The longer Covid-19 persists, the faster online sales are being driven online permanently thus cementing the long awaited ‘ecommerce revolution’ once and for all.
The ongoing pandemic has swiftly brought on unprecedented social and economic change on a global scale. Throughout March and April, many business sectors, including travel, hospitality, and non-essential retail, came to a screeching halt. While still, other industries have seen unprecedented demand. Consumer packaged goods, food and beverage delivery, educational software, health and wellness, and video conferencing software have all increased 10-fold.
However, many categories are still in flux. Take fashion as an example. For those brands that sell heavily in wholesale and retail channels, this has been a transformative experience leaving many in crisis. Other brands heavily focused on eCommerce and direct-to-consumer have seen expectantly strong results. The reality is that most of these brands have some mix of retail and online sales.
A closer analysis of marketing and eCommerce sales across 24 brands shows precise results:
- Brands that have restricted their marketing spend (greater than 40%), whether out of caution or necessity for cost-cutting in the face of the loss of sales, are seeing their online DTC sales struggle (-40% vs. the same period a year ago).
- Those that maintained their marketing spend have seen online sales weather the storm after the initial dip in sales seen at the onset of the crisis.
- Those that aggressively pushed forward with marketing and promotions are seeing unprecedented year-over-year sales growth.
Faced with precipitously falling sales the first two weeks of March, many brands had no choice but to cut their ad spend by about 50 percent according to analytics firm MediaRadar. But not all brands took this approach. Those in categories like streaming, virtual conferencing, and food delivery took an aggressive approach, as expected. But a few retailers such as Muck Brands and Karen Kane have doubled down on direct-to-consumer. With the assistance of BrandedOnline, both brands have come out swinging. They leaned heavily into promotions relying on AI consumer profiles driven by the BOL Platform. In doing so, Muck US has seen over 120% growth, well ahead of projections for 2020, while Karen Kane has been booming at 160%. Relying on the BOL platform, both marginally increased marketing to get their messaging out, first to customers, and eventually to prospects based on overwhelming response. Both brands have found a silver lining in this challenging environment.
Many might be surprised by this outcome, but after looking at the data, they really shouldn’t be. According to a study in The Economist, consumer discretionary spending is down by more than 50%. However, consumers are still shopping online; the inability to spend on things like travel, restaurants, and childcare and reduced costs for things like basic transportation means that there is still strong discretionary spending on eCommerce beyond essential goods. Throw in the fantastic discounts being offered all over the place, and it makes sense why, outside of a dip in mid-March, overall, non-essential eCommerce has fared well.
Depending on the chosen strategy, individual brands are seeing wildly different outcomes. While overhead for brick and mortar such as rent and payroll for sales associates are the cost of doing business in the retail world, digital advertising on Instagram, AdWords, and Facebook (among others) is the price of doing business online. While brands that have pulled back on marketing may conclude that online demand is soft, it is hardly the case. The brands that are fighting for it are taking the share of wallet.
Brands with both large retail and wholesale presence face difficult choices. They know cutting back on marketing will harm the bottom line. Many brands are opting to save their resources for a few months awaiting for stores to reopen. Although this seems to be a logical move facing the closure of a major sales channel, the timeline for people to return to retail shopping is very much still in limbo. As states and retail commerce begins to open back up, consumer fears may still slow the return of retail. The longer consumers remain hesitant to return to brick and mortar establishments, the more likely it is we will finally realize the commerce capabilities the internet has promised since the first “.com” boom of the 1990s.
Despite the toilet paper hoarding and panic buying, many consumers are trying online purchases for the first time; others are increasing online purchases because it is the only option they have. Either way, through the sentinel event effect, simple psychology tells us that many of these short-term consumer behaviors will lead to a permanent shift. And although some of this behavior will stick, and with states gradually re-opening retail, the presumption is that a return to normalcy is just around the corner. Common sociology however, tells us that although retail stores will open, the expected rush of customers in June might never come. It is highly likely, as we have already seen in states like Georgia, that stores could re-open to a flood of week-one returns and very lukewarm subsequent traffic. It may take a long time or even a vaccine before consumers fully return, if they do at all, to some semblance of their pre-pandemic shopping behavior.
In the face of such uncertainty, decision-making can be strategically challenging. Moreover, rushing blindly into the digital world is not the right move for any brand. But taking the time to hone your messaging, and getting your ducks in a row to define your re-opening promotional strategy is crucial. This is your opportunity to define your strategy with the specific goal of building your online sales channel.
Right now you have the opportunity to redefine your brand. Take this opportunity to design market tests that validate your online marketing efforts. Begin to develop testing strategies to weigh your promotional successes, however incremental they may be. Dive in to rebuild your ideal customer profile and scale into new markets and “always be testing”. Hone in on what messaging strategies, based on observable data, can effectively drive online purchasing behavior. Utilize this time to effectively determine your cost of acquisition, and figure out what actually makes sense for your business to spend. Transform your brand digitally to meet your target audience. The longer you wait for normalcy to return, the more likely you will be to wake up six months from now with multiple under-performing sales channels.
The current pandemic has already changed the world in countless ways we cannot even begin to grasp. Although the next few weeks and months will likely be stress-inducing and uncomfortable, brands must view this as an opportunity to remake their business strategy by focusing on digital growth and transformation. Those that don’t evolve, will quickly face an existential crisis. Meanwhile, agile direct-to-consumer brands will be happy to fill the void. With a track record of over 20 years of consumer data, Branded Online is uniquely engineered to help brands bridge that unknown gap.