17Jun 2020

How the Black Swan Event of 2020 is Affecting eCommerce

On March 11th, 2020, the World Health Organization declared COVID-19 as a global pandemic. The news was expected. The virus had spread from China to across the world at alarming rates, causing much concern and panic globally due to this new coronavirus.

Just a few weeks later, the numbers have shot through the roof, and there’s no denying that the situation is quickly changing, sometimes overnight. At the time of writing this article, there were over 4.8 million reported cases, 317, 240 deaths, and the US became the epicentre of the pandemic. 

It’s safe to say that COVID-19 is one of the defining events of the decade. In just a few months, this pandemic has had a significant impact on everyone around the world.

More people are working remotely, social distancing is being encouraged, and nonessential businesses are shutting down. One of the biggest changes we’ve noted is how people have significantly changed their shopping behaviors. 

While scientists and researchers work around the clock to find a cure for this virus, the rest of us have to navigate these confusing and uncertain times. In just a few weeks, brick-and-mortar businesses have undoubtedly felt the impact of this new way of life. But what about Commerce businesses? 

In this article, we’re analyzing the eCommerce industry as a whole and looking into how the COVID-19 pandemic has affected the space. But, before we do that, it’s essential that we understand the panic buying we’ve noticed from consumers over the past few weeks.

What Influences Panic Buying?

No matter how much the government and various other sources tell us not to panic, many people still decided to stock up.

Photo by John Cameron on Unsplash

We saw images on social media and the news where people stocked up on essential household items like bread and toilet paper, as well as medical supplies such as masks, gloves, and sanitizers. This demand made it challenging for brick-and-mortar businesses and online stores to keep up.

There are different reasons why people have been panic buying. Some noteworthy reasons are due to herd mentality. As Dr. Sharam Heshmat explains:

But people aren’t just stock-piling on foods. In fact, Nielsen, a market research company, has identified the following six key consumer behavior thresholds connected to the COVID-19 outbreak:

  1. Proactive Health-minded buying
  2. Reactive Health management
  3. Pantry stock-up
  4. Increase in online shopping and other activity
  5. Restricted living
  6. Living a new normal

Research has shown that Gen Zs and Millennials are the groups that have most altered their buying behaviors. These youngest people in society are not just changing their purchase behaviors. They’re also cutting back on experiences, and stocking up more on essential items. 

When it comes to gender comparisons, while women are very concerned about the pandemic, it seems that men are the group whose shopping behaviors have changed more than women. 

Now that we understand the general picture of why, how, and what consumers are buying, let’s get into some specific findings in eCommerce, particularly over the month of April 2020.

Industries That Have Seen an Increase in Sales in April 2020

Many eCommerce businesses entered 2020 with reason to be optimistic…then the pandemic hit. The COVID-19 epidemic has flipped business models upside down. Many companies are struggling to keep up with consumer behavior, which is rapidly changing from month to month. 

Photo by Negative Space from Pexels

With regards to April in particular, Debbie Guerra, executive vice president at ACI Worldwide, explains that “Trends in eCommerce purchasing behaviors that we began to see in March have continued in April, as hundreds of millions of consumers around the world adapt to the restrictions put in place to inhibit the spread of the coronavirus.” 

Research has shown that the COVID-19 pandemic has had a significant impact on eCommerce sales in general. Adobe’s Digital Economy Index notes that 49% in eCommerce sales were seen in April, compared to March. Adobe worked with 80% of the top online retailers in order to gather this information data. It also analyzed around one trillion online transactions over the past few months.

The specific area with the most notable increase has been online grocery shopping. Research from Adobe highlights that there was a 110% uptrend in daily sales, from March to April. According to many reports, many people are, unfortunately, going to lose their jobs because of the pandemic.

But companies like Walmart, Amazon, and Instacart have had to hire more employees to keep up with consumer demands. This period has actually been great for Instacart. The San Francisco based company, which focuses on grocery delivery and pickups, was profitable for the first time after selling $700 million over just the first two weeks of April. This was a 459% increase from the company’s December 2019 sales.

Adobe’s data also shows that consumers are shopping for more than just food online. Electronic sales, in particular, have seen a 58% increase from March to April. This is an interesting observation because electronic sales haven’t been doing well over the past few years. In fact, online electronic sales have been steadily decreasing from the year 2014. However, since the pandemic hit, sales have increased, and the decline has flattened. 

What Type of Electronics Are We Talking About?

Computers, audio mixers, microphones, and other related audio equipment have increased exponentially by 459%. This could be due to the increasing number of creatives and podcasters who have needed to make their homes studios over these social-distancing times.

Bazaarvoice took data from over 6200 retail and brand sites and found that the month of April saw a general increase in sales in the eCommerce industry. While the rise in online grocery shopping for essentials is expected, it seems that consumers decided to turn to services and products that will increase their comfort and general entertainment during this period. Specifically, their research reveals an increase in online sales for games, toys, sporting goods, and entertainment items.

To correlate this finding, ACI Worldwide data also found that Gaming sales went up by 126% in April, compared to March and digital downloads increased by 26% from March to April. Regarding liquor sales, in April, Adobe’s research found that beer, wine, spirits, and related items increased by 74%.

These studies have shown that people are looking for not only basics (grocery shopping) but also comfort and entertainment items. If you have an eCommerce business in any of these mentioned industries, now is the time to really rev up your content marketing because, as discussed, consumers are online more than ever before.

But of course, not all eCommerce industries have seen an increase in sales during the past few months. Some industries have suffered greatly since the start of the COVID-19 pandemic.

Industries That Have Tanked Due to COVID-19

It’s important to note that multiple industries have been significantly affected by the pandemic. Big stores and brands like Nike, Macy’s, and JC Penney are also experiencing major losses during this period.

Understandably, brick-and-mortar businesses that rely heavily on foot traffic from consumers for sales have felt the most impact. The most obvious industries are those in travel and restaurants as consumers try to decrease the viruses spreading through social distancing.

Another industry heavily affected by a pandemic is the luxury goods industry. As reported by Vogue Business, there is a projected loss of around $10 billion for the year.

Apparel sales have also seen a decrease in sales from both brick-and-mortar and online stores. This is understandable as most people prefer to shop in-person for clothing. In addition, the economy and the stock market have been volatile and consumers are opting to cut back on general spending, according to Brakrate LLC. So, people are understandable, choosing to spend their money more on essentials than luxury items.

How Will the eCommerce Industry Behave in the Coming Months?

Before the pandemic hit, the future for eCommerce was already looking positive. B2B Commerce was exploding, and customer experience and personalization were among the core focuses on helping improve sales.

At the moment, considering the ongoing research and studies that reveal different statistics and findings from month to month, it’s challenging to know what the future holds. Still, one thing is for sure, shoppers are trying their best to adapt. And as you’ve seen from the above, this adaptation is changing what and how they are purchasing. 

Whether you’re a small, medium or enterprise business owner, these uncertainties are ringing true for you as well. And the added challenge is that besides learning to adapt, you also have to continue to be present for your customers when they need you.

One of the key components to striving through these strange times is through doing online marketing well. A key component of online marketing is SEO (Search Engine Optimization). In a nutshell, this is the marketing tactics that are put in place in order to help your customers find you online. This involves improving your customer experience, your website copy, blogging, PPC ads, and so much more. These tactics can all work in unison to help you connect more with your customers and be found.

While there is definitely much uncertainty and so many questions, one thing is for sure – COVID-19 is going to continue having a significant impact on business, both brick-and-mortar, and eCommerce.

AUTHOR

Khanyi Molomo is a writer for ReferralCandy and CandyBar, two tools helping online and brick and mortar businesses increase customer retention and word-of-mouth.

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