The trend toward shopping online will continue and accelerate this year, as consumers look to stay safe. This evolving shopping behavior will dramatically affect the potential for companies in the coming year. According to an Accenture survey, 61% of consumers plan to minimize in-store shopping to reduce health risks. The holidays will not be bright for mall retailers. An ICSC survey reports that only 45% of shoppers plan to visit a mall this holiday, down from 64% last year. This is bad news for many malls which have been in decline for a long time. Some won’t make it.
During the pandemic, sales online rose to $210 billion in the second quarter (well ahead of all previous projections). Companies are learning how to best serve customers online and consumers are embracing this evolving channel. Online shopping is safe, convenient and provides access to a very wide selection of goods and services. Barriers to using this channel are being removed and consumers are responding with their dollars. Their shopping behavior is shifting profoundly and is likely to continue even as the Covid crisis lifts.
As consumer behavior changes, smaller companies can either take a wait and see approach or be proactive and ride this wave to their advantage. Currently, only about a half of US based small businesses even have a website. And according to Forbes Magazine, only 28% of smaller businesses are using the Internet to sell their goods. Even though it can be difficult, we are recommending to our clients that they move quickly to keep up with these trends. We are helping them to identify and understand their customers and how to utilize opportunities to compete in this space.
Size Does Not Count As Much Online
When it comes to brick and mortar, size is both a strength and a liability. In malls, large stores like JC Penny benefit from name recognition and can draw strong traffic. However, this did not save that company from bankruptcy. Like smaller companies, JC Penny failed because they did not fully understand customer shopping behavior online. Its lack of direction and investment in the omnichannel and ecommerce approach is blamed for its current financial troubles.
More inspirational is the story of San Francisco based shoe brand Allbirds. Launched in 2016, this brand grew to a huge net worth of $1.6 billion. The brand was built on a direct-to-consumer online apparel model. It appeals to consumers desire for comfortable and environmentally friendly footware. A customer friendly approach and easy return policy (use for 30 days) supported this success story.
With a highly effective online strategy, the company was also prepared when Covid hit.
During this difficult year, Allbirds maintained strong sales. Erick Haskell president of Allbirds commented, “E-commerce has been critically important for us, and being able to fulfill from our retail spaces was something that many brands were not able to do seamlessly. In this world, where we can be struck by crises – it can be a health crisis or a financial crisis – keeping that flexibility and ability to work across channels is just so critical.”
Online Sales Will Affect All Businesses
All companies can learn from this example. In its early days, online selling was confined to a few sectors such as books, electronics and apparel. Consumer purchasing in other sectors is growing rapidly. A McKinsey study completed in June of this year showed particularly strong growth in online shopping for the Furnishing, Fitness and Wellness, Vitamin and Child Product sectors. Meanwhile online shopping for Jewelry, Apparel, Skin care and Makeup, Accessories, Footware, Books and Consumer Electronics has already exceeded shopping in-store and will certainly not go back.
It may surprise some to hear that sales of even big ticket items like furniture are growing rapidly. Earlier this year, Blueport Commerce (a leading omnichannel) reported that sales of furniture on its platform were up over 300% since the beginning of Covid. Retailers like Bob’s Discount Furniture are learning that while brick and mortar will continue to serve many of their customers, they must provide online information and the potential to purchase at their website. As part of the customer journey, Bob’s has discovered that over 80% of their customers access the website at some point ahead of purchase. Such information was vital to the conversation that would ultimately close the sale. This includes providing virtual reality depiction of how the furniture would look in their home. These visualization gives customers confidence in their purchase.
Understanding How Consumers Shop Online
To make the most of the online opportunities, it is critical to understand consumer needs and the way that they move along the path toward purchase. We can make some generalizations about perceptions that customers have about buying online. Most (71%) believe that they are getting a better deal if they buy online. However, many are reluctant to buy online because they are worried that the product will not be as it is depicted. That is why product recommendations and refund policies are so important.
Understanding How Customers Shop Online
Related to the swell of information on the Internet, brand loyalty is declining. Research from McKinsey shows that 40% of consumers are shopping at a new retailer for the holidays, while only 11% are shopping from the same retailers they used last year. Brands need to clearly understand their customers needs to remain relevant. We are working with our clients to evaluate ways for them to benefit from new opportunities presented by online channels. While there are challenges, experienced by big players like JC Penny, we know that smaller companies can reap the benefits. In part because they are much more nimble.