COVID-19 thrusts e-commerce into the spotlight

3 stages to becoming a digital business in a novel economy.

covid 19 coronavirus global pandemic by smartboy10 getty images binary tunnel by robertiez gettyima
smartboy10 / robertiez/ Getty Images

In the wake of shelter-in-place mandates around the world, non-essential brick-and-mortar retailers are forced to shut their doors until social distancing measures ease. As a result, e-commerce demand is soaring. According to a new “Global Shopping Index” report published by Salesforce, the number of unique digital shoppers rose 40% year-over-year (YoY). Digital shoppers drove 20% revenue growth compared to 12% in Q1 2019. This growth outperformed the pre-global pandemic 2019 holiday shopping season, which was viewed as very strong season.

Ecommerce has long been on the rise. But it’s always lagged behind physical store performance. Just 10 years ago, ecommerce was at 5.1% of total retail purchases. In 2019 however, consumer online spending in the U.S. jumped to 14.9% over 2018.  This elevated total ecommerce sales to an impressive 16% of all retail. Looking at these numbers, one could assume that a majority of infrastructure investment for growth then should focus on physical retail. But, ecommerce in these times, is soaring. As a result, people, even older generations, are becoming acclimating to digital shopping as their new normal.

With Covid-19 placing people under shelter-in-place orders and introducing social distancing aka physical distancing measure when out public, consumer dynamics changed overnight. In response, business retail CIOs/CDOs/CTOs were forced to focus on several critical functions simultaneously, 1) enabling the rapid shift to remote working, 2) supporting the spike in contact center overload, and 3) Facilitating ecommerce and accelerating the deployment of digital touchpoints.

Early trends indicate digital customer experience is a wise investment

Companies around the world are accelerating and adapting operations and capabilities to address changes on many fronts. These are indeed exceptional times. As Covid-19 started to spread, digital revenue spiked 41% during the final 15 days of the quarter. It should have served as a leading indicator to give retailers a head start in digital preparedness.

Once brands and retailers started to shut their doors, aside from essential or local goods, consumers were faced with no choice but to shift their purchasing behaviors online.

According to the Salesforce Global Shopping Index, between Q1 2019 and Q1 2020, retailers experienced a spike of 16% in digital traffic growth. Additionally, the average spend per visit, grew by 4%.

Even before the crisis, mobile was become more and more dominant as the go to digital device in any decision-making journey. In Q1 2020, mobile ecommerce traffic grew by 25% across all industries. In the US, mobile activity grew by 28%. In fact, mobile phones represented 56% of total order share and 71% of total traffic for Q1 2020. Social media represented 8% of total traffic share with consumers clicking through to retailer sites directly from their favorite social networks.

So, where were consumers spending their money?

Home goods experienced a huge 51% YoY surge. Active apparel and toys and games followed with 31% and 34% YoY growth respectively.

At the same time, between March 10 and March 20, digital spending on essential goods (food, personal care, etc.) spiraled upwards by an incredible 200%.

The next economy is already taking shape: digital transformation be damned!

On question on the mind of executives is, will this growth sustain, or will things return to normal once cities reopen and science gets a grip on Covid-19?

I guess it depends on how we define normal. Everyone is using the phrase “new normal” for good reason. Everything is different now. Behaviors are changing as a result. The longer this last, the more resilient new behaviors (and thinking) becomes.

Make no mistake, none of this is temporary.

In our initial return to the public, strict social distancing behavior and PPE guidelines will be enacted. They will ease over time, but it will take time.

Picture six months from now, shopping for a new car, clothes, jewelry, furniture, electronics, or whatever it is you choose to shop for in person. Without readily available treatments or a vaccine, waves of contagion are inevitable. Shopping for discretionary products could look like today’s surreal grocery store experiences. Only a fraction of customers allowed at any one time, everyone wearing masks and gloves, individuals asked to stand six feet apart, sanitizer and wipes everywhere. It’s hard to imagine that reasonable consumers wouldn’t practice risk-averse behaviors for the foreseeable future.

This means ecommerce and the digital customer journey are going to continue to skyrocket.

Covid-19 has created a somatic marker in our lives, an emotional bookmark that will forever link us to 2020. Shelter-in-place is changing mindsets, values, beliefs, norms, and behaviors. It’s forging new routines. There’s a permanence to all of this. These human changes set the foundation for the new normal.

A new report by Capgemini Research Institute already supports this suspicion. In its research, Capgemini found that consumers appetite for online shopping and convenience will only continue to grow once lockdowns are eased.

  • 59% of consumers worldwide had high levels of interaction with physical stores before COVID-19, but now only 24% expect to return to that level.
  • In the next 6–9 months, just 39% of consumers expect a high level of interaction with physical stores.
  • Before the crisis, 30% say that they had high levels of interaction with online channels, but now 37% see themselves in that light. Capgemini also expects online interaction will only accelerate from here on out.

Looking at these numbers, it’s easy to get caught up in the controversy of it all. No one wants to see physical retail disappear, not even Amazon. Yet ecommerce is the new and next normal.

Retailers must invest in digital beyond bolting on new platforms/channels. It’s an opportunity to deliver new value through native and intuitive experiences. Furthermore, it’s a chance get closer to the customer, in a time of need, to use digital to show them that they’re more than a shopping cart or transaction, a customer ID, an email address, or a conversion percentage. This is where AI can humanize and personalize engagement.

In Salesforce’s Global Shopping Index, AI is showing promise and could help retailers reimagine digital customer experiences.

For example, AI-driven product recommendations had a 26% impact on lift in average order value (AOV). These are purchases that were the of an AI product recommendation.

I realize imagination is a luxury right now. I guess, if you think about it historically, it always is. Fires to put out are an everyday occurrence even outside of a pandemic. I can’t really say it any other way other than we have to figure it out. We have to find a way to innovate in these times of crisis. It’s a global Ctrl-Alt-Del moment and everyone is trying to figure it out. There will be innovators and there will be the status quo. The innovators will raise the bar and customers will expect that level of experience. So, we can’t come out of this in the same place or just slightly ahead of where we were before.

The reality is that competitors, digital natives and digital immigrants (progressive legacy competitors), are devising plans to slingshot past everyone else as shelter-at-home restrictions and consumer fears ebb and the economy comes back to life.

Digital transformation ironically wasn’t ready for digital disruption

The overnight shift to support exponential digital activity is shocking many systems, supply chains and also mindsets.

The only force leading digital transformation right now is Covid-19. But that can’t be the only driver in the investments we make after our initial response.

As companies reel in the chaos, existing roadmaps are reset. Digital transformation becomes a burning platform. Immediate needs and unforeseen problems are clamoring for attention.

Some companies are said to be experiencing “Black Friday” level traffic as digital becomes the only means for consumers to shop. This disruption is leading to an unanticipated wave of digital disruptions that are exposing digital transformation initiatives of all types. Retail is just one dimension to this conversation.

Digital transformation has meant many things to different stakeholders over the decade. At a high level, digital transformation was about two different transformations. On one side, internal-facing efforts are focused on digitizing and modernizing operational systems, the foundation of the business itself. On the other side, external efforts are aimed at developing a modern platform to run a digital business, its offerings, the ecosystem, the customer journey itself, the experiences that unfold in each touchpoint. The differences are essentially, iteration vs. innovation.

Digitization is implementing new technologies and expertise to digitize and improve existing business methods. Developing a digital business uses novel technologies and expertise to create and deliver new value in the form of products, services, and experiences overall.

This distinction is notable and as such, they’re different in goals, management, skills, and outcomes.

Without purpose, direction, or the ability to connect the dots to a value chain, the failure rate of digital transformation initiatives was scarily high, up to 84% in some cases.

Research shows that often the problems are not related to technology as much as they are to human issues. Common challenges cited in my research over the years include communication breakdowns, the absence of goals and accountability, politics and agendas, egos, emphasis on shareholder value, corporate culture, and what I call digital out-of-touchness, executives who are not able to empathize with an always-on, connected generation of customers and employees. This leads to digital Darwinism, the evolution of technologies and their impact on societies. Behaviors, mindsets and norms evolve. Legacy organizations struggle to keep up. Digital native companies change the game. Surviving and thriving or falling to obsolescence become a matter of Darwinism.

Before the crisis, legacy retail was already reeling from the so-called “retail apocalypse.”

For years, organizations struggled to become digital when a significant number of decision-makers were inherently not digital. This led to slow or irrelevant actions or even inactions, the development of unintuitive and inefficient processes between digital and analog and internally between silos, and overall time-wasting due to rigid and hierarchical cultures. 

Digital transformation was never the answer to the problems retail was facing. It was an enabler for a new genre of business. Now, that next normal model for ecommerce, digital business and business itself, are under construction.

Digital transformation becomes a burning platform with purpose

This is obviously bigger than retail.

This “new normal” is an opportunity to get digital transformation right, to create a next economy that places people and experiences at the center of big decisions. And, those big decisions don’t just have to be rooted in legacy mindsets and investments just because that’s the way things have always been done.

“Covid-19 has created a sense of urgency in fully embracing digital transformation and not just talking about it, but acting on it,” Wineth Malvar, Global Marketing Director at Sherwin-Williams shared with me in a conversation about the need for new leadership and thinking moving forward. She continued, “We’ve shown how quickly we can set things in motion when absolutely necessary. Imagine if we keep that mindset in everything we do?”

We’ve been placed at a critical intersection. Processes, prioritization, focus areas, supply chains, all need a reset to see the path forward clearly. We can’t do so if we’re just scrambling to keep up.

It’s a question of who we serve moving forward, what we intend to do and for whom and why. Equally, it’s about decisions about what not to do.

We’re entering not just a new normal, but a formidable era of which defines the future of all business, digital and brick and mortar. I call this the #NovelEconomy. Novel means new and unusual and that accurately describes these times. In a business sense, Novel represents a new strain of market conditions, in this case retail, that are not fully identified or understood.

Brands and retailers (and organizations everywhere) have no pre-existing defenses or experience against this level of global disruption. There isn’t a preventative business vaccine to protect us from this or future disruption. But truth be told, we shouldn’t really seek to respond with preexisting roadmaps or checklists. Herein lies the opportunity. We’re not going back to the normal we once knew. Customers deserve something better; everyone does.

The Novel Economy represents the moves we make now and over the next 36 months or 1,095 days. Every day counts. It gives our work a name and a sense of purpose.

The way forward is your trail to blaze

It shouldn’t have taken a global pandemic to accelerate the importance of a modern digital infrastructure. How technology influenced the evolution of customer behaviors, preferences, and aspirations should have always been at the center of digital transformation investments. But it’s a moot point now. Disruption is already here and settling in.

1. Organize around the chaos

1 2 Page 1
Page 1 of 2
Download CIO's Roadmap Report: Data and analytics at scale