For many years, e-commerce has been on a steady rise, making up roughly 9% to 10% of total U.S. retail sales. For emerging brands, it has been a vehicle for going from unknown to household name. For others, e-commerce has lived primarily on the whiteboard as a problem to solve in the years ahead.
Due to the COVID-19 pandemic, there’s no longer any time to wait. E-commerce now equals survival. Retail sales are expected to drop more than 10% in 2020 as a result of the pandemic, according to eMarketer. Meanwhile, that same report indicates that e-commerce will experience an unprecedented jump of 18%, reaching $709.78 billion, in 2020.
The pandemic and quarantine have put e-commerce into fast forward. Five-year plans are being tossed aside, with business leaders forced to take immediate action to strengthen this channel.
This rapid adoption of online shopping is providing new insights and lessons, some of which will last long past the pandemic. Pre-COVID-19, the top two categories for online shopping were consumer electronics and apparel/accessories. Due to stay-at-home policies, the industry is experiencing a massive shift in the types of products people are purchasing online. According to eMarketer, categories such as groceries and health products are on a sharp incline, expected to grow by nearly 41% in 2020.
Clearly the pandemic has unlocked a wider array of online shopping. No longer just fixated on gadgets and clothes, shoppers are now purchasing more items essential to their daily lives. For example, health products that previously relied on storefronts to showcase their brands must now act quickly to bolster their e-commerce channel, lest an upstart competitor fly by.
Change is occurring not only in the types of products consumers are buying online, but also in how those they’re being physically acquired. Retailers are being forced to adapt, and flexibility is vital. Kroger converted a store in Cincinnati to pickup-only service. Major brands and retailers such as Gap and Nordstrom are offering curbside pickup at dozens of stores. Many more are launching, or scaling up, their own curbside operations.
The pandemic has forced brands to reach customers where they are, which is easier said than done. Brands are facing a bevy of new challenges in logistics and supply-chain, such as the need for visibility of inventory, constantly adjusting fulfillment capacity, delivering goods of different sizes, navigating last-mile delivery, and managing product returns efficiently to keep customers happy.
Formidable as they are, these challenges often represent just the tip of the logistical iceberg that companies face. Brands that have struggled to accelerate e-commerce operations in the past are now potentially up against an existential crisis caused by the pandemic.
Brands face three common issues today: (1) they’re not deeply integrating their physical and digital logistics capabilities, (2) they’re not adequately leveraging their wide-ranging assets, and (3) they’re neglecting analytics.
To overcome these hurdles, brands must have a “omnichannel” mindset. This means rethinking inventory and ordering procedures, especially around sourcing, allocation and processing. It also requires making better use of order-management tools, both to track orders efficiently and to allocate orders to the right locations (according to service, distance and availability rules). It involves deploying systems that can reroute orders in real-time (say, if there’s an unexpected stockout in a particular location). And it means using tools that offer “one-view” inventory, to ensure that managers have full visibility on all items up for sale.
Those companies that have excelled in e-commerce before and during the pandemic know hassle-free shopping is vital to their success. Reliable delivery is one key element. So is having goods available with minimal wait time when customers want them. An intelligent order management system (OMS) that offers a single inventory view and can determine the closest distribution center or storefront to access the product (as opposed to placing the burden on the consumer to find it) provides the ease and efficiency that is now paramount. It also reduces the risks and costs of over- or understocked inventories, and it enables brands to adopt sophisticated analytics that can better predict trends.
Agile distribution networks are equally critical for handling the ebb and flow of demand, especially during uncertain times like the present. Stores, for example, can be used for a wider range of purposes if they’re more tightly integrated into logistical networks. By incorporating machine learning, brands can optimize where orders are coming from, to leverage local stores instead of distribution centers for e-commerce fulfillment Some might be employed as warehouses that offer “buy online, pick-up in-store” options. Still others could serve as drop-off points for product returns.
Change is constant. Online shopping is at its highest levels to date, but shoppers will certainly return to stores at some point. Brands must be able to flex up or down to navigate the new post-COVID world. With this omnichannel mindset and approach, brands have a stronger ability to serve customers wherever they are, the visibility for intelligent decision-making, and the levers and flexibility to adapt quickly and overcome the obstacles of the future we will undoubtedly face.
Fred Loeffel is executive vice president of strategic development at Geodis Americas.
Timely, incisive articles delivered directly to your inbox.