That shoppers have turned increasingly to digital commerce in the current health crisis is hardly surprising perhaps, a trend confirmed by the publication of the Salesforce Q1 Shopping Index, which analyzes data from the activity of over one billion global shoppers across 34 countries.
This quarter’s study - to the end of March - finds that as lockdown and shelter-in-place instructions were issued around the globe, between March 10 and March 20 digital purchases for essential goods shot up by 200%. Inevitably areas that are deemed COVID-19 hotspots registered the highest numbers. California, for example, saw digital spend increase by 230%.
While most headline attention has focused on the boom in online spending - or attempted online spending - on essentials like groceries, digital retail around non-essentials has also remained active. While as noted previously, many fashion retailers may be struggling as the need for flashy clothes drops off, locked-down consumers still have non-essential needs to be met. Hence, digital spend grew by 51% year-on-year for home goods retailers selling home decor or crafts items, 31% for leisure wear, like jogging bottoms, and 34% for toys and games as households re-discovered the joy of the jigsaw puzzle.
The study observes:
Initial data and analysis suggest that we’re still in the early stages of shifting to a new normal, and we expect continued increases in digital commerce as more people look online to fulfil their needs. While digital commerce saw a surge in traffic and sales, this likely won't account for the significant decrease in brick-and-mortar sales that brands and retailers are experiencing.
That’s the hard data. But what about the stories from the frontline? Adriana Bourgoin is Salesforce Commerce Cloud's Chief Customer Officer and, on the back of recent conversations with around 30 retail customers, has some interesting observations to make, which she shared in a recent online conversation:
Really the range of topics is pretty extraordinary, from sort of existential, - you know, what is my business going to look like if it survives? - to more tactical questions like how to optimize technology…Initially it was a lot of questions around our business continuity policies and then a realisation that they needed their own.
That realisation brings with it some learning curves:
Most [customers] aren’t really equipped to move day-to-day operations and be compliant with the required social distancing guidelines. There was some complexity, and continues to be complexity, because our shelter-in-place orders [in the US] are state-by-state and not a Federal mandate. So it was it was tough to make a plan. There was really no fixed point in time to say, ' This is how we're going to be for the next three weeks, three months'.
So, our customers really had to quickly look at the business to rethink how to run it in real time. Some of the questions we got were, how should I redeploy store resources?; what should I be doing in terms of managing all parts of the website operation?; what are we going to do about fulfilment?; how do we continue to engage with our customers, run email campaigns, social campaigns?
The reality was our customers learned pretty quickly, where they had agility and where they didn't. And if they didn't, In some cases it did hinder their ability to get organized. And that's that's been a learning for sure. I think everybody's got a point of view on VPNs at this point and that was for sure one of the blockers we saw for getting a remote workforce up and going.
As for consumer behavior, Bourgoin points to the rush of panic buying - “sort of like a moral panic” - seen all around the world as an initial response to the crisis:
There was a lot of [activity] in store traffic and essentials. And as consumers were going to stores, they picked up other items because you always buy more at a store, not less. But now that we're a few weeks in, there's much more consumer confidence in the food supply. We also see more limits in terms of what stores can sell.
Online we saw, in addition to essentials, anything sort of recreating the formerly off campus experience, like your gym. Or buying bread - you're baking bread instead. You're finally getting [around] to your home office and making sure you have a decent chair. And then there's quite a bit of activity around personal care, soap at any price point and haircare as nobody's going to the salon. One of our salon customers is up 300%.
There’s also a lot of what Bourgoin refers to as “emotionality” influencing buying decisions now and in the future:
Some of the brands that are doing this already used it as a way of driving revenue. It's not a great long term strategy. However, one brand I want to mention is Rag and Bone. They are a non-promotional brand [with a] pretty expensive price point for jeans, sweaters, boots. And they never discount. Two days ago, the founder basically lowered prices across all of their catalog, with a note that the intent was not to diminish the value of this product, but rather to stay in business and keep people employed. That's just a level of transparency and I think evoked quite an emotional response that I think people are going to remember for a long time.
In terms of the supply chain, Bourgoin reckons that many retailers found themselves in better shape than might be expected. In the US, what she refers as “macro-political conditions” - for which, read President Trump’s bellicose stance on tariffs and trade wars with China - meant that firms had been making moves to diversify in terms of sourcing merchandise. This meant that when the current crisis kicked in, the problems weren’t perhaps the ones anticipated, but there has been a knock-on impact on the sector:
It wasn't a lack of inventory. Sometimes it was a challenge figuring out where it was and how to move it. But what we really see now is [that of] the multiple revenue streams that a brand has, really the biggest one is wholesale If there's a fundamental change in wholesale because people aren't going to stores, it really is an impetus to diversify distribution. A lot of the channel conflict the brands typically had to balance doesn't really exist anymore in the physical sense. I'm not sure how a brand without a direct to consumer strategy can really thrive going forward. So that's been an interesting trend.
And then for [retailers] with stores, there's sort of this question of, ‘What do we do with all this inventory in our store?’, particularly for items that had suddenly a surge in demand, but aren't essentials. So arts and crafts. A lot of kids are at home. There's time to kill. [Retailers] realised that the best way to get the in-store inventory to the customer was to have it available at curbside. That's not as easy to do as say, because it means you have to have an understanding of your inventory at a store level and you need to understand the geography of your customer.
In terms of the online experience, we were wondering if we were going to see an uptick of credit or multiple installed payments, which is something that in other countries, like Brazil for example, is a common practice. And then we saw some activity around loosening credit qualifications for private level credit cards, so that was that was interesting, [retailers] trying to figure out how to suddenly get into the finance business. And then for payments, I think contactless commerce is going to be a big part of the return to store, in terms of Apple Pay and Stripe and wherever we can minimise physical contact.
What’s not clear at this point is how these immediate reactions and operational shifts will pan out over the longer term. Will there be a return to ‘business as usual’ over time or is the retail sector’s modus operandi undergoing permanent change? Bourgoin reckons:
I do I think it's actually more of an acceleration than the development of a new behaviour. For a younger customer, they're looking for a connection with a brand, a community that's founded around the creator or a personality or a point of view. The brands that are doing that quickly - and a lot of them are younger, they have a little more agility - are in a good spot to be top of mind when discretionary shopping comes back.
But you'll even see older companies like L'Oréal USA, [which] just announced they are going to keep paying employees through the end of June - 12,000 workers. They announced this on Instagram, which is sort of amazing considering they’re a 110 year old company. Previously this kind of information never would have been shared with the public and and certainly not on social media. So a lot of what we're seeing is somewhat exaggerated versions of what's already taken place. But for sure I think this is the beginning of some new established consumer behavior.
Our coverage of how the retail sector has reacted to the current public health emergency has already thrown up some winners and some losers - and we’re far from out of the woods yet. As lockdowns are relaxed over the coming months, the Trumpian [electorally sensitive] vision of just bouncing back will be put sorely to the test. It’s more likely that the ‘step-by-step’ approach advocated by European leaders will become the norm.
Retail stores are opening up again in China, as NIKE CEO John Donahoe noted a few weeks back. I for one can’t wait to browse around a real world store again as a symbol of some kind of return to normality. But as Bourgoin argues persuasively, the pandemic crisis has brought into focus and accelerated behavioral changes in consumer buying patterns that retailers are going to have to factor into strategic planning. Striking that elusive omni-channel balance has always been a big challenge. Coming out of Coronavirus, that balance may well need some urgent recalibrating.