What Should Online Retailers Do in the COVID-19 Pandemic?

Provided by Visionet Digital, written by AJ Leale, Sr. Director eCommerce Consulting
During this uncertain time with the COVID-19 pandemic, many businesses are closed, and some are even closed for good.  Retailers have a challenging path forward to navigate through to the other end.  This article will suggest some options based on past events and current information seen from many retailers today.
With this pandemic, there is a fundamental shift in the job market.  If people can work remotely, they still may have jobs; if they work in stores that are non-essential, these jobs are no longer available, and they are unemployed.  Knowing that there has been stimulus bills passed by the government, we all hope that the economy will start to rebound in a few months and we will need to be ready to expand again.  But with this temporary (hopefully) contraction in the job market and physical channel to make purchase, how can retailers maintain their overall revenue by increasing online sales.  This article will outline a similar historical situation and relate it to a plan to weather this downturn and maintain or expand online sales for eRetailers.

The Great Recession

In 2008, there was a deep recession that saw the closing of many physical stores.  Retailers who focused only on their brick and mortar stores were severely impacted, many went out of business.  For those who focused and pushed their eCommerce sites to sell more, they had a better chance of surviving.  Eventually retailers recovered, for the most part, but the physical store was forever changed.  Omnichannel became the hot topic, sell online, pick up in store, were all the areas where retailers needed to address to keep their physical stores relevant.  Fast forward to today, Spring of 2020, we have a similar, but more serious contraction looming.
Unlike the Great Recession, the COVID-19 Pandemic of 2020 has the worst trifecta possible.  This ‘Pandemic Trifecta’ includes:

1. It has the added impact of closing ALL non-essential physical stores, even profitable ones, whereas many, but not nearly all physical stores closed in 2008.
2. Americans are being asked to ‘shelter in place’. So even when they need to go to get groceries or go to the pharmacy, they are nervous about going outside. Receiving deliveries can be just as nerve wracking. This is especially evident here in the New York area. This will expand throughout the country as the virus spreads
3. It has a severe contraction in all forms of employment that rely on in-person work like restaurants, stores, etc. AND the job loss will be staggering. 28 Million applied for unemployment benefits last week alone, 3/26/2020, next week may be similar.

Looking at this trifecta of doom and gloom may be intimidating, we feel that it is an opportunity, just as 2008 was, to rethink and improve eCommerce to prepare, survive, and maybe grow a little this year, and to drive forward aggressively in years to come.

Why is Amazon hiring?

Amazon recently announced that they were hiring over 100,000 new employees, Instacart is also hiring.  These companies strive on at home delivery and overcome the first 2 items in the ‘Pandemic Trifecta’, they are open, and they deliver fast.  They overcome the delivery nervousness by communicating the steps they go through to maintain the health and safety of their workers and customers.  By adopting a safe working distance, providing PPE to employees (in many but not all cases), and by rigorously cleaning and sanitizing warehouses, delivery trucks, and other equipment, they help alleviate these concerns.  They both add one thing that we should all consider…. Contact-less delivery.  Amazon uses that by default for all of their deliveries do not require a signature during this pandemic.  Instacart has made ‘Contact-Less’ delivery the default delivery method for its customers.
Both of these vendors alleviate the delivery anxiety.  Leaving a delivery on the front step, or in the garage allows customers to retrieve their merchandise when and how they see fit.  Some customers will sanitize everything twice, others will leave items outside for a few days, so any Coronavirus is no longer on the packages.
The major shipping carriers have followed suit and deliver to the addresses as requested and have even modified their customer signature process.  All are either suspending all signature requirements or providing a ‘social distance’ method to allow customers to show their ID, state their name, etc. and then the delivery will be placed where the customer wants, all touch and contact free.  This is the final step to reduce the anxiety around the delivery method contaminating my delivery and should pave the way for retailers to ease the concerns of their customers in this area.

What about unemployment?

Contact-less delivery and the sanitization of the fulfillment process only helps 2 out of the 3 in the trifecta.  To overcome the final element, joblessness, retailers need to think outside the box.  We have seen a dramatic uptick in sales following the announcement of the economic stimulus plan by the US Government in some industries and markets.  Retailers of industrial, home, and other expensive necessities have seen an uptick from a lessening of the financial risk for the unemployed from the assurance that they will receive much higher unemployment benefits and an incentive check.
Retailers not in these industries need to consider alternatives.  Apparel, food and beverage, automotive, beauty and other industries that are based more on discretionary spending, should look to ways to improve the current state and keep the orders flowing.
Automotive companies have started to offer no payments for new cars for 90 – 120 days.  Honda offers no first payment for 90 days, Chevrolet offers no payment for 120 days for some models.  Obviously, the customers need to be qualified for the financing offer, but these companies are self-financing the purchase and are taking on a little more risk to sell more vehicles.
Retailers should consider providing similar plans to their customers.  We suggest a few options to consider.

1. Provide flexible payment plans to allow customers to pay over time. Examples include:
   1. Buy Now, Pay Later after this pandemic has subsided or after unemployment benefits kick in
   2. Buy Now, Pay, by providing a monthly payment plans either self-financed or using companies like AfterPay.
2. Provide Lay-away promotions
   1. Customers could reserve to purchase a product now at ‘Black Friday’ level discounted prices. The retailer would ship the order in a couple months, and the customer would only pay when it ships.
3. Provide unique GWPs, gift with purchase
   1. The most unique marketing campaign I saw was one retailer offering a free roll of toilet paper with every purchase, or free hand sanitizer. Surprisingly, these worked, but only because these offers were made with a bit of levity and friendship between the brand and the customer, not as a true and main incentive.
   2. GWPs tailored to help customers use your products better in this pandemic can be a good option. For example, a free zippered suit bag with every suit purchase (to keep it clean and dust free when not in use).  Retailer should look for inspiration around this idea and ask their customers what they need.

 

How should retailers proceed?

Throughout the month of March, we have seen consumer confidence drop, unemployment rise, but we have also seen some eRetailers have increased sales, conversion rates, transactions, etc.  This seems to be at odds with what is happening in the US now.  There are a few things each retailer needs to do now.  Communicate to your customers and analyze what is working now.

Communications needed

It is important to keep the lines of communication open and relevant to your customers, while not being too pushy or overbearing.  If you have already sent out a ‘COVID-19 Concern’ email, fine, if not, do not send the standard email most retailers have sent.  Your customers are tired of receiving emails from every retailer they have ever purchased from expressing that they are helping their customers through this pandemic.  The COVID-19 emails have been overdone…
Your customers want and need to hear how you can help them find products that will make their lives better now, or ones that then need soon for the spring/summer.  Within the communication, retailers need to emphasize how the customers will receive their order safely.  If possible, retailers should offer payment options, as noted earlier, so the customer can enjoy now and pay later or save it for later.
Your communication plan should be consistent across all ways your customers experience your brand.  The Homepage needs to be consistent with the ads on Google, consistent with the email and social campaigns, and consistent with your call center and any other channels still open.

What to analyze

After a comprehensive analysis of many clients, colleagues and other research sources, we have found that there are some common trends in March that were very surprising.  With the state of the nation, we would expect that all their metrics would be way down, this is not the case.  In fact, the opposite was more common.  In every retailer we surveyed, here are the key takeaways.

1. Conversion rate increased, sometimes dramatically
2. Revenue was slightly down, to slightly up.
3. The mix of traffic from sources like PPC, Organic, Direct, etc., changed dramatically.
4. Generally, traffic was down from paid sources. However, lower paid traffic was due to lower retailer budgets for these paid sources, not due to these sources converting less; most converted better than February.

These observations lead to the recommendation to analyze your traffic even more than you ever did.   Each retailer should analyze February to March 2020 and March 2020 to March 2019 to ask and find out the answers to these questions:

1. Where has traffic changed? Where has it dropped and where has it risen, and why?
2. What was the impact to conversion rates?
3. Have new visitor levels risen or dropped and how does that change my conversion and revenue?
4. Did my PPC traffic drop by more or less than my PPC revenue?
5. What should be my mix of marketing spend based just on these numbers and not the overall economy?

 

Conclusions

If the trends we have seen among many retailers where their revenue is flat, only because they have reduced their budget for paid advertising on Google, Bing and social channels, are consistent across many other retailers, then each of you should consider the following recommendations.

1. Do not reduce spend on marketing/PPC/Social. Instead increase it until the ROI drops to your minimum goal.
2. Analyze your traffic and adapt to a more agile and iterative approach to traffic management. Change your mix as soon as the market dictates you should, be flexible enough to allow this.
3. Adapt your communications to be sensitive to the outbreak, supportive with payment options and product ideas, while being based on subtly driving the sale.
4. Optimize your landing pages to make best use of the space to drive the new messaging and communications that will translate into conversions.
5. Add flexible payment plans, or flexible shipping arrangements.
6. Consider adding Gift With Purchase to help drive a customer to buy your product, and get a free gift that they need during this pandemic.
7. Add new technologies as needed to be able to catch the wave of economic recovery that is probably later this year.