly not “recession-proof.” Businesses, like consumers, will also have short-term and a long-term responses that deviate from their typical shopping behaviors.

Businesses that are acutely impacted by COVID-19 (restaurants, bars, and other places of public gathering) will likely cease ordering, or at least drastically curtail any new purchasing. Suppliers of these types of companies should look for ways to re-prioritize other lines of business by reevaluating merchandising decisions and content on the site.

Other businesses that are not as severely impacted by the virus may look to shore up their supply chain by holding more of their raw materials in inventory to avoid product shortages (similar to how individual consumers have stocked up on toilet paper and other non-perishables). This, however, is highly dependent on the business’s long-term outlook as it relates to their future sales. One way that B2B suppliers can help their customers obtain the products that they need is to prioritize the “essentials.” A good way to help businesses restock on items that they frequently purchase is by offering a reorder capability where customers can place an order exactly as they had previously without needing to build out a cart. These sorts of time-saving tools are extremely valuable to customers in times like these.

Conclusions

During periods of uncertainty it is natural to respond defensively and continue to attempt to carry on business as usual. It is precisely in uncertain times, however, that it is imperative for businesses to responsibly innovate by understanding their customers’ needs and provide them with tools to enhance their shopping experience. By being able to adapt to a rapidly changing situation, online retailers will be better suited to ride out the storm.

Interested in talking through your strategy for handling COVID-19? Contact us to set up a (virtual) meeting.

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