As we enter our second wave of the COVID-19 pandemic, a few questions are raised. First is, when this pandemic will finally be over, and second, what will be the ultimate result on markets and the economy? The first of these is more difficult to answer as each nation’s government and its peoples are reacting differently to the widespread outbreaks, and will there be a reliable and trusted immunization in short enough time to be of use? We will leave this first question to the scientists and doctors to answer, but take both a short and long-term recovery into the answering of the second question.
The Beginning of COVID-19
Let’s start with what we know first. With the social distancing and lockdowns that started the pandemic from March through the summer, online shopping has come out the king. At the lockdown’s height, the research firm Technomic found that over half of consumers avoided crowds, and a third were leaving their house less often. Another firm, First Insight found that 30% of already tech savvy millennials were more frequently shopping online in their market study. Adobe Analytics also reported that consumers were shopping for non-perishable food items with an increase in demand of close to 69%.
Online’s Continued Surge and Tactics
The most recent data released by Adobe Analytics showed that September’s online sales in the U.S. increased 43% year over year, topping $60.4 billion, above August’s 42% year over year record. This trend will likely continue with the normally July Amazon Prime day 48-hour event, being held in October this year.
Resulting in over $10 billion in purchases recorded, which is an increase of 45.2% above the prior year’s same event sales, and with Amazon stating that $3.5 billion of which was made by their Amazon Market Place third-party sellers, this would be a near 60% year-over-year increase.
At a McKensey Roundtable, European fashion execs agreed with the Adobe findings, that the crisis has accelerated digital use, and the crisis paradigm shifts seen will continue post-crisis. The majority of the leaders agreed that rather than take a defensive position during COVID-19, it was time to invest in both brand and e-commerce marketing while measuring the right KPIs and making use of automation. By having this balanced approach, retailers can take advantage of opportunities and be sure that they are setting the correct campaign targets. This way, companies will create new ways to engage, communicate, and interact with their customers while acknowledging a change in consumption, where buyers now look for purpose and sustainability. Marketplaces, including that for fashion, must accept a “next normal” is here to stay and they must embrace innovation.
With the approaching holidays, retailers are expecting strong online sales and continued trouble with instore pandemic sales. The longer the COVID pandemic continues, the more likely brick and mortar will suffer.
The Digital Commerce 360’s retailer holiday survey of 118 retailers found that 1/3 of retailers expect holiday web sales to increase up to 24%, and another 1/3 project more than 25% gains. With the final 1/3 expecting flat or downward trends.
As the Fall/Winter COVID second wave is hits, all sellers should plan for the same issue that plagued the marketplaces over the spring and summer, Inventory shortages due to supply chain issues. Michael Krakaris, multi-channel e-commerce fulfiller Deliverr’s Co-Founder, spoke at the Payoneer BEYOND conference about how this issue has been best addressed — stating that Walmart stayed successful throughout the pandemic through its previous years of planning. Walmart was able to drive its own online grocery sales and sales of their third party marketplace, allowing for multiple channels to provide consistent products to shoppers. They found massive spikes in specific product categories, and thus, by thinking in a “category way” rather than in a “per product way,” Walmart was better able to deal with demand. Expecting warehouse closures was required, and developing workarounds through redundancies made fulfillment possible.
Smart and experienced online third-party sellers did a similar tactic; they were diversifying sales through different channels, selling on Etsy, Walmart, Wish, Amazon, Google, and Shopify to get their products out. The reason being that multi-channel eCommerce remains more defensible, and a typical online buyer pattern was first to conduct a search for the desired product at Amazon, then if unsuccessful go to Google, where the retailers who were best at marketing their products on Google, such as Walmart and eBay, gained the buyers business. The smaller players are doing a similar tactic, building their own Shopify, Amazon, and Walmart marketplace stores and running their own Google Ads to get multiple indexing for all buying pathways.
Winners and Losers
In a recent article Ovidiu Solomonov, Adevinta’s (a marketplace specialist) SVP for global markets, said that COVID-19 had been the perfect work at home experiment showing that employees can still be productive working remotely.
This result, tied with the fact that housing, healthcare, and education, which are some of the U.S.’s largest economic sectors, but only bring in less than 10% of their revenue from online sources, means that these sectors’ potential to drastically change their service delivery channels, give them the biggest opportunity for online growth, and will likely lead to the most significant successes.
Solomonov said that marketplaces having end-to-end capabilities internally or through strategic partnerships would have the best margins and, in turn, tremendous success.
Adventia’s Marketplaces Report, compiled by Dealroom.co, gives a numerical clarification to these successes, saying that 60% of startups are in an excellent position to navigate the crisis. And specifically, startups in online learning, recruitment, health tech (both care and pharmacies), all forms of food delivery, and the newly named “passion economy”(doing what you love to make money) are seeing the most growth, while expectedly travel, real estate tech, and mobility services being part of the 1/5 of the vulnerable marketplace startups are troubled.
The digital marketplace adoption that was already happening over the past two decades has just accelerated with the COVID-19 pandemic. The forced changes due to COVID restrictions have resulted in short-term winners and losers. COVID has shown that for online businesses, there isn’t necessarily a considerable challenge adopting for most sectors, but brick and mortar outlets will have the most significant struggle returning to normality.
They can either embrace the convenience and new health considerations solved by online buying or selling and the opportunities it affords, adding additional geographic sales and payment options, or ignoring these changes, likely fail.
There has been a more defined structural impact on marketplaces and shopping through the COVID-19 changes. Globally online marketplaces see a combined value of $814 billion and will only continue to grow as we get out of this dark time. As the recent results have shown, they will undoubtedly remain the leaders in our post COVID recovery.