Article (16 minute read)

COVID-19 thrusts ecommerce into the spotlight

Around the world, retailers are forced to shut their doors until social distancing measures ease. As a result, e-commerce demand is soaring...

Larry Hau / Rackspace

Editor's Note:

Everyone agrees that coronavirus has changed the way business is done, but there is still virtually no agreement on what it has changed permanently. We’ve seen huge changes to consumer and business purchasing decision processes, but we’re still left to wonder if those effects are permanent or temporary, and how they will apply across industries. The fog of war can’t be reduced, so instead, businesses will need to be commensurately more flexible.

The best way to do that? Get even better at what you’re already good at. It’s essential for businesses to focus on how they can port their analog experiences into a digital and hybrid digital/analog world. The technology is less important than your ability to learn and unlearn it quickly. Digital transformation, at its core, is about the ability to change. Quickly prioritizing the most critical technical investments and tying those back to the business you’re in is essential to success right now…and always!

 Don’t worry about the stuff you can’t control. If you want a successful ecommerce strategy, get good at moving fast.

-Larry Hau

In the wake of shelter-in-place mandates around the world, non-essential brick-and-mortar retailers are forced to shut their doors until social distancing measures ease. As a result, e-commerce demand is soaring. According to a new “Global Shopping Index” report published by Salesforce, the number of unique digital shoppers rose 40% year-over-year (YoY). Digital shoppers drove 20% revenue growth compared to 12% in Q1 2019. This growth outperformed the pre-global pandemic 2019 holiday shopping season, which was viewed as very strong season.

Ecommerce has long been on the rise. But it’s always lagged behind physical store performance. Just 10 years ago, ecommerce was at 5.1% of total retail purchases. In 2019 however, consumer online spending in the U.S. jumped to 14.9% over 2018. This elevated total ecommerce sales to an impressive 16% of all retail. Looking at these numbers, one could assume that a majority of infrastructure investment for growth then should focus on physical retail. But, ecommerce in these times, is soaring. As a result, people, even older generations, are becoming acclimating to digital shopping as their new normal.

With Covid-19 placing people under shelter-in-place orders and introducing social distancing aka physical distancing measure when out public, consumer dynamics changed overnight. In response, business retail CIOs/CDOs/CTOs were forced to focus on several critical functions simultaneously, 1) enabling the rapid shift to remote working, 2) supporting the spike in contact center overload, and 3) Facilitating ecommerce and accelerating the deployment of digital touchpoints.

Early trends indicate digital customer experience is a wise investment

Companies around the world are accelerating and adapting operations and capabilities to address changes on many fronts. These are indeed exceptional times. As Covid-19 started to spread, digital revenue spiked 41% during the final 15 days of the quarter. It should have served as a leading indicator to give retailers a head start in digital preparedness.

Once brands and retailers started to shut their doors, aside from essential or local goods, consumers were faced with no choice but to shift their purchasing behaviors online.

According to the Salesforce Global Shopping Index, between Q1 2019 and Q1 2020, retailers experienced a spike of 16% in digital traffic growth. Additionally, the average spend per visit, grew by 4%.

Even before the crisis, mobile was become more and more dominant as the go to digital device in any decision-making journey. In Q1 2020, mobile ecommerce traffic grew by 25% across all industries. In the US, mobile activity grew by 28%. In fact, mobile phones represented 56% of total order share and 71% of total traffic for Q1 2020. Social media represented 8% of total traffic share with consumers clicking through to retailer sites directly from their favorite social networks.

So, where were consumers spending their money?

Home goods experienced a huge 51% YoY surge. Active apparel and toys and games followed with 31% and 34% YoY growth respectively.

At the same time, between March 10 and March 20, digital spending on essential goods (food, personal care, etc.) spiraled upwards by an incredible 200%.

The next economy is already taking shape: digital transformation be damned!

On question on the mind of executives is, will this growth sustain, or will things return to normal once cities reopen and science gets a grip on Covid-19?

I guess it depends on how we define normal. Everyone is using the phrase “new normal” for good reason. Everything is different now. Behaviors are changing as a result. The longer this last, the more resilient new behaviors (and thinking) becomes.

Make no mistake, none of this is temporary.

In our initial return to the public, strict social distancing behavior and PPE guidelines will be enacted. They will ease over time, but it will take time.

Picture six months from now, shopping for a new car, clothes, jewelry, furniture, electronics, or whatever it is you choose to shop for in person. Without readily available treatments or a vaccine, waves of contagion are inevitable. Shopping for discretionary products could look like today’s surreal grocery store experiences. Only a fraction of customers allowed at any one time, everyone wearing masks and gloves, individuals asked to stand six feet apart, sanitizer and wipes everywhere. It’s hard to imagine that reasonable consumers wouldn’t practice risk-averse behaviors for the foreseeable future.

This means ecommerce and the digital customer journey are going to continue to skyrocket.

Covid-19 has created a somatic marker in our lives, an emotional bookmark that will forever link us to 2020. Shelter-in-place is changing mindsets, values, beliefs, norms, and behaviors. It’s forging new routines. There’s a permanence to all of this. These human changes set the foundation for the new normal.

A new report by Capgemini Research Institute already supports this suspicion. In its research, Capgemini found that consumers appetite for online shopping and convenience will only continue to grow once lockdowns are eased.

  • 59% of consumers worldwide had high levels of interaction with physical stores before COVID-19, but now only 24% expect to return to that level.
  • In the next 6–9 months, just 39% of consumers expect a high level of interaction with physical stores.
  • Before the crisis, 30% say that they had high levels of interaction with online channels, but now 37% see themselves in that light. Capgemini also expects online interaction will only accelerate from here on out.

Looking at these numbers, it’s easy to get caught up in the controversy of it all. No one wants to see physical retail disappear, not even Amazon. Yet ecommerce is the new and next normal.

Retailers must invest in digital beyond bolting on new platforms/channels. It’s an opportunity to deliver new value through native and intuitive experiences. Furthermore, it’s a chance get closer to the customer, in a time of need, to use digital to show them that they’re more than a shopping cart or transaction, a customer ID, an email address, or a conversion percentage. This is where AI can humanize and personalize engagement.

In Salesforce’s Global Shopping Index, AI is showing promise and could help retailers reimagine digital customer experiences.

For example, AI-driven product recommendations had a 26% impact on lift in average order value (AOV). These are purchases that were the of an AI product recommendation.

I realize imagination is a luxury right now. I guess, if you think about it historically, it always is. Fires to put out are an everyday occurrence even outside of a pandemic. I can’t really say it any other way other than we have to figure it out. We have to find a way to innovate in these times of crisis. It’s a global Ctrl-Alt-Del moment and everyone is trying to figure it out. There will be innovators and there will be the status quo. The innovators will raise the bar and customers will expect that level of experience. So, we can’t come out of this in the same place or just slightly ahead of where we were before.

The reality is that competitors, digital natives and digital immigrants (progressive legacy competitors), are devising plans to slingshot past everyone else as shelter-at-home restrictions and consumer fears ebb and the economy comes back to life.

Digital transformation ironically wasn’t ready for digital disruption

The overnight shift to support exponential digital activity is shocking many systems, supply chains and also mindsets.

The only force leading digital transformation right now is Covid-19. But that can’t be the only driver in the investments we make after our initial response.

As companies reel in the chaos, existing roadmaps are reset. Digital transformation becomes a burning platform. Immediate needs and unforeseen problems are clamoring for attention.

Some companies are said to be experiencing “Black Friday” level traffic as digital becomes the only means for consumers to shop. This disruption is leading to an unanticipated wave of digital disruptions that are exposing digital transformation initiatives of all types. Retail is just one dimension to this conversation.

Digital transformation has meant many things to different stakeholders over the decade. At a high level, digital transformation was about two different transformations. On one side, internal-facing efforts are focused on digitizing and modernizing operational systems, the foundation of the business itself. On the other side, external efforts are aimed at developing a modern platform to run a digital business, its offerings, the ecosystem, the customer journey itself, the experiences that unfold in each touchpoint. The differences are essentially, iteration vs. innovation.

Digitization is implementing new technologies and expertise to digitize and improve existing business methods. Developing a digital business uses novel technologies and expertise to create and deliver new value in the form of products, services, and experiences overall.

This distinction is notable and as such, they’re different in goals, management, skills, and outcomes.

Without purpose, direction, or the ability to connect the dots to a value chain, the failure rate of digital transformation initiatives was scarily high, up to 84% in some cases.

Research shows that often the problems are not related to technology as much as they are to human issues. Common challenges cited in my research over the years include communication breakdowns, the absence of goals and accountability, politics and agendas, egos, emphasis on shareholder value, corporate culture, and what I call digital out-of-touchness, executives who are not able to empathize with an always-on, connected generation of customers and employees. This leads to digital Darwinism, the evolution of technologies and their impact on societies. Behaviors, mindsets and norms evolve. Legacy organizations struggle to keep up. Digital native companies change the game. Surviving and thriving or falling to obsolescence become a matter of Darwinism.

Before the crisis, legacy retail was already reeling from the so-called “retail apocalypse.”

For years, organizations struggled to become digital when a significant number of decision-makers were inherently not digital. This led to slow or irrelevant actions or even inactions, the development of unintuitive and inefficient processes between digital and analog and internally between silos, and overall time-wasting due to rigid and hierarchical cultures.

Digital transformation was never the answer to the problems retail was facing. It was an enabler for a new genre of business. Now, that next normal model for ecommerce, digital business and business itself, are under construction.

Digital transformation becomes a burning platform with purpose

This is obviously bigger than retail.

This “new normal” is an opportunity to get digital transformation right, to create a next economy that places people and experiences at the center of big decisions. And, those big decisions don’t just have to be rooted in legacy mindsets and investments just because that’s the way things have always been done.

“Covid-19 has created a sense of urgency in fully embracing digital transformation and not just talking about it, but acting on it,” Wineth Malvar, Global Marketing Director at Sherwin-Williams shared with me in a conversation about the need for new leadership and thinking moving forward. She continued, “We’ve shown how quickly we can set things in motion when absolutely necessary. Imagine if we keep that mindset in everything we do?”

We’ve been placed at a critical intersection. Processes, prioritization, focus areas, supply chains, all need a reset to see the path forward clearly. We can’t do so if we’re just scrambling to keep up.

It’s a question of who we serve moving forward, what we intend to do and for whom and why. Equally, it’s about decisions about what not to do.

We’re entering not just a new normal, but a formidable era of which defines the future of all business, digital and brick and mortar. I call this the #NovelEconomy. Novel means new and unusual and that accurately describes these times. In a business sense, Novel represents a new strain of market conditions, in this case retail, that are not fully identified or understood.

Brands and retailers (and organizations everywhere) have no pre-existing defenses or experience against this level of global disruption. There isn’t a preventative business vaccine to protect us from this or future disruption. But truth be told, we shouldn’t really seek to respond with preexisting roadmaps or checklists. Herein lies the opportunity. We’re not going back to the normal we once knew. Customers deserve something better; everyone does.

The Novel Economy represents the moves we make now and over the next 36 months or 1,095 days. Every day counts. It gives our work a name and a sense of purpose.

The way forward is your trail to blaze

It shouldn’t have taken a global pandemic to accelerate the importance of a modern digital infrastructure. How technology influenced the evolution of customer behaviors, preferences, and aspirations should have always been at the center of digital transformation investments. But it’s a moot point now. Disruption is already here and settling in.

1. Organize around the chaos

The first mission is to stabilize the shock. Decision-makers are convening in virtual war rooms to triage and plan for real-time and where to concentrate resources in the short-term. Investments are scrutinized to ensure immediate impact need and ultimately on the value chain. Current investments are examined for untapped, relevant capabilities, “What else can I get out of my existing investments?” Everything at this point is aimed at solving problems or responding to needs that can happen in days or weeks.

Speed is the relevant currency.

2. Shift war room into a center of excellence for DCX

Next, brands and retailers have to integrate digital and physical operations. Shift the war room focus into a command center for hybrid digital/physical journey architecture and orchestration.

The second mission is to accelerate and renovate touchpoints defining the digital customer journey.

Anyone can, and everyone will, compete on price. New expertise is needed to think “digital,” not just digital-first, but also in digital and mobile only scenarios. We don’t want to just support digital customer experiences for existing customers, we aim to spark CLV and attract net new customers. Here, timelines are zeroed-in on digitizing and modernizing systems that support online commerce, service and support, and also remote working to support everything else. Omnichannel must be intuitive and native to each platform. The goal is to deliver an intuitive, unified, and adaptive consumer engagement across their touchpoints.

For the foreseeable future, every day can be like Black Friday and Cyber Monday with the right cross-functional approach (journey-wide, recent data sets and real-time AI-powered analytics are critical here).

Infrastructure has to support that level of activity for the near term while building to compete differently as the Novel Economy progresses.

Remember the distinction between the digitization and modernization of operations and building a digital business for the next normal. Investments should be separate, running in parallel, aimed at digitizing operations and also facilitating modern digital customer experiences at internet speed and scale.

3. Expand digital services and create “born digital” products

The Novel Economy is both a mandate to digitize and become digital and a blank canvas to spark innovation in a new world.

The third mission is to build out next-generation business models. Here, you’re challenging legacy conventions, training for new leadership and expertise, and innovating across the journey.

Even though we’ve focused on digital shopping, this isn’t just about digital only or digital first. Instead, we’re building for a total, integrated, and seamless digital and real-world experience that meets the needs and expectations of the evolved customer.

We’re designing for a seamless, intuitive, integrated hybrid model that blends digital and analog experiences. Furthermore, this is about introducing new hybrid experiences that create unprecedented value.

There’s a quote by Dr. Prabhjot Singh that comes to mind right now, “We spend a lot time designing the bridge, but not enough time thinking about the people who are crossing it.” This is incredibly true in the Novel Economy. This is a chance to get it right from the get-go.

For retailers, boosting digital capacity is not a question. Beyond pricing, those retailers that go the extra mile to enhance digital experiences in each touchpoint throughout the customer journey will stand out against competitors.

Omnichannel takes on new dimensions with each channel and touchpoint uniquely supported by processes, systems, and employee training to deliver native (UX+UI innovation), personalized (humanized) experiences. This includes ecommerce, service and support, and loyalty programs. Also, experiment with new ways to deliver digital-exclusive value and experiences in existing and new channels.

A working list for digital experience innovation:

  • UX and UI design must be specific to each platform. Design has to be on par with or better than the best experiences in each channel. This includes looking outside of retail.
  • Mobile-only and mobile-optimized
  • Social media
  • Phone ordering
  • DTC pet supply company Chewy connects commerce and service to help customers place orders online and over the phone. Representatives also offer expert advice.
  • BOPIS/curbside and online order for delivery (sanitized and contactless must be in place and communicated in the last mile)
  • Conversational commerce
  • Beyond chat bots for basic questions and answers, consider a more robust intelligent system that understands intent and helps guides customers forward.
  • Also ensure a human can step in when needed. B&H offers on-demand chat with human experts to help customers with product insights before they place their order.
  • Contact centers too are being slammed, requiring the exploration of automation and conversational-AI solutions to address the crushing volume.
  • Voice shopping
  • Amazon enables voice ordering via its Alexa platform. And, because it’s a platform, brands and retailers can also develop Alexa Skills for voice-based customer experiences. For example, Domino’s and Pizza Hut (among many others) offer voice-enabled ordering through Alexa. This is a prime example for voice-native UX/UI design. If not done thoughtfully, voice can be a truly awful experience.
  • Experiential
  • Party City developed a “Banish Boredom” program to provide shoppers who are under shelter-in-place orders with ideas on DIY activities, fun in-house party planning (like a rave!), and at-homes games for the family.
  • Fender is offering three months of free guitar lessons for subscribers to its website.
  • Ethan Allen is offering video-based design consultations via FaceTime, Skype, or Google Hangout.
  • Brands, this is a chance to get to know your customers directly, in authentic ways, to deliver special services online that aren’t possible in-store. Plus, it’s an opportunity to capture data, surface insights, and learn new ways to continue to deliver value.

The time is now to digitize, become digital, and innovate.

The key to every step is empathy and human-centered innovation. And in a digital sense, this means data-driven empathy, the ability to see new and evolving data sets, contextually, by intention and aspiration, that are defining the next normal, in each interim and evolving state.

Global disruption serves as a great equalizer. Our response though, is what will define us moving forward. We can effectively manage the response and we can use it as a catalyst to align, transform, and even innovate.

CIOs, CDOs, CTOs and CMOs are the architects who must co-develop a post-Covid-19 blueprint to survive and thrive in the Novel Economy. There really isn’t anything in the books that says we have to go back to the way things where. In fact, there is no playbook for these times.

This article was written by Brian Solis from CIO and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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About the Author

Senior Product Manager, Unassisted Acquisition, EcommerceLarry Hau

Larry has worked in the cloud since 2012 on every major cloud provider.  He’s run the gamut of support teams to operations teams to engineering teams and managed infrastructures of nearly 200,000 nodes, around the world and around the clock...

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