June 3, 2020 by Ben Chafetz

Adapting to Coronavirus Part 4: Exploring The Long-Term Effects

This week, in the final part of our Adapting to Coronavirus series, we’ll take a look at some of the lasting effects of the pandemic.

Everything has changed. Though many U.S. states are now reopening, things are different – masks are required in many stores, home delivery of groceries is the norm, and many restaurants are still not providing full service.

Wondering how things may be different for eCommerce?

Here are a few changes that we think will have ripple effects for years to come.

Online Sales Will Continue To Increase – Especially For Groceries & Household Essentials 

Okay, we didn’t exactly have to peer into a crystal ball to make this prediction. Everyone knows that during the COVID-19 coronavirus crisis, online sales have increased quite a bit. In April 2020, online sales spiked 49% compared to the prior year, according to Adobe Analytics.

But we don’t think that this is just a “flash in the pan” that will go away after COVID-19 coronavirus becomes less of a threat. This virus has dramatically impacted our day-to-day lives, and until it truly becomes a thing of the past, we expect online sales to continue to increase – particularly in the area of groceries and household essentials.

This has already happened, to some extent – online grocery sales jumped by 37% in April alone, and are now forecasted to grow at a total of 40% year-over-year. In comparison, there was only a 22% growth in online grocery sales in all of 2019. 

According to Coresight Research, 49% of people say they started buying groceries online or are purchasing more groceries online due to COVID-19 coronavirus. This is a dramatic shift – particularly since online grocery shopping has suffered from very slow adoption until now. 

In addition, Buy Online and Pick Up In-Store (BOPIS) purchases of consumer goods have grown by over 208% since the pandemic began. 

So, what does this mean? Well, it often takes something drastic to change patterns of consumer behavior – and given these recent shifts and the massive investments that retailers and grocers like Kroger, Walmart, and Target are making in online ordering, we think that these changes in consumer habits are here to stay – at least to some extent.

Brick-And-Mortar Retailers Will Have To Improve Their Omnichannel Shopping Experience

Sure, Amazon has had some issues maintaining its stock of goods and has suffered from major shipping delays. But Amazon, along with other stores with a large eCommerce presence like Walmart, Target, and international companies like Alibaba and Rakuten, are poised to reap huge profits from the rise in online shopping. 

Amazon, for example, saw $75 billion in sales in Q1 2020. Though this was a slight decline compared to its Q1 results, that’s still staggering – especially since so many brick-and-mortar stores experienced extreme revenue drop-offs due to store closures. 

Even some stores with a relatively solid eCommerce presence – like J.Crew and Neiman Marcus – had to declare bankruptcy due to the effects of the virus on their brick-and-mortar locations.

What does this mean? It means that eCommerce can no longer be an afterthought for any retailer. Brick-and-mortar stores are all well and good, but they can’t ensure profitability in times of crisis – and if another crisis like COVID-19 happens again, retailers need to be prepared. 

Online Retailers Will Need To Diversify Their Supply Chains 

Do you want an example of the fragility of the current global supply chain, and how it was impacted by COVID-19? Let’s take a look at a humble piece of workout equipment – the kettlebell. 

Kettlebells are, essentially, heavy hunks of iron with handles that are used in weight training – and they exploded in popularity at the beginning of the COVID-19 crisis because they are ideal for at-home workout routines.

This article from GQ is an excellent read if you have the time – but we’ll sum things up here. Online fitness companies that sold kettlebells, such as Rep Fitness, Rogue, and Kettlebell Kings experienced an unprecedented surge in demand when the first wave of COVID-19 stay-at-home orders hit. This surge in demand struck right when most factories in China – where the majority of kettlebells are made – shuttered in response to the pandemic.

The result was a massive shortage of kettlebells. By early April, it was nearly impossible to get a one in America – and as of publication time, most retailers are still sold out of the most popular sizes. It’s still very difficult to get your hands on one, both online and in stores.

This same thing has happened across dozens of different industries and with a lot of different products. The lesson that needs to be learned is that a robust supply chain with multiple manufacturers in a wide variety of locations is indispensable.

The demand for kettlebells grew at the exact same time that the supply shrank – due to an over-reliance on Chinese manufacturing. If there was a more consistent supply of these products, the companies selling them could have made massive profits – but instead, they were stuck selling their current inventory, and then sending stockout notifications to thousands of customers. 

For this reason, we think that it’s very likely that many eCommerce retailers and brick-and-mortar retailers alike will begin thinking about how to diversify their supply chains, and ensure that they can continue to serve their customers even in times of crisis.

The Long-Term Effects Of COVID-19 Remain To Be Seen 

Naturally, it’s hard to provide any solid predictions about what will happen in the future. But if consumer and retailer actions during the coronavirus outbreak are any indicator, it’s likely that the landscape of both retail and eCommerce will change forever.

Thanks for reading, and we hope you’ve enjoyed these insights. From all of us, continue to stay safe.

 

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