Retail

Preparing For The Second Wave Of The Digital Shift

eCommerce

There are now not one, but two digital shifts occurring as the COVID-19 pandemic continues to disrupt consumer shopping habits. The first is the consumer-driven digital shift that has been well-documented, especially with brick-and-mortar powerhouses like Walmart clocking an eCommerce surge of 74 percent. The second is just starting. It’s the digital shift taking place among retailers who are trying to play catch up with consumers by pulling resources away from brick-and-mortar investments and stacking them against digital infrastructure and capabilities.

For the best example of retail’s digital shift, look to Inditex and its key brand Zara. Known globally as a fast fashion destination, Inditex put markets on notice last week that it will shift millions of euros from offline to online with Zara and its other brands. Expect other global retailers to do the same as they see the permanent nature of the consumer shift. And they will do so without the dread of meeting Amazon in the marketplace. Yes, Amazon is a competitive factor. But if Amazon stays at the mid-40s in terms of market share, fashion retailers especially can look at creating their own market share instead of stealing from Amazon. That new business dynamic has consequences for the retail digital shift.

The first consequence is in media. Brands like Zara, Target, Guess and Nike are among those who pundits say will start to double and triple down on digital, and they made their businesses and reputations via media. But they haven’t yet brought their full leverage online. They now need to drive results quickly and grab consumer mind share, and that will drive them to start snapping up online inventory, starting with the social networks. According to Mediapost, last week Facebook’s worldwide CPM fell to an all-time low of $1.95. Similarly, the average overall digital CPM in the U.S. fell below $3 for the first time in the past two years on Sunday, March 22, and has remained there. The average CPM in the United States from March 2018 to February 2020 was $4.67. “We’ve observed between a 35% to 50% decline in average CPMs across the Facebook Ads marketplace in the countries most affected by COVID-19 in the last couple of weeks,” says Gupta Media Strategy & Analytics Expert Alex Palmer.

The second consequence will be more mobile: mobile commerce, mobile payments and mobile wallets. This is where real progress will be made in what PYMNTS research refers to as Commerce Connected. In the current phase of the consumer digital shift, it’s the initial and basic online behavior that’s changing. But in order for commerce to be truly connected it will need to include the device that captures the most consumer time, and that’s the smartphone. This will start to rise as dramatically as the retail digital shift kicks in because the retailers behind the digital shift need as many touchpoints as possible in as little time possible. Expect more brand-payments platform partnerships. The sophisticated retailers that are betting their future on digital will demand no less than those partnerships.

“The use of online ordering platforms, home delivery services, mobile grocery ordering applications and subscription services has shot up since the pandemic’s onset,” the latest PYMNTS Commerce Connected report notes. “Fifty-one percent of shoppers responding to another survey made online grocery orders in late March and early April, and 33 percent noted it was the first time they had done so. Consumers have also turned their attention to mobile phones for home delivery, with aggregated shopping application Instacart reporting that downloads rose 218 percent from February 15 to March 15.”

The third consequence will be seen in the post-purchase experience and this is a tough one to call. This is where separating Amazon from the rest of the digital retail pack is important, because no retailer or group of retailers right now can go toe-to-toe with the shipping and return infrastructure Amazon has in place. Can free shipping be sustainable? Not for most retail brands, at least not for every customer. Expect the post-purchase experience to separate into a “good, better, best” model. Only the best customers will get free shipping although customer retention strategies could give new customers at a shot at free shipping. The post-purchase experience is a key part of the customer experience. PFS research shows that 45 percent of U.S. consumers have shopped with online retailers they have not previously purchased from during the COVID-19 pandemic and intend to continue shopping with them based on the excellent experience they had. The game is open.

“Many consumers have been forced to look outside their preferred brands due to what is available in their geography,” says PFS. “For luxury items, some shoppers may be able to withstand longer fulfillment times; however, for essential goods, household items or consumables, shoppers will likely be forced to go with what is available. Thus, consumers are now experiencing interactions with new brands for the first time. These are make or break moments, as shoppers are admittedly purchasing these brands because of their availability. A poor e-commerce experience could turn-off a shopper for good, while a seamless experience could lead to a new brand advocate.”

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