Covid19 - consumer & retail outcomes

Welcome to the #eCommerce20 article series during the ##covid19 crisis with Yves & Sri. Collectively, we are treading on 50 + years of #cpg cross functional experience ranging capability building, strategy, #innovation, #marketing, field sales, #eCommerce, IT. Our views are straight from the trenches, real world experience crafting, strategizing and then building. Click on our names to find us - Yves & Sri.

In this article, we discuss how the recent outbreak of #covid19 may have permanently reset consumer shopping behavior in the US towards #online shopping (we will post a global outlook in a later article). Has the tipping point arrived and will #eCommerce become a way of life as opposed to an executive passion? Our views are generally applicable to most #eCommerce forward environments (China, UK, France, Germany, Canada). Let's get to it and answer a few questions that are on everyone's minds.

Q1 :How has Covid-19 affected consumer behavior so far? 

The past month has shown #consumer behavior similar to when projected weather anomalies like snowstorms, tornado watches, floods and even black Friday have happened- hoard when the price is still at value. No one could have predicted a #virus debilitating an entire country. What’s normal is stockpiling canned food, shelf stable goods, paper goods, and we are seeing the same - with the slight difference of risk impact is now projected for weeks and months. Hence the frenzy, we personally look at it as poor crisis management by #leadership. Consumers respond to messages from leadership they have elected and when the message is inconsistent at best, so will behavior follow. We're not sure if the behavior today is a consistent model of what to expect for the future, but the patterns are similar to other tragedies but to a greater scale. We personally do not see any anomaly vs previous extreme events other than scale and impact. The one area I’d like to call out is downloads of retailer apps - they have crossed levels any of us could have projected. The reality is with millions of downloads and purchases taking place #online - it is impossible to argue against a massive growth in #eCommerce in #CPG.

Q2: Have you seen online businesses change their behavior?

Unfortunately there’s been positives and negatives.

The positives observed :

1. Realization that their time has come (wonderful) & that they have a chance and role to actually help reduce the risk with #homedelivery or click & collect
2. This means, improving UX, better product images, titles, easier search indexing, and generally clearer shipping promises (remember, no one can guarantee delivery accuracy now and neither should it be expected - our own experiences shopping #online now has hit the mark with delivery timing near 100%)
3. Staffing up warehouses to meet the surge in demand (putting more people to work in this environment is a huge plus,  thank you #ecommerce businesses)
4. Declaring certain categories as priority vs everything

The negatives observed : 

1. Massive out of stock issues - we will attribute this to poor emergency management given limited warning from our country’s leadership and generally excuse this
2. Price gouging - platforms took a few weeks to catch up and eliminate this or attempt to control it. Search now still reveals the existence of this but at significantly lower levels than originally
3. Very reactive supply chain adjustments real time - re doing warehouse setup, inventory allocation, cross docking, product acquisition (purchasing) - this list is long and points at no Plan B ecosystems. I’m not sure if even #eCommerce native brands and companies had a Plan B sitting on some e-shelf for surge of these levels

Q3: Have you seen B&M stores make changes due to Covid-19?

Yes, many physical retailers, especially in the non-discretionary sector like groceries and drugstores, now have special shopping hours for seniors and people with weak immune systems. This is a great idea not only because it will help slow the growth rate of the virus, but it’s also a way to build goodwill with the local community, and maybe some of those consumers will return the favor by shopping in these stores more often when things return to normal. 

We’ve also seen stores in the food and hospitality sector close their doors for dine-in customers, but stay open for take-out orders. Even better, some restaurants are asking their customers to donate food orders for healthcare workers, which I think is a fantastic idea! 

Many people don’t realize that a majority of workers in the US are employed by small independent businesses not large corporations, so we should all do everything we can to help these small businesses survive. With people avoiding public transportation and shopping malls it is essential to find new ways of supporting our local businesses.

Q4: What has been the impact on media spend and consumption?

This is an interesting question, one the one hand everyone expects that media spend will slow down dramatically, but on the other hand consumption of streaming media is likely to go through the roof.

It’s too early to tell exactly how much #media spend will be lost due to #Covid19, but companies like #eMarketer have already revised their full year forecast down from +7.4% to +5% or less. TV and radio are the most likely to suffer due to the lack of live sports and people spending less time commuting in their cars. But even online media will take a hit with big traditional spenders in the travel and hospitality businesses cutting back on expenses.

One major question everyone has is: 'what’s going to happen with the Olympics?' With over $1 billion already committed in advertising to NBC, who has the exclusive broadcasting rights, what will happen if the event is cancelled? If nothing else, it will ensure that the effects of the disease won’t be contained to the first half of 2020, and will drag on into the second half, which is much longer than anyone would like.

Q5: Which categories of CPG are most affected? 

No debate parameters here - Food & Beverages has (you heard it here first) seen a tipping point. There’s going to be a percent of shoppers who have permanently moved from store based shopping in food & beverages to online. Primary beneficiaries who have observedly met the challenge here - Amazon prime now/Whole Foods, Walmart click & collect, Instacart (significant gainer), local delivery services (such as postmates). For those arguing this is a passing phase - having spent time in the snack & beverage categories previously and learning that these happen to be trip drivers, for a certain percent of shoppers - this will cause a move to a full grocery trip shift to online purchasing. It’s in the ~5% range now, we expect this to at least double or triple up permanently (say ~15 %). Given the size of food & bev (> $ 1 Trillion) this is a whopping shift. In other categories such as apparel which was making a rapid move to online - this is the moment where we may see up to over half the category shopping move online (remember currently during this crisis its all online). We won’t state the obvious with electronic goods and paper products - that happened a long time ago. If you’re still going in store for those, we have to ask you why? Is it loyalty based value or physical coupons? Let us know.

Q6: How can ecommerce help through this difficult time?

The most helpful thing #ecommerce can do now is help make transactions as frictionless as possible. Reducing or eliminating fees, like Grubhub and Uber are doing; making it easier to obtain life saving information #online by cutting back on misleading news and scams, like #Google and #Facebook are doing; and prioritizing health orders like #Amazon is doing.

Some leaders, like Rand Fishkin, have called for more dramatic action from the big networks that will help businesses help themselves (https://bit.ly/2UrUvMU). Things like enabling links in Instagram to help drive traffic to local businesses, overhauling local listings in Google maps to increase #digital transactions vs physical directions, changing the way promotional mails are displayed in Gmail, emulating Reddit’s 'Secret Santa' program to encourage gifting services from local businesses, and extending ad credits and data to hard hit sectors.

Q7: Are there any downsides to doing more business online? 

Well, having been raised in the offline format, seeing job losses will be a little painful. Our workforce has traditionally accepted shifts to newer skills by largely not up-skilling, which means for a percent of the workforce, it’s a learn or 'be extinct' situation. This is your time, learn the skills. It’s never too late and it’s not complicated - it's a mental will… One other area that comes to mind is for impulse categories and scale only based brand decision making in the areas of innovation, distribution, supply chain, stocking, advertising - you don’t have a choice. Take this seriously please - learn & adapt. #Consumers need you to. None of these are really downsides - they are opportunities. 

Q8: Can we learn any lessons from what may be happening overseas?

I think it’s interesting to look at what’s happening in #China. They were the first to be hit by the epidemic in late 2019, and they took swift measures to control the spread of the disease which seem to have worked as the number of new cases is now close to zero.

Local governments enforced strict quarantine measures and major retailers temporarily shut their doors, so housebound consumers turned enthusiastically to online shopping. JD.com alone reported that its online grocery sales grew 215% year over year during a 10-day period between late January and early February, and food delivery businesses have grown thanks to innovations in #contactless pickup and delivery services.

There is a lesson to be learned here about taking the threat seriously early on so we can “flatten the curve.” Extraordinary times call for extraordinary measures that will spur innovation and create opportunities for entrepreneurs, as well as generate societal benefits that will shorten the impact of the disease.

Q9: What are brands doing to build trust and goodwill with consumers, or not?

As mentioned in Q6 above - it’s a very positive sign to see firms like Grubhub and Uber waiving fees, especially since these companies are more often in the news for their “semi-predatory” behavior than for their altruistic behavior. Times of #crisis can represent a great opportunity for companies with a spotty reputation to make a course correction and change public opinion.

Another thing we’re seeing is companies adjusting their production lines to manufacture critical health equipment and supplies. One example is Tesla who’s now manufacturing #ventilators for hospitals, and LVMH (owner of Louis Vuitton and Christian Dior) who’s making hand #sanitizer in its factories. 

It’s also very encouraging to see powerful people like Jack Ma, co-founder of Ali Baba, personally donating 1 million masks and 500,000 test kits to the US. Bill and Melinda Gates should also be commended for pledging US$100 million to help global detection, isolation and treatment of the #coronavirus. 

Here's our controversial piece : conversely, we think it’s fair to say that Jeff Bezos and Amazon could do more to help. Given the immense power and fortune this business represent, we should expect more from them than a simple request that workers donate sick time to each other. The NBA should also be called out for testing asymptomatic players when sick people can’t get tests, as should the airlines who are asking for bailouts because they spent “too much” money on stock buybacks and dividends in the last 10 years.

Q10: Do you want to venture any predictions about the future beyond this crisis? 

This one is easy - one sentence summarizes it - the tipping point for eCommerce is here, as an executive adapt and deliver for the consumer. No more waiting for - "its 5 years from now, its NOW!"

This one infographic below from preparedfoods.net conveys change is on the way : https://bit.ly/2QDbWsB

Yves & Sri share their personal opinions and views on CPG & ecommerce. This is not meant to be a guidance or exact forecast of the future. We would like to see brands progress towards the future and consumers engage with and continue to get value from brands. This is our motivation. If you’d like to join this journey of CPG progression with us – get in touch!