How COVID-19 Has Changed the Future of E-Commerce as We Know it
COVID-19 has required nearly all marketers to rapidly adapt their strategies and navigate unchartered territory. Some of these shifts will be here to stay even after recovery efforts set in.
For the last few years, the term “digital transformation” has been the focus of many businesses. This organizational evolution was designed to move companies from the analog age to digital, with all consumer touchpoints having a digital fingerprint, both online and offline. From creating a better in-store checkout experience to a website designed with the consumer experience in mind, digital transformation was meant to check off all these boxes. However, like many organizational changes, especially of this magnitude, businesses quickly realized that this task was akin to moving a proverbial cruise ship, not an agile and nimble jet ski. Enter stage right: a global pandemic that has shaken the core of our very definition of “normal.”
COVID-19 has had a global impact, affecting all markets and businesses, leaving nothing unscathed. One particular category which has faced tremendous hardship is retail. With storefronts closing across the globe, retail brands have had to quickly pivot in order to survive the new marketplace. In this quest, many retail brands faced a difficult question when approaching the challenge brought forward by the crisis: Is our organizational infrastructure ready to handle new consumer consumption habits?
For many retailers, the overwhelming percentage of sales still occur in-store — 84 percent vs. 16 percent online, according to the U.S. Department of Commerce. Despite steady annual growth, online sales have continued to play second fiddle to in-store sales. When the global pandemic hit, businesses were forced to refocus their sales strategy, knowing that they had to somehow convert 84 percent of in-store sales to online sales. Some brands took this challenge in stride, quickly adapting to new market needs; others weren't so lucky, as their decisions from the past handcuffed their ability to be nimble and adjust with the times.
Two examples of successful brands in this new era of commerce are lululemon and Nike. With lockdown rules in place across the globe, the demand for athleisure wear has increased exponentially. Both of these brands had elements in place to successfully weather the storm: strong brand loyalty paired with excellent digital experiences. The brands also likely benefited from athleisure being a top choice for stimulus check spending, according to a survey conducted by J.P. Morgan last month. Consumers have been able to overlook the higher price point associated with these premium brands as they placed more value on each brand's mission and commitment to its customers.
With the shift to complete e-commerce, lululemon has leaned into the fact that its products are appropriate wear for every season. Therefore, the brand created more options for consumers seeking diversification. Additionally, the fact that lululemon is a vertical retailer gave it control over distributed inventory and product flow. Nike has been able to flex its celebrity clout by bringing exercising into the great indoors using engaging marketing efforts with support from Cristiano Ronaldo and Rafael Nadal, and subtle appearances of Nike products. Want to beat Ronaldo’s ab workout challenge? Great, here are some shorts to wear when trying to do so. By focusing on meaningful and timely content that was still relevant to the brand, Nike quickly developed a brilliant marketing strategy that drove sales and ultimately created even stronger customer engagement.
On the other end of the spectrum, two brands that have struggled with the new market landscape are Under Armour and Uniqlo. Under Armour’s distribution relies predominantly on third-party distributors, which have categorically struggled due to physical stores being shut down. Under Armour has been at the mercy of these third-party retailers’ online experience, which for the most part is basic at best. Uniqlo, a brand whose ethos lives in footfall, has seen a massive decline in sales due to global lockdowns. The online experience Uniqlo offers consumers pales in comparison to its in-store counterpart, which has led to a drastic decline in sales.
There's no doubt that this global pandemic has altered the retail ecosystem’s ratio of offline-to-online sales and will continue to do so even after brick-and-mortar stores reopen. Brands that are able to build digital experiences and an online community will surely win consumers’ share of spend in the retail space today and tomorrow. When we look back at this pivotal time in retail history, the answer to the question of “who led your company’s digital transformation?” won’t be the CEO, CMO, or CTO, it will be COVID-19.
