PayPal and Shopify reported blockbuster earnings results this week, which showed a growing shift to digital amid the pandemic. But that also raises the question: “Is this change permanent?”
Brian Bogosian, CEO of sticky.io, joined Karen Webster for our latest This Week In Payments conversation to discuss that and other key developments affecting the industry this past week. Here’s a rundown of what they discussed:
Will The Digital Shift Stick Around?
Bogosian said the digital shift was already in motion even before COVID-19, but the pandemic has certainly accelerated the trend. After all, traditional supply chains have been interrupted, and many manufacturers of consumer goods and other wares have faced disruptions to their traditional distribution methods as retailers closed.
“The landscape has been permanently altered, and I think that people will take things delivered online — even things that they would have gone to the grocery store or the drugstore for” as part of their routines, Bogosian said. “I think that what we're seeing now is just the beginning of a trend to move distribution of products online. And I think [it's] permanent.”
Webster agreed, noting that consumers couldn’t choose where to buy their products during pandemic-related lockdowns; they had to buy them online. She added that while lockdowns have lifted in some locales, many consumers still prefer digital channels because they’ve established a habit of going online. They like the convenience and ease of online shopping, and eCommerce outlets have made the experience simple, she said.
Bogosian concurred, adding that financial distress at many retail chains is only speeding up consumers’ digital shift.
“A lot of these firms have been burdened with large amounts of debt — they certainly weren't able to modernize [and] they can't carry the inventory,” he said. “As consumers go back to what they would consider to be a normal pattern of buying and then find that the things they will usually get aren't in the store, it's just going to further accelerate this movement to purchasing things online.”
The Rise Of DTC
Bogosian said many mass-market brands are realizing they need to create a direct-to-consumer (DTC) relationship to maintain their position in people’s homes. He predicts that as a result, more and more consumer-goods makers will be going DTC.
“[Those retailers] will still be there for whatever they can do, but for … companies with quarterly earnings and drive to profitability, there's just no way they can get there without rapidly accelerating their initiatives internally to going direct to the consumer,” Bogosian said.
Webster added that Coca-Cola and PepsiCo, which released quarterly earnings recently, made large shifts to DTC partly out of necessity, as physical channels where people consume soft drinks — stadiums, bars, restaurants, etc. — are mostly closed. If the soft-drink makers want to make up the lost volume, they have to find ways to reach customers directly, she said.
Meanwhile, Bogosian said a few startups are seeking to disrupt the traditional 7-Eleven distribution channel for convenience items, directly delivering the kinds of products that consumers usually buy at those kinds of stores.
“If you can get those things and at the same price and delivered to you, I think … that’s driving this mentality of not going to the retailer and [instead] doing things online,” he said.
With such a sea change under way, Bogosian has invested in a company that builds carts that will tackle the last-mile challenge of grocery delivery.
“It'll drive up to your house and you'll unlock it from the secured cage … and then the vehicle’s on its way to the next person,” he said. “I think the mentality of this is going to get people a lot more familiar with this whole idea of consuming from their computer or their mobile device — and also be able to get it pretty rapidly, cost-effectively.”
Big Tech Takes On Capitol Hill
Also this week, the CEOs of Big Tech giants Amazon, Apple, Google and Facebook faced lawmakers in a hearing before a House Judiciary subcommittee on antitrust.
Webster told Bogosian that she thought some of the hearing’s most interesting questions and dialogue centered around competition and whom Big Tech sees as rivals. Bogosian observed that “in static industries, that's a lot easier to see how competition goes. But technology is anything but static. Things are always changing, and who may be your ally today may be a ‘frenemy’ tomorrow.”
He added, “I think there is a role for government and regulation and monitoring because if a search engine tends to advantage a certain channel … then those kinds of things have to be monitored.”