Today, we live between two worlds: before the pandemic and after. Retail sales have been hit with the largest MoM decline in 30 years. Oil is underwater. A different divide, however, marks my world: inside BSC and beyond it. Amidst the turmoil, online retail has seen its modest expansion suddenly sent into overdrive. Across the globe, we’ve seen revenues rise every week since the nationwide lockdown. Staggering figures to rival Black Friday, Big Billion Day, etc. No, this is not an anomaly....that sort of data has been confirmed by email providers, 3PLs, marketplaces, credit card companies, and even platforms:
Despite this shift, many owners still find themselves paralyzed by uncertainty. If that’s you, I get it. When faced with uncertainty, we turn to the numbers.
The problem with COVID-19 is that it’s utterly unique. Under the weight of singularity, our usual models and data crumble — decimating our mirage of control. The unknown unknowns haunt us, driving us back (yet again) to seek refuge in data.
What do we do in a world that’s so brutally exposed our unknowing? We stop predicting and start acting. We take a leap.....of conviction behind this data. For ecommerce brands, three realities shaped that future. To wait is to miss the most pivotal moment this industry may ever experience.
1. Habits have changed for the good
In the midst of upheaval, swapping out your deodorant doesn’t seem that dramatic. Why? Because nearly half of our behaviors are attributable to habit.
When habits break, long-held behaviors break with them.
Does our new life with COVID-19 qualify as a life-changing event that shapes consumer habits?
Millions of “unreached” internet users are venturing into digital activities for the first time. This is especially true for new online customers, with undeclared digital loyalties. Rural internet users just crossed the urban count at home. Time Spent on smartphones in week 3 of COVID-19 disruption inched towards 4.5 hours per day. Source:Nielsen Smartphone Panel, COVID Disruption Data as compared to Pre COVID-19 Data, April 2020
While the sense of urgency to acquire a new product isn’t a new trend, the extent to which it accelerated for Indians post COVID-19 was extremely palpable. With the closure of major retail stores, search queries for essential services “near me” or providing “delivery” saw an unprecedented boost. 1 out of 2 consumers wanted to find out how brands are responding to the situation.
As a result of this non-linear-exploratory journey of the consumer, brands may feel the need to be omnipresent.
The battle is for a new, potentially loyal class of consumers who will be seeking a frictionless welcome to a new series of behaviors. When the incumbents are being swamped and everyone is frantically trying everything, it may be easier for new voices to be heard. Again — the market is being reset. Left behind in this pursuit will be many consumer product giants (P&G, ITC, Unilever, Marico, Dabur, etc.). Having withheld entry into ecommerce for fear of “channel conflict” and apathy created by the assumption that it’s a small victory to be won, legacy manufacturers lack the ability to move with the speed of DTC.
2. Cheaper inventory, will not be forever
When coronavirus struck, enterprises with massive ad dollars pulled spending in droves. In total, Facebook and Google could lose over $44 billion in advertising revenues.
The price of ad inventory reflects it. Comparing Mar. 1-7 (the week before quarantine began) with Mar. 8 and beyond, shows an aggregate reduction of -26.79% in CPM.
Now, look at the same data set in a different time period. CPM's cumulatively are low but have increased by +15.94%.
This isn’t the window to worry about 30-day profitability because the window will close on these prices and you will have to scale back your acquisition. Customers create revenue for a lifetime. Don’t forget that.
3. Fortune favors the brave
In 2003, China experienced an outbreak of SARS that provides a parallel for the potential stakes that may be available for winners in the future. “Just 17 years later and China’s online retail economy is the envy of the world. At nearly 37% penetration and growing, analysts estimate that the rate will reach 63.9% by 2023.
Wherever you go to gather your opinion, you’ll be hard-pressed to find positions that entail ecommerce going backward. Recession or not, the online retail pie will grow for sure.
While short-term profitability will always be at the back of your head consider this future. And also consider what short term P&L battles you are willing to concede to take hold of the spoils of the larger war.
So what's now folks?
You can choose to ignore this or go a different route. The thing you can’t do is pretend you didn’t know. When Facebook prices rise or you see a competitor launch that incredible campaign or product perfectly built for the moment. You know the feeling that will come…
It’s the feeling that I didn’t act. I didn’t seize the moment. It’s a different feeling than failing. It’s worse.
If you want help from a partner who is working every day to help their clients transform their future and achieve their dreams, reach out. We would love to be a part of your story.
So go ahead, take that leap with conviction!