As the world is already well aware, the coronavirus (COVID-19) pandemic is causing waves of uncertainty and pressure on all aspects of life from social occasions to education to businesses, topped only by the health implications this novel virus is having across the globe.
Those who work digitally, including marketeers and e-commerce retailers, are lucky enough to be able to continue jobs as much as possible from home, keeping both our families and friends, as well as the NHS as protected as possible. But many e-commerce businesses will be coming to terms with these unparalleled circumstances, with many struggling to cope and adapt to the albeit temporary “new normal”. So what exactly have we seen the impact to be so far, and how do we expect it to continue?
Though it’s in no doubt to economists that we’re likely to hit a recession as a result of the crisis, even a few weeks into the UK’s journey we’re seeing businesses both nationwide and globally predict significant impacts on sales volumes. And with 32% of the country expecting the virus to have a financial impact on them and their families (Statista), it’s no wonder retailers are forecasting these slumps in sales.
Statista: Expected impact of lost retail sales | Retailer perceptions
McKinsey have forecast two potential scenarios for the impact of COVID-19 on businesses: delayed recovery and prolonged contraction. In the delayed recovery scenario, we see new case counts rise in Europe until the middle of April- which are positively impacted by social distancing and an improvement in testing capabilities. Though this is positive for health implications, we do see these measures drive a drop in spending, resulting in a recession between Q2-3. If the virus proves to be seasonal, the warmer weather further limits its spread and an economic recovery is likely to take place within Q4.
Within the prolonged contraction scenario, the peak does not come until May – where the European population do not adhere to social distancing rules as desired. This means demand suffers for longer, and the number of redundancies and bankruptcies rises. If the virus does not prove to be seasonal, there is no relief throughout the rest of the year and even countries such as China, which have been successful in their measures so far, continue to keep some of those measures in place to prevent the return of the virus. In this scenario, we are unlikely to see economic recovery until Q2 2021.
Shifting consumer demand
Though what we are experiencing is rightly described as a crisis, no one will be surprised to hear that some industries and businesses have seen a huge surge beyond the norm for their services. Terms like “online food shopping” and “online food delivery” are seeing the biggest shift in terms of demand, as much of the country shifts their weekly rituals to fall into place with social distancing guidelines.
However, it’s not just necessities that are on the rise- many of those who are successfully isolating and are lucky enough to be able to work at home have the lesser worry of what to do in their free time. With this, we see an increase of searches for crafts, activities and even exercise equipment for those who are used to spending their evenings on a treadmill. So long as businesses’ supply and logistics can keep up, these businesses will be crucial in propping up the economy as much as possible.
Key insights from our in-house experts
We asked some of Croud’s e-commerce experts how they think COVID-19 will impact the space.
Adam Rose, Head of Commercial Development
What is most remarkable is seeing how everyone has adapted to the situation we’re in: from restrictions in personal freedom to changes in general working practices, everyone has adjusted to the world we now live in and adjusted fast! Every business we work with has been impacted in some way so far, but seeing how companies have reacted is quite exceptional in itself, not only from having to adapt to new employee safety measures and remote working, but also in how they’re starting to adjust their approach to trading too.
As expected, many omnichannel retailers are shifting over to become more pure play, some are seeing a rise in demand for certain product lines, while others are adapting well by thinking up creative ways to tap into new audiences. We’ve also seen businesses adapt their approach to support logistical challenges they may be facing too, with many relying more and more on Amazon for distribution and as a key route to market at this difficult time.
Andy Siviter, Head of eCommerce
We’re all looking for some positive news right now and it’s hard to look beyond the next seven days, never mind beyond that. What’s interesting is how this situation might more permanently shift shopping behaviours and the ways brands and retailers may need to react as a result.
The lockdown and the surge in online activity we’ve seen in Google Trends generally is pushing people to try new ways to get essentials, and also to satisfy their non-essential retail impulses through ecommerce. This is sure to create a longer-term shift in buying behaviors, but to what extent we won’t know until we understand the wider economic impact and how long social distancing measures will remain in place. Uncertainty like this is never a great recipe for consumer confidence and an increase in net spend overall. However, for those brands and retailers in the right categories who can deliver a good ecommerce experience against all odds, there’s an opportunity right now to sell more and to engage new customers for the longer term.
Different government approaches and the trends we are seeing in quarantine friendly categories make it a little more tricky to forecast. Large numbers of shoppers are trying to buy essentials and groceries online who wouldn’t ordinarily do so. As a result you might expect a longer term change in behaviour in that category. However, given most of these services have struggled to meet this demand, the experience has been mixed for many so far. As seen in those search trends, for other categories like hobbies, home entertainment and home and garden, there’s plenty of opportunity right now if brands and retailers can get delivery and no-contact click and collect systems working effectively over the coming weeks. It’s an opportunity to strike up relationships with many new customers as well as getting existing in-store only customers to set up accounts and try online fulfillment methods for the first time.
Tips for ensuring e-commerce success
So, with all the odds stacked against us, how can we make sure that, wherever possible, we continue to keep e-commerce businesses afloat using digital platforms – regardless of which scenario ultimately plays out?
Ensuring safety and reassurance of customers
First and foremost, reassuring consumers that you’re putting the safety of both your employees and end customers first is paramount. Consider altering ad copy, website landing pages and even adding pop ups at a push, to dispel any fears over ordering products whilst keeping as safe as possible. Also reflect on the call-to-actions you use throughout advertising – with such financial uncertainty alongside health concerns, it might not be the best time for hard-sell CTAs – use the space instead to show customers you truly care about the well-being of those around you and are trading in the most responsible way possible. It’s likely that conversion rates will improve as a result of this reassurance, but just to be sure, you could also review your returns policy to ensure that users have full peace of mind when continuing to purchase.
Review your existing goals and KPIs
One of the most important things to consider, at this time and at all times, is whether your goalposts should move during this period of huge fluctuation (P.S. – they should). If your business usually looks at online and offline sales, and optimises accordingly, you’ll need to review how performance has changed since stores have closed their doors and adjust your KPIs and targets to account for online only. Maybe you usually employ physical modes of marketing such as out of home installations and flyering – this is either likely to be much less effective or impossible over the coming weeks, and so considering shifts in budget will help to ensure that any new customers find you through digital platforms where they’re still able to connect with your brand and purchase from the safe environment of their own home. This will also help to ensure that any lower funnel activity such as Google Shopping has enough budget to capture the increased online demand, where sales may usually take place on the high street.
Carefully review competition
Carefully review how your competition react to the evolving landscape. If some of your key competition has dropped out of PPC auctions, you’re likely to be able to capture lots more demand at a cheaper cost-per-click (CPC). So long as your stock levels and logistics can keep up, make the most of this extra traffic and gather increased pools of audience data which can be used later on for analysis and additional insights on how the landscape has changed throughout the crisis. Also, review competitors’ websites – how easy do they make it for consumers to find information about their protocols on delivery, ensuring the safety of both their employees and customers?
Take even more care with bidding
Though you should be segmenting out your Google Shopping campaigns effectively for optimal performance in normal circumstances, it’s more important now than ever to ensure that your campaigns are segmented at SKU level to manage bids for products as efficiently as possible. It might be that you’ve seen, for example, your Trousers campaign perform significantly better than it had been before, but when segmenting at SKU level it’s actually a few pairs of fluffy stay-at-home-approved joggers that are leading the pack. By segmenting these products out, you’ll be able to manage CPCs based on the products that are doing well, not just the wider category. It may also be useful to feed stock levels into your Shopping feed, using custom labels, to ensure that bidding accurately reflects your ability to service demand.
As we move into a prolonged period of uncertainty, it’s a good idea to review the bid strategies you employ across all aspects of activity. If using an auction-time bidding strategy, it’s likely that the algorithms will be able to keep up and adapt themselves to the fluctuations in performance that we are seeing with each new development of both the virus and social guidelines. If you’ve seen changes of +/-20% throughout the first weeks of isolation, your auction-time strategies will likely be able to continue without too much adjustment. However, as mentioned above, strategies should be adjusted wherever appropriate to keep up with the changes in business goals. A complete change of tact, or a fluctuation exceeding 20% warrants a significant change to the way you bid – especially if you’re not using auction time bidding strategies. Don’t be scared to make bold decisions based on your business and the performance you’ve seen over the last few weeks- though machine learning bidding has become more and more intelligent, it still can’t predict pandemics any more than you or I.
Work together as a harmonious unit
Throughout making these decisions across bidding, messaging and the landscape, you should work closely with buying teams to ensure you’re aware of any issues with stock levels both present and future. If there are no issues foreseen, continue to trade and advertise as you wish, but if there are any stock considerations which may result in longer lead times or delivery times, you may want to eke out your resources and advertising budgets in a slower fashion, to ensure that the stream of traffic to your e-commerce website is reflective of your ability to serve those customers.
Though we’re living through what will one day be taught across curriculums worldwide, there are – for the moment – at least some measures we can take to ensure that, wherever we can, we’re continuing to help push the economy through these trialling times through e-commerce retail. If you’d like to understand more how Croud can help guide you through, please contact us – we’d be more than happy to help.