The retail industry is transforming into an online colosseum where players worldwide must survive any unexpected situation to stay afloat. Covid has made them participants in an all-digital experiment.
Online shopping is booming worldwide. The YoY number of weekly online searches for fresh produce on China’s Baidu rose anywhere from 273 percent to 2800 percent over the first two months of the year, according to Discripto. Ecommerce sales in Finland overall jumped 60 percent in just two weeks in March. As more consumers at home shop online, e-commerce and online retailers are seeing a surge. It is a big win for those already focused online. Now, others are racing to join them but may often overlook the demanding process behind it. Some stores with a loyal customer following could fall hard if they do not properly manage the sudden online transition. Payment services are a crucial element of that transition.
Payments and Digital Future
As online shopping has increased, so has the use of digital payment services, especially after the WHO said banknotes were a potential source of Covid-19 transmission. In Saudi Arabia, online payments jumped over 400 percent in the first quarter of 2020, following a significant shift in consumer behaviour.
In late March, one of Saudi’s biggest online retailers, BinDawood Holding, saw average 10-day sales increase 200 percent, average order value rise 50 percent and app installations jump 400 percent. As many businesses are forced to close over the pandemic, the retail company has connected its supermarket and hypermarket branches, BinDawood and Danube, with e-commerce platforms, letting customers seamlessly move their purchases online. Fintech use has already penetrated many of the social aspects now in overdrive. The lockdown is accelerating trends already in motion and extending exponentially. Financial consultancy deVere Group recently reported that the global pandemic had driven a 72 percent increase of fintech app use in Europe. The really big consumer changes from this rapid digitization, though, are just now taking shape.
The phenomena of selfies, online shopping, e-commerce, social media, as well as massive and widespread use of mobile devices have syncretised into a digital animal, a modern pathway that sales retailers are turning to in unison. Instagram, for instance, revolutionized e-commerce last year by embedding a “check-out” button for users to make a direct purchase. In 2018, Instagram recorded over 25 million businesses on the app, opening a whole new revenue stream for both sides. In 2019, it claimed 90 percent of its users followed at least one business account. We do not yet know the full effect Covid will have here.
Keeping up with a boom
Today, with pandemic fever ballooning the importance of digital features, retailers are rolling out more sales and promotions online and on multiple channels to sustain customers at home. An interruption to that flow, however, represents a serious risk, especially when rivals are just a click or a tap away. Online retailers need to think about managing unexpected escalations. Increased orders, for instance, can challenge any company to maintain stock, not to mention the cost of restocking items, especially when on-site operations are either under strict safety measures or forced to close.
Sudden booms in demand can even put giants under pressure. Amazon was forced to create a waitlist due to endless grocery orders placed with Amazon Fresh. It plans to cut shopping hours at some of its Whole Foods stores to give more time for staff to meet online orders. Big box grocery delivery apps and major supermarket chains like Instacart, Amazon’s Whole Foods delivery are struggling to keep up with the sudden wave of delivery demand overnight. Instacart has seen 150 percent volume order growth in just a month. In the UK, supermarket chains like Tesco, Waitrose and Sainsbury’s have all placed blanket restrictions on per-item sales to control buying.
To keep up with online demand, retailers are still working beyond their limits to respond fast. Walmart has put longer store hours in for pickup and delivery at some locations. Kroger closed at least one of its Ohio stores to the public entirely, reserving it for online-order fulfillment. The overflowing demand is not exclusive to groceries. UK fashion retailer Next’s website reopened for items like childrenswear in low volumes after it was hit with a rush of online sales. The idea is to keep stocks available with a small number of workers in each warehouse at a time, ensuring social distancing compliance and protecting employees.
All businesses face disruption from what the International Monetary Fund says will be the biggest recession since the 1930s. We do not yet know exactly what the world will look like post-pandemic but we do know it will be very different and many of the lessons retailers are learning now will hold true.
Stores will continue to exist and customers will be coming in, but where and how they make their purchasing decisions has changed. It is not clear what role the store will primarily assume. A showroom? Experience centre? A brand ambassador? Will self-scanners link to a system that ships from a warehouse somewhere else as you stroll casually down the aisle? Not everybody must become as big as Amazon or Instagram to survive, but a complete overhaul will be necessary, as will an optimized warehousing and shipping system like the former and an attractive point-of-sale platform like the latter.
Online, customers want stable connections, intuitive interfaces, appealing designs, up-to-date stock information, simple and secure payments and the guarantee that they will get what they want, when they want. This is a new era and we all live in it.