Many marketing experts predict that e-commerce sales will only increase as COVID-19 infections soar, social distancing becomes standard practice, and more people choose—or are required—to stay home. However, sellers aren’t so optimistic.
In fact, 36% of sellers predict their sales will actually decline due to supply chain issues, product shortages, shipping delays, and the potential for demand to drop as the economy fluctuates.
Here’s what sellers can expect during this turbulent time, as well as tips from e-commerce experts on how to protect your online business and make the most of this opportunity by connecting with your customers.
What E-commerce Sellers Can Expect During the Pandemic
There are a lot of unknowns right now: how far the coronavirus will spread, how the market will respond, and what the overall impact of the pandemic will be worldwide. Though no one truly knows what will happen, these predictions will give sellers an idea of what to expect.
Changes in Demand and Revenue
Almost half of retailers expect some economic downturn due to the pandemic.
However, preliminary data from Quantum Metric shows that e-commerce has recently experienced an average revenue weekly growth rate increase of 52% and an 8.8% increase in conversion rates compared to a year ago. This may reflect a sudden increase in demand as more consumers turn to online shopping.
And more people are shopping online. Nearly 75% of U.S. internet users say they plan to avoid in-store shopping because of the pandemic. And with brick-and-mortar retail accounting for 85% of U.S. retail sales, this is shifting day-to-day shopping to online marketplaces. However, this increase in demand will cause other issues, which we’ll explore in detail below.
Overall, total retail traffic fell 9.1% last week, though, according to Morgan Stanley, and analysts don’t believe that e-commerce will fully mitigate these declines.
And while consumers are spending on essentials like groceries and, of course, toilet paper, sellers of nonessential goods have seen their sales drop by 40% to 60% on Amazon lately, as shoppers limit discretionary spending.
Conversions on Longer-Delivery Items
With the popularity of Amazon Prime and its free two-day shipping, modern consumers expect fast delivery and will often opt for the product that will arrive fastest. But demands on inventory and shipping delays have made it difficult for even an e-commerce giant like Amazon to deliver on this promise.
This means online shoppers are more likely to convert on products they need, even if they have longer delivery windows, to avoid going to brick-and-mortar stores, where inventory may be low or even nonexistent.
This has both pros and cons. It’s likely to bring in more paid search dollars. However, as supply chain issues increase, third-party sellers will look for ways to limit the impact, such as reducing ad spending.
Decline in Consumer Confidence
Forty-two percent of retailers cite concerns about consumer confidence. This is an economic indicator that measures the degree of optimism that consumers have about both their personal financial situation and the overall state of the economy.
However, they disagree on how great of an impact there will be. Nearly 60% believe there will be some impact. Twenty-two percent believe the impact will be significant, and 20% project a limited impact.
Inventory Shortages
If you’ve been to a grocery store lately, you’ve no doubt encountered empty shelves. With more people buying up food and supplies and hoarding necessities, numerous industries are dealing with inventory shortages.
FolsomNatural/flickr
Forty-four percent of the sellers surveyed say they expect production delays, and 40% expect inventory shortages throughout 2020.
“Why are we having such great shortages, and why can’t the system respond? Because you have a perfect storm,” says Steven A. Melnyk, professor of operations and supply chain management at Michigan State University. “Most companies, when they deal with demand, are predicting it, [but the volume recently sought by consumers] was just off the scale. It was an event they had never foreseen.”
Supply Chain Issues
Many of the challenges online retailers currently face are supply chain-related, and online marketplaces are responding in various ways.
For example, retail giant Amazon has experienced a massive strain on its supply chain, resulting in shipment delays, technical glitches, and labor shortages. Now, it’s stopping shipments of nonessential products to its warehouses. It’s accepting only household staples, medical supplies, and other high-demand products until April 5.
This affects even non-Amazon sellers who use Fulfillment By Amazon (FBA) for their fulfillment needs.
“Leaked documents from the U.S. government are suggesting [shortages] could last up to 18 months and come in waves,” says Tommy Walker, global editor-in-chief of the QuickBooks Resource Center. “We’re still in early days, but if that is the case, options like FBA will be unreliable at best, and the entire supply chain will continue to be disrupted.”
Amazon is also prioritizing shipment in the following categories: baby products, health and household, beauty and personal care, grocery, industrial and scientific, and pet supplies.
Retailers who were asked what actions they’re taking as a result of the pandemic cited supply chain communication and contingency planning as their top actions.
Strict Enforcement of Rules and Regulations
Many e-commerce sellers have engaged in price gouging and false marketing, prompting marketplaces like Amazon and eBay to remove millions of items and even suspend or ban some sellers.
Laws around price gouging and false advertising vary from state to state. Still, with sellers making headlines for taking advantage of panicked consumers, lawmakers are calling for strict enforcement of these laws, and online marketplaces are following suit.
The impact on sellers who are penalized for such practices won’t only affect them in the short term, but also in the long run as they’ll have to address a negative image. “Retailers trying to gouge prices or take advantage will have to deal with serious brand reputation management when this passes,” says Goldie Chan, founder of Warm Robots.
6 Steps to Protect Your Online Business During the Pandemic
According to a survey published on March 12, only 20% of e-commerce retailers plan to take “aggressive action” in response to the coronavirus, while 44% reported that they plan to take “some action.”
However, given the progression of COVID-19 across the globe and the numerous countries and U.S. states that have issued store and business closures since that date, the organizers note that “retailers certainly could have moved into panic mode since they’ve taken this survey.”
Whether you’re in panic mode or not, here’s what the experts advise you do to protect your e-commerce business during this unpredictable time.
1. Be Tactful and Transparent.
While some brands are trying to capitalize on changes in the market and take advantage of customers’ fears, experts urge e-commerce businesses to avoid such tactics.
“A lot of e-commerce brands are making the mistake of alienating their audiences with tacky promotions that are taking advantage of the pandemic,” says Ross Simmonds of Foundation. “Whether it’s using clever puns or making the coronavirus their promocode for a discount, these tactics can leave a bad taste in the mouth of your customers. While some of these tactics might give you some short-term wins, it could cause long-term damage as people will remember how you responded during a crisis. I advise all retailers to embrace empathy in their communications.”
Eighty-six percent of people say transparency from businesses is important to them, and this is imperative during times of uncertainty like now.
E-commerce brands can practice transparency by publicly addressing common customer frustrations like delivery delays, out-of-stock products, and internal sanitation procedures. They can also take steps like providing additional training to customer service agents about handling coronavirus-related inquiries.
Check out VoiceSage’s communication best practices during the pandemic here.
2. Don’t Over-Communicate.
Communication is essential during this tumultuous time, but focus on what’s important and don’t over-communicate.
You’ve likely had an influx of emails from every company you’ve ever done business with, informing you of how they’re dealing with COVID-19—but how many have actually been relevant to you as a consumer?
Over-communication about unimportant things is just as damaging as not saying anything at all, so find ways to share something positive.
3. Diversify Your Supply Chain.
As noted above, e-commerce businesses are facing serious supply chain problems, so it’s essential to take steps to alleviate these problems before they worsen.
“Long-term, diversify both manufacturing and fulfillment locations, when possible,” advises Casey Armstrong, CMO of ShipBob. “On the manufacturing side, that might take a while, especially with the demand and uncertainty today. On the fulfillment side, that can be done much faster. The importance of proper supply chain management is showing right now. We have been summarizing everything we have found as quickly as we can on our site, especially as it pertains to both the receiving and fulfillment of goods across our entire network.”
4. Focus on Virtual Products
Supply chain disruptions may make it difficult to manufacture and ship physical products, which will undoubtedly negatively impact profits. However, sellers can lessen the blow by marketing any virtual products they may have to offer.
“There are no barriers with virtual products,” Walker says. “Gift cards are obvious, but classes, tutorials, e-books, these are all options as well—you just need to get creative.”
5. Keep Advertising.
If sales are declining, it’s only natural to look for ways to cut costs, and often, your advertising or marketing budget is first to go. But don’t cut back entirely on prospecting. Doing so means that you’ll have to invest more time and resources into these areas when business returns to normal.
To begin, focus on your customers by creating deeper connections with them. While it may be challenging to attract new customers at this time, look for ways to recapture lapsed customers and engage your higher-value customers.
Also, consider display advertising. App downloads have surged as a result of coronavirus. In China, app downloads over the first two weeks of February were 40% higher than the average for all of 2019.
“There is a notable increase in internet traffic as people are working, learning, and spending more waking hours at home and online,” says Bradley Hoos, Chief Growth Officer, The Outloud Group. “We have seen early indications that viewership across online content platforms like YouTube, Twitch, Instagram, and TikTok [is] trending upward. This creates opportunity.”
6. Get Social and Connect with Consumers.
Ninety percent of Instagram users follow brands on social media, so there’s ample opportunity for e-commerce businesses to connect with their followers during this difficult time.
Leo Strupczewski, Curalate’s marketing director, says many brands are doing this exactly right. He notes independent running company Tracksmith, which ran an Instagram Story earlier this week, sharing running-related books, movies, and podcasts, as well as Calpak, which outright asked its followers what kind of content they want to see right now.
“While brands have spent a ton of time over the last few years building influencer- and user-generated content strategies to create an ‘authentic’ look that’s still highly curated, right now the curated aspects of a brand feel a little off,” Strupczewski says. “I think brands are recognizing that, and there are new examples every day of brands throwing that out the window. My favorite example right now is Glossier. Look at their Instagram feed from March 13 forward and compare it to the posts from the week before.”
Right now, consumers aren’t looking to be sold to—they’re looking for connection—so keep that in mind as you engage with users on social media.
“The online businesses I’ve seen who send genuine, human, personal communications about this pandemic are the ones I most want to continue doing business with,” says B2B SaaS consultant Nichole Elizabeth DeMeré.
Build Customer Trust
All of the tips outlined above have one thing in common: They build customer trust.
From keeping consumers informed of product shortages to taking steps to improve your supply chain to maintain inventory, each one helps reassure the most crucial aspect of your business: the customer.
The coronavirus situation is changing rapidly, and it’s still too soon to know exactly what to expect and how to prepare. But if e-commerce sellers keep their customers at the forefront, it’ll successfully guide their decisions.