‘This Time It’s Different’
Retailers have to engage with the needs and desires of the consumer and adapt to their behaviour. The opportunity to do this online is measurable, data-driven and creative — it offers more opportunity than any other channel.

Customer loyalty, retention and improving the online experience were all paramount to the success of eCommerce.

The GFC brought with it an industry-wide decline in retail sales, both online and in-store. Consumers had less credit available, meaning people were forced to save more and so the reduced consumption expenditures meant a slowdown in consumer spend.

Consumer confidence became a central problem. But still, trends began to emerge, dividing the online and traditional retail markets. In-store, customers were deterred from impulse buying, eliminating room for unnecessary purchases.

As a result, consumers took time to research online and find the best deals. Constant price comparisons were the result. This has not changed today. Crisis or not, people are hooked on the ability the internet gives them to find the best deals.

91% of online shoppers use the internet because researching products online makes them feel more confident about their purchases. The same percentage of buyers also announced that comparing prices online reassures them that they are getting the best deal.

People used the internet because it didn’t feel like an impulse purchase.

In 2003, the SARS outbreak dramatically changed consumer behaviour.

This idea of empowering the individual in a time of crisis, controlling when and what to purchase and how it’s distributed and delivered, comes with eliminating as many variables as possible.

Even during a weak economy or public health crisis, people continue to use the internet to shop.

The internet provides a comprehensive set of information related to a particular product or service that is not always available in store…

Nor is that information, price and availability limited to a single retailer. In a time where markets become increasingly challenging they also become more competitive, digital marketing and the internet allow you to break into new markets and retain existing share.

The emerging trend of avoiding going in-store is here. As Governments around the world attempt to contain the spread, choices become limited. It is going to get worse before it gets better.

In the USA Nike, Apple, Microsoft, Abercrombie & Fitch, Urban Outfitters, Glossier, Patagonia and LuluLemon are all closing their doors.

Online stores are always open and now is no exception.

Retail behemoth, Amazon, reported they have already seen significant spikes in activity on their site. Scrambling to hire an extra 100,000 team members to meet warehouse and delivery capacity requirements. They are even being accused of putting profit before safety by warehouse workers in the UK as they are asked to work overtime.

eCommerce is absolutely roaring as a result. To quote Mark Dolliver at eMarketer:

Since older individuals are the ones for whom the virus has been most fatal, they may be especially likely to alter their behaviour, which could mean a more widespread adoption of eCommerce, an area lacking for the demographic.

In the US, eCommerce is booming. The search count for health products and groceries has surged. Moreover, digital shoppers are more willing to convert on products they need despite longer delivery times.

Meanwhile, in the UK, there are reports that eCommerce purchases could increase to as much as 40% of total retail spend, up from just over 10%. Not all shall prosper, but opportunities will begin to present themselves. Especially in the world of online.

Here at Particular Audience, our portfolio of clients across France, USA, UK, Australia and New Zealand have demonstrated some clear winners in the Pharmacy, Groceries, Luxury, Apparel, Furnishings and Homeware verticals. There is great optimism amongst objective risk mitigation.

Retailers selling social products, including party supplies, are having a tougher time. It’s been inspiring watching their rapid shifts toward product diversification and the quick pivot on marketing messages as they adapt with the time.

It will be interesting to see how fast fashion is effected, pureplay online retailers are doing well and we haven’t seen much of a shift in behaviour for those with physical stores at this stage perhaps as a result that the economic buyers have little concern for the overall economic situation, and even with a reduction in buying outfits for events, the reallocation of spend from bricks to clicks seems to be holding up online metrics.

Focus on cash flow generating investment, with transparent performance analytics and strategic collaborations with specialist vendors is imperative. The greatest risk to retailers right now is cutting valuable investments under the illusion that they are expenses. Vendor consolidation in areas that benefit from data network effects such as data mining, AI and machine learning may be an astute move with the right partner.

Everything outlined above regarding the changing face of the consumer is an ecosystem of demand data, benefiting from great data network effects, and should drive every single investment decision a business makes.

Keep On Keeping On

During the GFC, there was a 4.3% increase in profits during the recovery period for those businesses who invested in marketing and technology. Conversely, those who cut marketing spend saw a negative return of -0.8% in profits over the longer recovery period.

But what about profitability during the downturn?

During the GFC, a study of 1,000 firms in the UK revealed that they maintained average profitability of 8% if they increased their marketing spend during the downturn.

Guy Consterdine, a marketing and research consultancy commissioned by the Periodical Publishers Association of Ireland (PPAI) after the GFC summarises this in saying that “contrary to most marketers behaviour, the evidence clearly shows that it pays to maintain advertising expenditure in an economic downturn.” A recession actually provides opportunities for marketers, for it is a chance to invest to gain market share and market leadership, and attack timid rivals. This can also improve the stock market valuation of the company.

To quote Peter Fader of the Wharton School:

As companies slash advertising in a downturn, they leave empty space in consumers’ minds for aggressive marketers to make strong inroads.

Price promotions can also be tempting in a downturn, and are widespread in consumer markets, but they are likely to damage not only profits but also brand values. Brand values that are impaired in bad economic times will be hard to restore when the economy expands again.

Channel management is central to optimal response in changing consumer trends.

Slashing prices and desperately trying to attract consumers in places where they won’t actually be is a bad strategy. Retailers with physical assets must be swift in mitigating solvency risks, leverage physical locations for cost optimisation and convenience.

Retailers have access to the technology, tools and resources to assist with this now more than ever. Cashflow positive technology investments and those that can reduce operating expenses and labour costs are in focus.

Where Are Our Machine Overlords When You Need Them?

Artificial intelligence is new to most retailers since the GFC, the opportunities here include:

Detailed analytics and decisioning systems

Prediction and experience optimisation

Cost-cutting and resource automation

Now is the time to consolidate legacy systems with cutting edge third-party technology vendors who will let retailers maximise every opportunity where opportunities are less frequent, and that will turn your retail stack into one that will emerge from this downturn as a market leader.

With the increase in website traffic for retailers it will pay to investigate how big data and machine intelligence can make you more defensible in a downturn, memorable, reliable and a winner in the rebound. Leveraging data for predictive models will help retailers forecast sales, as well as allow retailers to react effectively with behavioural-driven recommendations to make discovery onsite intuitive.

This is not capitalising on downward trends or profiteering from a crisis, all in all, decisive measures need to be taken to assist your target market and keep you in business.

In fact, if you are short on resources. Investment in optimisation and automation during this time of uncertainty will be what will keep you on track when the rebound comes too. Servers scale, untrained staff tend not to.

This includes inventory allocation optimisation, visibility on attribute trend analysis, geographic demand gauging, intuitive and automated experiences both online and instore. Investing in technology has never been more important, the role of the digital team becomes incredibly important especially as human capital comes under fire elsewhere in the business.

We are also witnessing increased interest in robotics and warehouse automation across even mid-market retailers counteracting human capital risk. Ocado, for example, is weathering the current storm beautifully:

Ocado Share Price

Vendors who eliminate business costs will assist your business in times of uncertainty. Automation itself serves to fulfil this purpose to some extent, but look for flexible billing models such as pay-per-performance models that offer business owners confidence in times of uncertainty.

The Harvard Business Review concludes,
['James Taylor']
['Coronaviruses', 'Retail Technology', 'Retail', 'Recession', 'Ecommerce']