COVID-19 has brought America’s digital divide to the forefront. As online shopping and restaurant digital ordering exploded with the advent of the public health crisis, many companies were caught off guard, but those that invested in strong digital capabilities before the crisis were well equipped to weather the storm. Their bets paid off: E-commerce penetration increased markedly across a number of industries after the crisis hit.
Online’s Share of Market (Dollars) Increased Across Industries
Source: The NPD Group/Consumer Tracking Service, May 2020 vs. YA
Even after restrictions are lifted, many consumers still plan to shift their spending online. A May 2020 survey of Checkout panelists found 26% of consumers plan to shop more online at non-grocery retailers once social distancing restrictions are lifted, while only 16% plan to shop more in stores.
“We’ll leapfrog three years in terms of online adoption,” said Chief Industry Advisor Marshal Cohen when asked to predict how the shift to e-commerce will play out after restrictions are lifted and a new normal sets in.
Many agree the question is less about whether or not COVID-19 will accelerate the shift to online shopping —the consensus is it will — but rather, how e-commerce itself will evolve in the new retail landscape. NPD data through June 2020 shows the ongoing transformation of e-commerce. Traditional retailers’ dot-coms and online DTC retail outpaced total e-commerce growth from March through June* (See Chart 2), and digital ordering from restaurants exploded. At the same time, shoppers across demographic segments grew more accustomed to online shopping. This paves the way for continued momentum once a new normal is established (See Chart 3).
To keep up with these shifts, it’s more important than ever for brands and retailers to reimagine their customers’ online experience, specifically with regard to their websites, which will increasingly serve as the primary customer touchpoint. If implemented correctly, this will create more personalized and direct customer interactions and bolster shopper loyalty. In this evolving landscape, brands and retailers that seize the opportunity for transformation will be optimally positioned for the road ahead.
*In Chart 2, e-commerce growth by channel is shown on a weekly basis from March through June 2020. In the majority of weeks studied, the .coms of traditional retailers and online DTC retail outpaced total e-commerce.
In late March, Food Industry Advisor David Portalatin commented, “It’s highly probable that this crisis will define winners and losers by their digital proficiency. Now that we’re living in a world where the entire [restaurant] industry is an off-premise business, digital orders gain importance and provide an edge to those who already lead in that space.” Our CREST® data shows the importance of digital capabilities in the foodservice industry. Digital foodservice orders represented 5% of foodservice visits in January 2018; by April 2020, the share of digital orders increased to 20%. Digital restaurant orders increased by 138% in May 2020 compared to May 2019. Meanwhile, by mid-April, online grocery buying was about 77% higher than before the crisis.
Looking at online transaction data across industries, our Checkout data also shows payoff for DTC and traditional retailers, many of which invested in enhancing their digital capabilities in recent years.
DTC brands that had strong digital capabilities and social media savvy were the envy of consumer brands in recent years. COVID-19 accelerated DTC adoption. From March through June, growth in online DTC transactions was strong, our Checkout data shows.
Traditional retailers’ dot-coms (those with large store footprints) had strong performance versus the prior year, outperforming total e-commerce, our Checkout data shows. A number of retailers substantially enhanced their delivery and buy-online-pick-up in-store (BOPUS) options toward the end of last decade. This came in handy when online shopping accelerated as a result of COVID-19 precautions, and digitally-powered in-store pick-up options were a unique capability of traditional retailers. Due to the crisis, 13% of consumers said they were increasing their use of in-store pickup and drive-up options, our May 2020 Omnibus Study showed. By comparison, this was equal to the number of consumers who said they were increasing their use of streaming digital entertainment content after the crisis hit.
E-commerce Transaction Change by Channel Indexed to Pre-crisis Baseline (Per-capita Receipt Index)
Per-capita Receipt Index refers to the amount of transactions, as measured by consumer receipts, that occurred in each online shopping channel indexed to a pre-crisis baseline. An index of 120 = 20% growth in online transactions versus the pre-crisis baseline.
Source: The NPD Group/Checkout
Not only has there been an overall increase in e-commerce, but more people — particularly older shoppers — are now shopping online.
Shoppers 55 and older have shifted their spending online along with other age groups. In the early weeks of social distancing, it was expected that older shoppers would flock to e-commerce. A surprise was that online shopping growth among this group remained strong months after restrictions were put in place, said Chief Industry Advisor Marshal Cohen. He added that many of the sales that occurred online displaced in-store sales, but many consumers became accustomed to online shopping, which will likely impact their future purchase behavior.
E-commerce Transaction Change by Age Segment (Per-capita Receipt Index)
Per-capita Receipt Index refers to the amount of transactions, as measured by consumer receipts, that occurred across each age segment indexed to a pre-crisis baseline. An index of 120 = 20% growth in online transactions versus the pre-crisis baseline.
Source: The NPD Group/Checkout
Improving the Digital Experience
In the shifting online shopping landscape, brands and retailers, regardless of the consumer segments they target, will need to be increasingly proactive in developing enhanced digital touchpoints with customers. Further, customer interactions powered by digital channels will afford brands and retailers greater opportunity to form direct relationships with customers, which can, in turn, drive loyalty.
To thrive in today’s digital landscape, Cohen recommends brands and retailers foster a new kind of digital dialogue with consumers to overcome the perceived hurdles of a digital shopping environment.
With more categories shifting online, brands and retailers will need to do more to guide their customers through their products’ touch and feel. When asked the primary motivation for buying fashion products in-store, nearly two-thirds of consumers said it was because they preferred to see, touch, or try on products in-store, CivicScience research from 2019 reported.
To communicate a product’s touch and feel online, Cohen says brands and retailers need to “romance” their product descriptions by improving their digital copywriting prowess. Product descriptions can also be enhanced through video or other content formats.
One brand that has excelled on this front is Dyson, the household appliance company. When the company released a $500 hairdryer gilded with 23.75-karat gold several years ago, the brand used online video to share the story of how it engaged with a “Master Gilder” to highlight the craftsmanship that went into the product. The gilded hairdryer was a $100 upgrade from the standard product, still a hefty sum considering the average selling price for a hairdryer in 2019 was $36, our Retail Tracking data shows.
“To be successful, not only do brands need to come out with exciting products, but they need to tell a story about how their innovations solve consumer pain points, and do it in a way that emotionally engages the audience,” said Home Industry Advisor Joe Derochowski.
Digital communications that better describe products in order to bring them to life will be critical to thrive in a more online-oriented retail environment. Brands and retailers also should invest in content that informs and engages, with an eye toward building long-term customer relationships. We’ve seen brands and retailers with strong category expertise develop timely content to engage their customers, even during difficult times. In May 2020, Midtown Manhattan photo, audio, and video retailer B&H hosted a Zoom event exploring how photographic storytelling could unearth powerful narratives about life in the age of social distancing. Meanwhile, Nike dropped the subscription fee for its workout app in March 2020 to encourage people to exercise at home as gyms across the country closed. This was a valuable way to engage consumers given changes in workout behavior in the COVID-19 period. A May 2020 Checkout survey revealed that compared to pre-COVID-19 behavior, exercising at home had increased by more than 70%, and twice as many consumers were using online or app-based exercise classes.
To be successful, not only do brands need to come out with exciting products, but they need to tell a story about how their innovations solve consumer pain points, and do it in a way that emotionally engages the audience.”
Joe Derochowski Home Industry Advisor
Personalization, Fulfilment, and Payments
To make the most of e-commerce, Sports Industry Advisor Matt Powell stressed the importance of personalizing and curating offerings. While one of the key advantages of e-commerce is the ability to offer a full range of products unencumbered by spatial constraints, at the same time, brands and retailers should capitalize on valuable opportunities to know their customers and tailor messages accordingly. “Over the years, we’ve talked a lot about personalization and curation, but I still notice plenty of opportunities for brands and retailers to do a better job at ensuring they don’t send special offers for products that customers have no interest in buying. If someone only buys men’s shirts, they shouldn’t get numerous offers for children’s jackets,” Powell said.
Once shoppers decide what they want to buy, traditional retailers in particular have room to improve their BOPUS options to capitalize on e-commerce. While big players, like Walmart and Target, have succeeded on this front, Footwear and Accessories Industry Analyst Beth Goldsteinnoted that some retailers still have work to do from a shopper-experience front. When browsing for products at retailer websites recently, Goldstein noted it was often difficult to identify what was available for pickup locally, and some lacked a ship-to-store option if a product was not available at a particular location.
“As online shopping accelerates, traditional retailers have the advantage of being able to fulfill consumer needs in a number of ways, whether direct delivery, curbside pickup, pick up in-store, or shop in-store. While this offers opportunities, it’s clear that a number of retailers still have more room for innovation in this space,” said Home Industry Advisor Joe Derochowski.
Although personalization and fulfillment are critical ingredients to the shopper experience today, one emerging source of opportunity is rethinking the payment process. Powell noted digital payment solutions that enable customers to pay for products in interest-free installments over time have enticed consumers to buy products across a wide range of price points. He noted that making these services available on a site often brings in new customers and can yield immediate payoff.
The Road Ahead
As consumers continue to integrate e-commerce into their lives, brands and retailers can develop new playbooks in order to thrive in the new retail landscape. Just as companies have invested in experiential physical retail in recent years, they now must invest in online experiences. Better and more personalized digital content for both short-term sales activation and long-term relationship-building is critical if a company is to differentiate itself in the endless aisle of e-commerce.
Traditional retailers can look to leaders in their space to ensure they are maximizing digital. The goal is making sure some or most of their store count remains an asset rather than a liability as consumers make use of BOPUS and curbside pick-up options.
Experimentation is essential as brands and retailers navigate this new environment. While it’s important to improve digital content and e-commerce operations, new kinds of digital payment solutions offer a relatively simple way to bring in new buyers.
The road ahead remains uncertain; some companies will be unable to meet the significant challenges they face now and those ahead. Those that do will stay on the right side of the digital divide by investing in their digital storefronts and being open to experimentation. As disconcerting as uncertainty can be, strong companies will see it as an opportunity to deepen their ties with consumers and build powerful, long-term relationships.
Checkout offers robust data for tracking and improving performance across all channels, plus buyer analytics to help businesses keep current customers and win new ones. The Checkout Omnipanel tracks online and in-store sales for brands and retailers, including DTC. Additionally, buyer analytics deliver insight into consumer purchase behavior, providing information on brand loyalty, leakage, reach, purchase frequency, and more.