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Since March 2020, the Covid-19 pandemic has impacted virtually all aspects of our daily lives. Zoom meetings soon started replacing conference room gatherings. Kids are attending their classes from the kitchen tables. Families are watching their first-run film streamed into their televisions instead of a trip to the local cinema.
Moreover, the pandemic also affected the retail sector badly. However, despite every person’s expectations, not all of them are bad news. Retailers found new ways to connect with and serve their customers, particularly through e-commerce. Retail sales for the third and fourth quarter in 2020 prove that the customers are willing to spend both online and in stores, with a change in their shopping experiences.
To keep pace with the new reality of retail shopping, retailers started focusing on maximizing their in-store experience for their customers, thereby strengthening online retail offerings and checking the rising costs related to the physical stores.
Retail Trends Show Massive Online Growth
E-commerce was not a new concept during the pandemic. Instead, it stayed here long before the term covid-19 entered our vocabulary. In 2019, online sales consisted of 16 percent of the total retail sales, which rose from 7.6 percent in 2013. Statistics show a relatively steady increase in e-commerce sales in retails from 2013 to 2019.
The pandemic shifted the trend to overdrive. During the pandemic, the e-commerce sales volume reached $211.5 billion during the second quarter of 2020, which grew 32 percent from the first quarter and 44.5 percent every year. Although the rates went slightly down from the second quarter, e-commerce sales for the third quarter reached approximately $210 billion, 37% higher than the third quarter of 2019. However, the numbers do not include the transactions that “touched” online, such as customers researching a product online and purchasing it from the physical stores.
However, the cause of booming retail sales does not entirely depend on the physical retail stores. The in-store retail reached an all-time quarterly high of $1.259 trillion during the third quarter of 2020, overcoming a sharp rate at 14.5% after the struggling second quarter. The customer still preferred immediacy and in-person experience of the physical retail shops, although they wanted to engage with them differently. Customers preferred adopting a blended approach, combining the aspects of in-person and online retail.
Online retail played a great role in keeping the US economy from suffering even after suffering great damage during the pandemic. Stay-at-home orders and consumer concerns regarding exposure to the virus led people to order goods online and ship them to the customers’ homes at high frequency.
Moreover, online retail services failed to satisfy most customers. In a study conducted in 2018, 90% of the surveyed shoppers reported that online retailers charge high shipping charges and late home deliveries. The second-largest retailer of the nation after Walmart, Amazon cracked the code with its Prime service, offering free shipping and home deliveries within a couple of days. Undoubtedly, Amazon experienced tremendous sales growth in 2020. Other national retailers such as Walmart and Target had to invest resources for strengthening their online shipping services.
Besides, Omni-channel marketing that combines the strengths of online and in-person retains offers opportunities for the physical retail stores for serving customers in this environment of increased comfort with online shopping.
The market shift in retail poses tremendous challenges to small retailers. Engaging in e-commerce is easier than simply setting up a website and waiting for orders. Conducting Omni-channel marketing is difficult for small businesses due to the costs associated with setting up the operation. The costs include:
- E-commerce Software: The retailers need to set up their system for online purchases or pay a third-party vendor (such as Shopify) and help process the orders.
- Sales Tax Accounting: Large national retailers possess resources for sorting out tax obligations on a state-by-state basis. However, small businesses require employing third-party software options for tracking state sales taxes.
- Search Engine Optimization (SEO): Businesses need to attract customers’ attention on internet searches for key terms and get the coveted placement costs.
Black Friday and Cyber Monday are the two typically busiest sales dates of the year, illustrating how rapidly the retail market is shifting. Black Friday foot traffic to physical stores decreased by 48%. However, spending per customer increased by over 36%. Black Friday online sales increased by 22% from 2019 to $9 billion, while Cyber Monday sales rose to $10.2 billion, increasing 15% per year. These numbers reveal:
- Customers are willing to spend money, even in the current economic downturn;
- Shoppers are more purposeful, and hence they come to stores knowing what they are going to purchase; and
- Consumers are placing values on in-store purchases but increasingly need a reason for visiting the store.
Another key statistic is that contactless curbside pick-ups at retail stores went up a whopping 52% on Black Friday 2020. The increase points out customers’ desire for safety during the pandemic and their desire for immediate access to their retail products. The Buy Online Pickup In-Store or BOPIS revolution blends online and includes in-store customer engagement, providing consumers with a convenient way of shopping. Again, it is likely customers will continue craving the convenience even when the pandemic is over.
Retail trends will continue to evolve, but the country’s embrace of e-commerce seems permanent. Hence, small businesses and retailers need to prepare for meeting customers’ demands, both now and in the post-pandemic future. Some items to consider include:
Create value in the in-store experience: Customers are not ready to give up in-person retail, but stores must give them incentives to shop. Keep in mind that today’s customer values convenience.
Omni-channel marketing will continue: Small businesses and retailers close eye on BOPIS rights, rent considerations, and taxes.
Seek to reduce occupancy costs inherent in physical retail: The good news for retailers is that we live in a buyer’s market for commercial real estate space. Stores need to work with their property owners on ways to reduce the fixed costs of conducting business.
Small businesses and retailers require better collaboration for identifying new pathways for the digital economy. Over the past four years, the UNCTAD-led-eTrade served as a global help desk for developing countries to bridge the knowledge gap on e-commerce information and resources, thereby catalyzing partnership among its partners. Since the global pandemic outbreak, small businesses and retailers shifted their services to the e-commerce platform apart from owning their physical stores.
