Will e-commerce become a habit after the lockdown?

There is no doubt it will. Online shopping has grown considerably during confinement. 

KANTAR, an influential and reliable company, provides data about households in the habit of doing the shopping by Internet, having first applied a filter: it focuses on households that have shopped in this way at least once a month.

Here the data are about Spain, but the underlying reflections are useful to any market.

The question we are asking ourselves now is: After confinement, will the habit of "doing the shopping" on the Internet take root? 

We refer to this post lockdown phase as “Living with COVID-19”, because until the vaccine arrives, the pandemic will turn into a worrying endemic, a context that is both disruptive and unfamiliar.

To answer this question as coherently as possible, three approaches will be combined: the methodology used in “Brain-pleasing Marketing”, the article “Stop trying to delight your customers” by Matthew Dixon, Karen Freeman and Nicholas Toman, published in HBR (August 2010), and the book “The power of habit: Why We Do What We Do in Life and Business” by Charles Duhigg, published by Random House in 2012. 

It is about a habit

Methodologically speaking, what matters is not whether households that have begun to e-purchase groceries during lockdown will do so again now and then, but whether from now on the habit of e-purchasing will increase substantially.

When you do something as a habit, the brain goes into “automatic pilot” mode. The cognitive load is reduced, less glucose is consumed and, in short, it is less tiring than when you do something consciously. Therefore, a habit means making one's life simpler, especially if it is repeated frequently.

Habits are rooted in the limbic system, the non-conscious part of the brain, whose purpose is to foster the continuity of the life of that person and their family. And it is precisely that part of the brain that has the last word when making decisions. For example, how I am going to do the shopping.

How a habit is created

According to the sources cited, the creation of a strong habit requires 4 things:

1. Something external appears – in cognitive neuroscience it is called a stimulus – that leads one to think that a certain activity can be done in a different way that is better suited to the new context or situation. In this case, for example, the consideration that doing the shopping by Internet is appropriate in the context of lockdown.
2. A new behaviour must indeed appear, triggered by the stimulus. For example, starting to purchase on a supermarket's website and then receiving the order at home.
3. As a result of the new practice, the person must feel a reward or gratification. For example, seeing that the products ordered have arrived on time, in good condition and well protected. Or the recognition of other people in the household that buying in this way has been a good idea. A form of gratification may also be less frictions or efforts during the purchasing process in comparison with the previous habit. Dixon, Freeman and Toman confirm that greater loyalty to a brand or store is created if friction is reduced, than if the purchaser is given a fascinating purchasing experience. 
4. In the new behaviour, when an erroneous decision is made, the level of risk perceived is deemed 'acceptable'. For example, when a person goes to a physical store, they can easily see, and possibly check by touching, whether or not a piece of fruit is fresh. However, when you buy fruit having seen it in a photo on the website, logically the risk of making a mistake increases.

Application of the methods to the challenge

Below is a summary of the dynamics over time of each of the 4 factors that lead to the consolidation of a habit.

Factor 1: The existence of stimuli that make grocery e-shopping something suited to this period.

Factor 2: Making a habit of grocery e-shopping

Factor 3: Grocery e-shopping as a source of gratification or a means to reduce frictions

Factor 4: Satisfactory level of risk acceptance when making purchasing decisions that may turn out badly

Conclusions 

The following is what can be learnt from the analysis thus far, applied to the current context of “Living with the virus”:

A) Those who already grocery e-shopped before the pandemic will consolidate this habit. They will continue to represent the hard core of this clientele.

B) How much the habit of grocery e-shopping grows will not depend on the force of inexorable destiny, but on the behaviour of 3 factors, as described hereunder:

1. What retail companies will do from now on.
2. The decisions of public administration bodies on how to handle social issues during this complex context.
3. The personal circumstances of families in this period.

C) Five things will drive this habit:

1. The habit of grocery e-shopping will surely grow after lockdown, because many of the new customers who have tried out this form of shopping have felt significantly gratified in a very tough period of their lives.
2. Social emulation is always a factor that stimulates behaviour, and more so in a time of uncertainty. Knowing that people similar to you are purchasing in this way will reinforce this habit.
3. The probable increase in resources that companies selling groceries will devote to e-commerce. To be specific, to their logistical muscle. In this new post-confinement context, the lead time or period of time between the order and its reception will have to be shortened once again. A delay of several days or many hours will no longer be accepted, because people coming out of lockdown will become more demanding.
4. Retail companies becoming aware that not only can they sell "good brands", but they themselves should be a strong brand. For instance, by taking care of unpackaged products (e.g. apricots to be consumed within 2 days when they are just right), so customers can buy them feeling there is a lower risk of error than at present.
5. If uncertainty surrounding the health situation remains high, and especially if there were to be new outbreaks, even greater impetus would be given to grocery e-shopping.

D) However, three factors will curb the habit of doing the shopping by Internet:

1. The multi-sensory characteristics of stores: this is what the brain loves. Stores that have bigger aisles and those that deploy a less daunting array of health measures will attract the more traditional customer segments, those that best understand low-processed ingredients and how to cook them.
2. The growing fragmentation of the market. There will be a larger number of customer segments. The remarkable social homogeneity of lockdown will be over. Each market segment will be defined not so much by the traditional socio-demographic variables, but by the characteristics of the new family context (e.g. teleworking and looking after young children at the same time).
3. If uncertainty surrounding the health situation lessens (for example, when effective vaccines appear), the trend towards grocery e-shopping will not accelerate. In a certain way, there will be a tension between two poles: the multi-sensory attraction of some shops and fear of the risk of contagion.

E)  The aforementioned conclusions have limitations:

1. The number of families that did the e-shopping before the pandemic was quite low (in Spain). In percentage terms, the increase in the habit could be very marked (for example, the number of families in the habit of grocery e-shopping could feasibly triple), but the absolute impact on the total mass market will continue to be small.
2. Will grocery e-shopping be the option that is most appropriate to this current context, the characteristics of which can just about be glimpsed in the mist?  Given that the context is the most important variable when tackling a problem or challenge, at the time of writing of this article (Mid July 2020), the honest and sensible thing would be to say that any numerical prediction that does not cite the characteristics of the context in which it has been made becomes technically doubtful.

When it comes to "doing the shopping", another path is possible 

Up until now, an analysis has been made of the interrelationship between the variables of the model, but with an implicit aim: to improve the previous habit, that is to say, to improve on doing the shopping in physical stores. 

However, besides this incremental route, a disruptive form of doing the shopping could well appear: Not doing it. 

This would consist in customers giving a retail company some of their family details, circumstances and tastes. Every working day, this company would be responsible for delivering lunch or supper to the customers based on two criteria: what is appropriate (health) and what they like (pleasure).

If we take account of the fact that, statistically, the majority of disruptive innovations tend to be produced by players without experience in the sector, it is very unlikely that a supermarket chain will be driving this option.

However, since in the grocery shopping sector large volumes are required in order to be competitive, it is likely that the startups that do it well – and, on top of that, survive – will be acquired by a large player in the distribution arena.

Or they could be acquired by large supplier companies. Or even by a company formed by large suppliers that are, in theory, competitors. It will become increasingly less unusual for competing companies to decide to create new business models together. This is what BMW and Mercedes have done together in Germany: launch a retail company for renting their cars.

Epilogue

The big question that executives can ask themselves now should not be whether or not people will shop more by Internet, but how they can devise the best way to do the shopping in the new scenario of "Living with COVID-19".

The aim of the leading companies should not be to shape the best way to sell, but rather the ideal way to do the shopping in the present context.

And that "best way to do the shopping” will almost certainly have two characteristics:

1. It will be an "OnOff retail" model, with the e-body (alias the smartphone) as the driving force, but without turning its nose up at a complementary face-to-face component. When using their e-bodies, customers no longer realise whether they are on-line or off-line. Therefore, only the OnOff reality exists now. As I have explained in some articles and speeches, "OnOff retail" is the next step after the omni-channel retail.
2. In view of the highly fragmented context of households in the post-confinement period, the ideal shopping mode will not be "one size fits all", but there will be different models. A variation on this new business response might be that, using the economic tool of "economies of scope", someone would devise a retail concept that had a single base, but which could then be parameterised and adjusted to the characteristics of each household.

In the future, doing the shopping will no longer be divided into two modes (instore and on the Internet).

We will be telling our grandchildren about these two alternatives.

? Author: Lluis Martinez-Ribes, Visiting Professor at ESADE, with the support of KANTAR and m+f=!. BCN, 16 July 2020. Special thanks to Marina Font, my Research Assistant. Oxygen bubbles.

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