When I was getting my MBA, we played a game designed to show the impact of the speed of communication and decision-making on the supply chain of a fictional company. It was one of my favorite exercises because it was fascinating to see how small changes at both sides of the supply chain could cause massive impacts that rippled throughout.
Like so many other things these days, I don’t believe that game would work if applied to the current situation because we—our supply chains, economy, and culture—have not seen anything like this before.
Some believe ecommerce businesses are insulated from this pandemic, and while many don’t have brick-and-mortar stores to close or change operations within, there are very few brands operating right now that are immune to the impacts of massive disruptions to our supply chain.
For years, many businesses have relied on a just-in-time inventory model and, while effective when things are operating smoothly, it quickly falls apart when there are disruptions at any point along the supply chain. So, although online ordering was up 56% year over year between March 22 and April 4, this isn’t because of the usual suspects.
Food and beverage ecommerce
Looking through the data aggregated by Attentive, several clear trends are starting to form in the ordering habits of ecommerce consumers. The first, and probably most obvious, is the extreme surge in food and beverage purchases.
When compared with all other verticals, food and beverage have had the least amount of ecommerce penetration over the past few years. This is due to consumer reluctance to order grocery items online coupled with a lack of technological capabilities from the big grocers in the U.S.
Luckily, grocers have stepped up their game and implemented digital solutions to allow for online shopping. However, those systems don’t seem to be robust enough for the level of demand the industry has seen these past few weeks.
Due to a combination of restaurants closing, more at-home cooking, more traditional cooking versus prepared meals (who knew sourdough and banana bread would be this popular?), and a lack of space for curbside pickup, there are reports of week-long waits to get orders filled.
We have yet to see how much of this will stick for consumers post-COVID-19. But it seems safe to say as grocers continue to expand their online ordering and pickup capabilities—and consumers become more accustomed to this type of shopping—it will become a more regular part of the grocery shopping experience.
Alcohol and spirits boom
It would be remiss to not mention the increase in sales of alcohol and spirits. Retailers have experienced a bumpy road when looking to sell booze online. Part of this is due to the saturation of the product on shelves at liquor, grocery, and convenience stores. But it is also related to the variance in legal requirements within states, counties, and municipalities.
Variances across the country make it extremely difficult to gather an understanding of whether someone can have alcohol delivered to their home. In the wake of this pandemic, we have seen some of these restrictions either go away or have regulators turn a blind eye. It would make sense that after things return to some sort of normalcy, we could see an expansion in this type of commerce to include more curbside pickup, local delivery, and interstate shipping become options that are more broadly accepted.
Declines in ecommerce activity
While some verticals are seeing an uptick in activity—including outdoor retail, consumer electronics, and purchases for pets—it is not, however, all sunshine in the world of ecommerce. A recent survey by Digital Commerce 360 shows that more than 77% of retailers sampled were expecting to experience significant declines in revenue.
As consumers focus on staples—I told a coworker I had come down several notches on Maslow’s hierarchy of needs these past few weeks—there has been a decline in the purchase of luxury items. This makes sense as we continue to see the unemployment rate reach unprecedented levels week after week.
A recently released poll showed that one in three voting-age respondents have lost their job, seen reduced hours, or been put on leave or furlough, and another six percent expect changes to their employment soon.
What’s around the corner for ecommerce?
We know things aren’t normal right now. But the question we face is where the other side of this crisis is and what normal will look like once we get there. If nothing else, we can see that digital solutions to complicated problems are needed like never before.
There’s no way we would be able to communicate social distancing protocols or work from home or analyze data or laugh at memes without the robust digital infrastructure our society has built over the past several decades.
The problem we face as a society right now would seem even more insurmountable without the screens and wires that power our current life. Looking back, it’s difficult to believe that we got through other pandemics without these tools. That being said, it seems the rate of change has accelerated, and it will now be up to the business world to meet the consumer in the new paradigm in which we have all found ourselves.
DEG’s commerce experts not only develop digital solutions for businesses but have been offering guidance and strategy to our clients regarding back-end operations processes, order management, and shipping and fulfillment integrations. Feel free to contact us about any challenges you’re currently facing, and we’d be happy to discuss options with you—virtually, of course.